Welcome to the Block & Mortar newsletter! Every week, I bring you the top stories and my analysis on where business meets web3: blockchain, cryptocurrencies, NFTs, and metaverse. Brought to you by Q McCallum.

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#55 - Another report, atoms & pixels, and some legal matters

Another web3 long-read for you

A few weeks ago I shared two reports on the present and future of web3, from banking giant Citi and VC firm a16z.

Consulting firm Deloitte released their take last week. This report focuses on the potential of metaverse properties, as opposed to web3 in general. Deloitte has even broken down their analysis by geographic region. If you’re looking to explore use cases alongside thoughts of potential economic impact, this is your lucky day.

Now if you look closely at that link, you may have … questions. That’s not Deloitte’s website. Where oh where did I get this?

I know what you’re thinking: an analysis of metaverse business opportunities … as commissioned by a metaverse-themed company … that went as far as to change its name to “Meta” … and which managed to sink $36B into trying to make three-dimensional, virtual-reality worlds happen before investors told them to dial it back. Hmmm …

(Truth be told I felt gross clicking a link to That Site. But I am willing to go the distance for my loyal Block & Mortar readers. Sometimes. Only sometimes.)

FaceMeta has experienced such a great track record on data privacy and adolescent mental health, amirite? We can totally trust them to not tip the scale on Deloitte’s research. Especially as they’ve turned their attention away from web3 to AI. You know, just like everyone else out there.

I still think this Deloitte report is a worthwhile read. It’s fairly metaverse-positive but I don’t necessarily see that as Facebook’s influence. I see it as a reminder that companies are still building on blockchain, cryptocurrency tokens, and NFTs behind the scenes even as consumers either actively dislike the technology or simply don’t care. I sense a lot of potential in this sector.

(A quick tip of the hat to the folks at Les Echos, which is where I first found out about this report.)

Pixel potential

Is something only “real” if you can touch it? I think the last three decades of internet, AI, and web3 technology would beg to differ. An e-mail or an ML model can have just as much impact on your life as, say, a printed letter or a traffic signal.

That’s why I’m trying to break my habit of saying “real” when I mean “not digital.” In a nod to “atoms and bits” from Chris Anderson’s Free, I’ll use “atoms” to describe the things we can touch and “pixels” for the things we cannot. Because both are just different flavors of real.

And what happens when atoms and pixels come together? After digital twins and “phygital” perfumes we now have augmented reality (AR) try-on:

Shoppers walking past Coach’s store on Prince Street in SoHo, New York, may be stopped on the sidewalk by a fantastical reflection. In the window is the first storefront AR try-on, done in partnership with AR platform Zero10, which shows those who stop in front of the digital mirror wearing the brand’s popular Tabby bag in a variety of colours and imagery. A black Tabby bag conjures up matching black wings on the wearer; the image then cycles to a glittery pink bag with balloon letters spelling out TABBY floating in the air.

I dig this. It’s catchy and interactive, without being too much of a gimmick. (I’ll leave aside the potential data ethics issues until I learn more about how the device works and how Coach handles informed consent around data collection.)

And there’s potential for so much more. This excerpt tees up the commercial considerations:

Success of the AR mirrors will be determined both in terms of foot traffic to the store as well as conversions, both of which Yashin says will be tracked by Zero10 with Coach.

Followed by a bigger-picture issue:

It’s also an awareness play: Zero10’s goal is to make AR technology easier to access, and the try-on mirrors make it easy not only to understand how to use AR but to get a feel for digital-only goods, which Yashin sees as something that could be sold by fashion brands in stores alongside physical product.

(Emphasis added.)

There we go. Borrowing another idea from Free: as the price of some technology falls, ask yourself what happens when that price effectively zero? What new opportunities shake out of that? Anderson was talking about the cost of shipping bits as opposed to atoms. But the idea of using pixels instead of atoms also works. Let’s remember that the former are far easier to manage.

That’s where simulation comes into play.

Simulation is a fancy word for exploring “what if?” scenarios in a safe environment. Trading shops and insurance firms run simulations to spot potential anomalies before making financial decisions. Security firms simulate crowd dynamics in a large stadium event. Manufacturers test how their jet engines will hold up to extended stress. The common thread is finding weak points and weirdness before money and lives are on the line.

Similarly, AR try-on lets us simulate “how would this look on me?” It’s not as high-stakes an issue as a trading scenario, but it still makes an impact. Clothing manufacturers could use it to test ideas on a variety of body types and movements before producing large runs of a given item. Online retailers could reduce the environmental and financial impact of returns if customers were able to test-drive a digital version of an outfit before making their purchase. (Especially since more retailers are now charging for returns.) And so on.

The Coach/Zero10 collaboration is a mirror, yes. But it represents so much more.

Sam Bankman-Fried (SBF) and Do Kwon have a lot in common. Both are in their early thirties. Both were huge names in crypto, before becoming huge names in legal circles because of crypto. Both have fallen from grace, having been arrested in connection to some Still Technically “Alleged” But Oh Come On This Is Kind Of Obvious crimes. And by the time you read this Kwon should be out on bail, sharing SBF’s experience of being on house arrest awaiting trial.

(Side note: Say what you will about these two but … seriously, what had you accomplished by that age? Sure, you didn’t have governments haggling over who gets first pass at running you through the justice system. But nor had you done anything big enough to merit that level of regulatory attention. Just sayin’.)

My use of the word “alleged” merits further discussion. It’s a reminder of the difference between the Court Of Law and the Court Of Public Opinion. They play by different rules. Most public opinion says that SBF and Kwon definitely committed crimes and they need to be punished. That’s all well and good, but the point of the legal system is to see whether these accusations stick in a formal sense.

Which is why, this week, SBF and Kwon had something else in common: they both attempted to dismiss the charges levied against them. SBF’s legal team asked to dismiss ten of the thirteen charges, and Kwon’s pleaded not guilty to holding a fake passport when he was apprehended boarding a private jet.

(By the by: the TechCrunch piece on Kwon includes a useful timeline of events. Check it out if you need a refresher on the Terra/Luna saga.)

Do I think these tactics will work? I don’t know. But it doesn’t matter. Let me explain:

The whole point of legal defense is to Keep Clients Out Of Prison. So it’s rarely a good opening tactic to declare “my client’s guilty as hell, but …” Instead you start with “my client is innocent!” and then you make the other side do a ton of work to prove otherwise.

SFB’s and Kwon’s attorneys are, therefore, doing precisely what they are supposed to do. (I was about to write that they’re “going through the motions” but realized that would have been an unintentional legal pun. And Block & Mortar sticks to intentional puns, thank you very much.) Chipping away at the opposition before the trial begins – and in doing so, hopefully avoiding the trial altogether – is standard fare.

Even if the judges dismiss only a portion of the charges, that still amounts to less work for the defense team to do during a trial. And a smaller chance of their client facing penalties. You know, the whole Keep Clients Out Of Prison bit.

That’s why I find these updates interesting, but not exactly exciting.

Expect these skirmishes and dodges to play out over the coming months (if not years). The cases of SBF and Do Kwon may be settled as far as the court of public opinion, yes. But the court of law has a long way to go.

Illegal matters

I may have spoiled this exercise with the preceding segment, but let’s try it anyway:

Close your eyes and conjure up an image of a crypto criminal. Someone who has swindled people out of their tokens or swiped their overpriced ape JPEG very legitimate digital artwork.

What did you come up with? Someone in their 20s, wearing a hoodie and slamming Red Bull as they churn out code from a dark room? Or maybe a smiling, smooth-talking 30-something, explaining the benefits of cryptocurrency to wide-eyed politicians? A self-proclaimed business rapper? Something like that?

I’m guessing you did not imagine a couple of men in their mid-fifties “making a lot of money [by] “f**king with a website.”

And that, dear reader, is ageism in the tech sector. Ageism, plain and simple.

Shame on you.

The wrap-up

This was an issue of Block & Mortar.

Who’s behind Block & Mortar? I'm Q McCallum. I've spent the past two decades in the emerging-tech space. And I'm very interested in web3 use cases.

Credit where it's due. Big thanks to Shane Glynn for reviewing early drafts. Any mistakes that remain are mine.

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