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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The web3 news never stops. Not even Block & Mortar takes a detour to deliver the month-end media roundups. This first-of-the-month grab-bag therefore has more segments than usual, so I’ve kept them reasonably short.
Tangentially related to the second segment: I’ve been reading up on the 1990s Asian Financial Crisis. (No, I can’t get enough of banking crashes and asset bubbles. Why do you ask?) Russell Napier’s book on this topic tracks the events in chronological order, interspersed with his old reports from his days at Credit Lyonnais Securities Asia. China’s influence and impact on the region, in the run-up to the 1997 handoff, play a role. It’s interesting to see the mainland/Hong Kong dynamic turn up again in the crypto space.
I’ve seen several articles about what Apple’s new VR/AR headset might do. These have been interesting reads, but far too speculative – I might even say, “rumor mill” – for me to share here.
This Wall Street Journal piece is different. It’s not so much about the headset’s possible capabilities, but a list of extremely compelling use cases – so-called “killer apps” – that would make it a winner. So while it’s ostensibly about the upcoming Apple device, this article is really a wish list for any AR headset. And for the AR space in general.
I won’t spoil the read for you, but I will note that the author rightfully points out the importance of third-party developers:
Motivating those developers will require that Apple demonstrate what has so far been lacking for mixed reality: a blueprint for “killer apps” that will be so compelling that early adopters plunk down for this and future Apple headsets. (No small ask given that the device is expected to cost $3,000 or so.)
Apple certainly won’t be the only company to offer AR headsets. But over time, we can expect vendors’ hardware and OS feature sets to converge. That leaves apps as the only meaningful differentiators. Especially when certain apps or games are exclusively available on one platform.
Don’t believe me? Compare a recent Android and iOS phone, side-by-side. Or try the same test with modern game consoles. Which do you prefer, and why? Consumers may hold some degree of loyalty to the hardware itself, but the real draw is what they can do on it. And that responsibility mostly falls to app and game developers to make these devices fun and useful.
It’s been a little more than 25 years since the governance of Hong Kong switched from Great Britain to China. The area runs as a special administrative region or SAR, meaning that – to use very technical terms – it is part of China but also kinda-sorta its own thing. That status allows the Chinese government to operate the mainland and Hong Kong differently when the need arises.
Consider crypto, for example. It’s forbidden in mainland China but, as of last week, it is partially legal in Hong Kong. Quoting the Fortune article:
[T]he Hong Kong Securities and Futures Commission announced it was going forward with a plan to allow individual investors to buy and sell cryptocurrencies with high market caps, like Bitcoin and Ether, as it begins a new licensing system June 1. As of Thursday, it will be against the law for any unlicensed exchanges to market to Hong Kong investors, Bloomberg reported, citing Keith Choy, the interim head of intermediaries at the SFC.
Why would China open up to crypto this way? According to the article in Les Echos, Beijing figures that Hong Kong’s size – about 8 million people – makes it a suitable testing lab for crypto policies. They can try things in this “petri dish” (the author’s term, not mine) of a region before bringing it onto the mainland.
That makes sense, though I have a different take. Perhaps Hong Kong will instead become the equivalent of Nevada, in that it is the only place where certain activity is permitted. That would sure make it easier to keep an eye on things.
And that would also line up with Beijing’s slow-and-steady approach here. You’ll notice that they’ve only blessed the big-name cryptocurrencies. This is similar to a decision Canada made last year when it capped the amount of money people could spend on the lesser-known tokens.
Most metaverse use cases lean to gaming or shopping. I recently mentioned that Meta, being the more workplace-focused metaverse company, is looking into VR-based professional training. Beauty company Coty is building out its own metaverse property with just that in mind:
Created in partnership with metaverse real estate platform Spatial, Coty Campus integrates text and voice chat capabilities, screen- and file-sharing and customisable avatars. It also gamifies global collaboration between employees through what it calls a “phygital reward system”, based on item collection, location exploration and quest fulfilment. The idea is to connect employees worldwide to make collaboration easier, and to augment existing training, recruiting and onboarding processes.
It’s easy to throw the word “web3” at everything and hope it sticks. (For reference, please see the last decade of “machine learning” and “AI.”) Coty’s move doesn’t sound like a showpiece, though. By running the training programs inside a metaverse, and using blockchain to keep track of activity, they seem to be using web3 technology with a real purpose in mind.
I know, I know … That One Site hasn’t been a mess since That Guy took the helm. Sometimes I still find interesting tweets, though. Like this one from Bloomberg reporter and food enthusiast Muyao Shen, about NFT-based restaurant loyalty program Blackbird.
Longtime readers know that I’m bullish on loyalty programs as a web3 use case. (I even cited this in my O’Reilly Radar piece on web3 killer apps.) And I remembered the name Blackbird from this April article on Eater:
At its core, Blackbird is a loyalty program for diners, who can track their trips to participating restaurants and earn rewards for repeat visits. Built on that platform is a toolkit that restaurant owners can use to collect data on their customers, crowdsource money from their most loyal fans, and more. […] [Checking in] for the first time prompts users to enter their name and phone number. After that, each tap counts as a check-in, and repeated visits to the same restaurant unlock rewards that are typically reserved for regulars, investors, and friends of the owners, such as complimentary appetizers and priority in booking reservations.
Shen’s tweet pointed to a recent Bloomberg write-up in which Blackbird founder Ben Leventhal shares more details:
Independent restaurants don’t have the resources to create their own programs, Leventhal says, and Blackbird fixes that. It will also help operators identify valuable customers and repeat diners that they want to ensure get seats.
“We want to attack loyalty, benefits and ultimately payments,” says Leventhal, who was also the co-founder and former chief executive officer of Resy, the game-changing restaurant reservation platform that was acquired by American Express in 2019. (The amount was not disclosed, but the platform was valued at over $53 million in 2017).
This sounds like a win. Leventhal is handing busy restaurant owners a turnkey tool to improve their marketing and retention efforts. And the nod to payments is a promising next step.
In February I mentioned Cryptoys, a company that blends web3, toys, and IP licensing. The group behind NFT collection Pudgy Penguins is now taking a similar path in creating physical versions of its digital collectibles:
The company sees physical toys as a “Trojan horse” for the web3 ecosystem and NFTs. “Unfortunately, NFT revenue is not sustainable and it’s not really growable,” [Pudgy Penguins CEO Luca] Netz acknowledged, adding that the toys are meant to make the company more sustainable. “Secondly, we wanted to create an IP that transcends this ecosystem, and the way I know how to do that is through physical products.”
Atoms, as a hedge for bits? Nice. The TechCrunch article continues:
The initial launch will include about 100,000 toys, priced from $5 to $35, that will be sold online and through retailers internationally. Each toy comes with a birth certificate and QR code that unlocks a series of NFTs, or a trait box, on its online platform, Pudgy World, Netz said.
“Pudgy World is where you build your character, play mini-games and interact with other users,” he added.
Aha. Atoms, as a tie-in to bits. Even better. I realize the NFT rallying cries of “community” and “utility” sound cliche but they’re important for bringing people in and keeping them engaged. The fact that these are physical objects reinforces the idea that consumers have something even if the Pudgy Penguins company and tech infrastructure disappear.
I wonder whether these toys will turn into collector’s items? And if so, how will the secondary market turn out? It’s easy to draw parallels to the Beanie Baby meltdown, but that marketplace lacked the key ingredient of centralized price transparency. (The official-looking price guides were effectively made up by hobbyists, putting them just a stone’s throw from bond markets and the CDO mess of the 2008 mortgage crisis.)
Let’s say that you’ve met an overconfident smooth-talker who’s wrong most of the time. Would you hire them?
No, you certainly would not.
So perhaps you, like me, are confused as to why people keep trying to hire this person’s digital cousin. We all know that AI chatbots, like ChatGPT, don’t really “know” things. We know that their underlying ML models capture grammatical structure but not logical sequences of thought. And we know that these bots regularly
spew well-written nonsense emit very convincing “hallucinations.”
Yet, every company under the sun is having a go at using them. I can only imagine the pitch meeting: “I mean sure it has no grasp of facts but for us maybe it’ll tell the truth.”
Crypto exchange Bitget have given ChatGPT a trial run and … Well, the results speak for themselves:
ChatGPT began offering misleading or incomplete responses to customer queries. When one user asked for examples of prospective cryptocurrencies to consider, ChatGPT included the failed coin Luna on its recommended list.
Yes, that Luna. It gets better:
Another example showcases the limitations of ChatGPT’s dataset. When a user asks, “Is FTX a trusted crypto exchange?” ChatGPT responds that “FTX is generally considered a reputable and trusted cryptocurrency exchange”—a query replicated by Fortune.
See what I mean? Nonsense, in polished form, delivered as gospel truth.
This is not the person you want to hire as an employee.
This is pure founder material.
Time to ring up the VCs.
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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