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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Remember Celsius? They were among the
smoking craters fallen dominoes in last year’s Terra/Luna meltdown. (I guess that $75M loan to 3AC was not, in fact, such a good idea.)
Celsius is back in the news because of a hat trick of legal woes: the FTC, CFTC, and SEC all want to “have a talk” with the crypto lender. The company’s former CEO, Alex Mashinsky, is accused of:
[… having] misrepresented, among other things, the safety of Celsius’s yield-generating activities, Celsius’s profitability, the long-term sustainability of Celsius’ high rewards rates, and the risks associated with depositing crypto assets with Celsius.”
And also for:
"[… misrepresenting] the company’s “central business model and the risks to investors” by allegedly claiming Celsius did not engage in risky trading and paid most, but not all, of the company’s revenue over to investors.
I’ve written at length about crypto’s various legal woes. Right now I’d like to point out the difference between the “is this a security?” debate and, you know, outright fraud. See last week’s Ripple ruling as an example of the former. Celsius seems to have wandered into the latter territory. Which might be why Mashinsky was arrested last week.
If we do a quick recap of crypto fraud arrests connected to last year’s crashes, we have: SBF (December 2022), Do Kwon (March 2023), and now Alex Mashinsky (July 2023).
I can’t say for sure, but I wager certain industry participants are looking over their shoulder.
Philip Shelper’s Loyalty Programs notes that merchants can use perks to offset the buyer’s remorse following a luxury purchase. You bought the fancy car? Here, have “free” routine maintenance on the vehicle. You appreciate high-end watches? Come for an adventure weekend with Italian special forces.
This, I think, is part of the reason why luxury brands have embraced NFTs with benefits. When you’re asking people to drop more than $1,000 on a pair of shoes that come with a digital twin (Dior’s new B33 sneakers) or €39,000 on an NFT (Louis Vuitton’s “Treasure Trunks”) you really want to ease their minds both before and after the purchase.
You can frame it as one of:
- “Buy the NFT, get [luxury item] and other perks down the road.”
- “Buy [luxury item], the NFT becomes your proof-of-purchase which grants you access to other perks.”
Either way, a buyer drops money now, and you periodically reward them so that they don’t regret it later. Think of it like a drip campaign but less annoying.
Something to keep in mind when you see eye-watering prices for luxury brands’ NFTs or goods-bundled-with-NFTs. Or when you incorporate NFTs into your company’s loyalty program.
That Fashion United article about the B33 shoes also noted that some brands are taking the NFT-as-certificate-of-authenticity seriously:
[…] Dior has utilized a provenance token based on technology developed by the Aura Blockchain Consortium. Notably, Dior’s parent company, LVMH Group, is a founding member of this consortium, alongside OTB Group, Prada Group, Mercedes-Benz, and Cartier (part of the Richemont Group), as reported by Forbes.
I’m pleased to see several companies joining forces this way so they don’t have to reinvent the wheel. And any brand involved in this consortium probably has some interesting NFT plans coming. Hmm.
I mentioned the Ordinals project a while back. It’s a way of (sort of) having NFTs on the Bitcoin blockchain. Purists
raged politely expressed their view that NFTs would be bad for Bitcoin because:
- They didn’t like it.
- It would add extra fees to that blockchain.
There’s no good way of addressing the first point, but the folks at Luminex have taken a stab at the second. The fees for Luminex-style (BRC-69) Bitcoin NFTs run just ten percent of the cost of Ordinals-style tokens.
These projects have likely convinced some people to dust off Bitcoin again:
In April, the number of daily transactions executed on Bitcoin hit all-time highs above 350,000, according to Ycharts. On-chain activity peaked at around 682,000 daily transactions in May but had since dropped 55% as of last week.
This is all well and good, but the surge in popularity makes me wonder: how much of this NFT business is really about making Bitcoin better? And how much of it is a ploy to keep Bitcoin relevant? At some point in a project’s lifetime, any proposed change becomes the blockchain equivalent of “introduce a new kid to the sitcom to boost ratings.” In which case: that’s your signal to ride the (likely brief) price bump and cash out.
Neal Stephenson called it. Twice. His 1992
slightly dystopian cypherpunk novel blueprint for the present-day world Snow Crash gave us the term “metaverse.” And the “Young Lady’s Illustrated Primer” in 1995’s The Diamond Age is what every generative AI chatbot aspires to be.
Stephenson has yet to announce any AI chatbots, but last year did launch a metaverse company called Lamina1. He shared his views on the wider metaverse goings-on in an interview with French business newspaper Les Echos.
The catch? The article is both paywalled and in French. So in case you’ve let your subscription lapse, I’ve translated two quotes that stood out for me.
When asked about Meta’s metaverse ambitions, Stephenson noted:
Meta is very focused on VR. I have nothing against that, but I think that the vast majority of people will access the metaverse through traditional [computer] screens, as we do to play video games.
This aligns with statements I’ve seen from other companies. And it underscores a common suspicion that Meta is most interested in pushing VR goggles because it needs a screen of its own on which to show advertisements. Apple and Google own phone screens, so that means they get an outsized vote in what Meta can do with that visual real estate. Case in point: iOS privacy changes have apparently burned $9B of Meta ad revenue.
In response to the question “what problem does the metaverse expect to solve?” Stephenson offered:
This question reflects a very utilitarian state of mind that I don’t find very interesting. I see the metaverse as a collection of capabilities and a creative medium, and not a technology that’s supposed to solve a specific problem. As William Gibson wrote: “the street finds its own uses for things.”
(Editor’s note: for reference, Gibson’s full quote is “Vasopressin makes you remember, I mean really remember. Clinically they use the stuff to counter senile amnesia, but the street finds its own uses for things.”)
The Gibson line summarizes my take on emerging technology and hype cycles: companies throwing The Hot New Thing at every possible idea feels silly in the micro timeline; but in the macro timeline, they comprise a public testing lab that is collectively sorting out what this new technology is actually good for. The surviving use cases of the first-generation Corporate FOMO™ will lead to second- and third-generation products that actually provide value.
Let the street do its thing.
“You have to meet people where they are.” This marketing guidance has led companies to (sometimes reluctantly) establish a presence on Twitter, Instagram, TikTok, and various metaverse spaces.
Who says big brands should get all the fun? Toronto attorney Madaline Zannes has recently opened an office in the Somnium metaverse. The digital location serves as both a meeting space and NFT art gallery.
Does it seem frivolous for a law firm to shell out for a metaverse space? It shouldn’t. It’s hardly the flashiest thing a company has done to connect with prospects and build a buzz. For crying out loud, Coach converted a jetliner into a showroom.
I wonder which niche each metaverse property will carve for itself? (I’ve been thinking about this for almost a year now.) Eventually they’ll all have reputations and vibes, like neighborhoods. If jewelers know they should set up shop in New York City’s Diamond District and high-end tailors hang their shingle in London’s Savile Row, will Somnium be known as The Place For Small Law Offices?
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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