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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Start with the fun

I’ve noted before that emerging tech is a funny beast: it’s all about the actual technology in the short run, but over time policy gets the attention. I should amend that as follows:

Emerging tech is all about the actual technology in the short run, then about people for a while, and then the focus shifts to policy in the long run.

That “people” part is important.

You build something with the intent that people will use it, right? Either you sell directly to them for their own use, or you sell it to someone who will compel others to use it. (Anyone who has suffered through enterprise software will know what I mean there.) Whatever the case, Someone Who Is Not You has to see value in what you’ve made in order for them to buy it. This is Someone Who Doesn’t Care About The Underlying Machinery. Someone Who Just Wants The Damned Thing To Work. Or be fun, or whatever.

I’ve made that point about the Meta Quest and Vision Pro headsets. Investors have said something similar about building blockchain-based games. The same holds for metaverse properties.

Meta has injected tens of billions of dollars into the Horizon Worlds platform and the associated VR goggles. But it still strikes me as metaverse for metaverse’s sake. Some random online space where you can launch a comedy club. People might initially show up because of the novelty of VR, but is it enough to make them stay?

Compare that to Fortnite and Roblox. You can see them as games, as hang-out spots, and as concert venues. The underlying idea is: Looking for fun? This is the place.

(This is a big part of why I expect niche metaverse properties to take off over the long run… but that’s another story.)

This piece in The Verge sums it up well:

Why haven’t a massive entertainment conglomerate and a massive social network been able to crack the metaverse, but a goofy game where a banana can fight Ariana Grande has? The answer is that, well, it’s a goofy game. Meta and Disney (and every other company chasing the metaverse trend) started with the desire to create a new vision of the internet, an all-encompassing virtual world that could serve as a place to play and to work. But they didn’t give people a reason to want to exist in that space. Fortnite, on the other hand, began as a thing millions of people really wanted to do — play a fun game with characters they know and love — and built its virtual world aspirations on top of that.

Whereas Horizon Worlds strikes me as “build it and they will come,” Fortnite and Roblox are “everybody already wants to be here.” The popularity explains why Fortnite has sold more than $20B of digital merchandise over the last few years. And also why, per The Verge, Fortnite’s parent company Epic Games has just received a $1.5B investment from Disney.

The fact that this follows Disney shuttering its “Next-Gen Storytelling” initiative is doubly interesting. It tells me that The Mouse didn’t give up on its web3 aspirations, but instead chose to accelerate them by partnering with a pro.

This is not unlike when large companies would acquire data science shops after failing to build their own practice internally. Sometimes you just have to go with the people who have actually done it. So expect to see more of that in the web3 space. And cross your fingers that it goes better than Fortnite’s Lego partnership…

Just like cinder blocks in the walls

Super Bowl advertisers have to walk a fine line: they need to make a memorable commercial in order to get their money’s worth. (A tall order, at $7M for 30 seconds.) At the same time, they have to be careful so the commercials don’t become the wrong kind of memorable. And yes, that includes Making Statements That Will Come Back To Haunt You In A Courtroom.

Which is to say: has it really been two years since the crypto Super Bowl advertising blitz?

The answer is, “yes.” It’s the one thing plaintiffs and defendants can agree on.

Between those lawsuits, Crypto Winter™, regulatory scuffles, and general loss of consumer appetite, we’re seeing a lot less crypto in mainstream advertising these days. One might take that as a sign that crypto – and by association, the entire web3 layer cake – is on its way out.

Not quite.

The fashion industry is still investing in NFTs and digital twins. That includes everyone from the big-name haute couture houses to sneaker manufacturers. The Starbucks Odyssey loyalty program shows no signs of going away. You then have governments getting involved, like El Salvador accepting Bitcoin in exchange for visas, to Bhutan using the country’s hydroelectric power system to drive crypto mining, to cities in Poland creating stablecoins for local commerce.

My take? The rough times have sent the tourists in search of new opportunities. Those who remain will find use cases suitable for what crypto really is: a set of tokens, built atop blockchain’s distributed, tamper-resistant transaction ledger.

Plenty of use cases will shake out of that. The web3 parts will be important to the builders – making old applications easier and new applications possible – but invisible to the end-users. Just like cinder blocks in a wall.

Saving this for future reference

Bitcoin’s price has reached a rather newsworthy $47k.

I started to write something here about what these price movements really mean. But then I realized that I had already done that. About a year ago:

This is one of those cases in which both the fans and the skeptics are right. Did Bitcoin rise to $68k? Yes. Did it tumble to $17k? Also, yes. Is any of that relevant? No. Because when it comes to investments, only three numbers matter:

1. The price at which you got in.

2. The price at which you got out.

3. How much you managed to sell as you made your escape.

The unrealized gains and losses in between are good for casual conversation, but little else.

And then again, August 2023:

But do those prices really tell us anything useful? That depends on where you sit:

[…]

2/ Traders only care about asset prices when they buy or sell, because that’s when they actually make or lose money. Someone who buys Bitcoin at $327 and sells at $15k (November 2015 - December 2017) should feel pretty good about their decision. To buy at $61k and sell at $64k (March 2021 - November 2021) is a far less impressive move, even though the actual prices are larger. This is why traders skip past the absolute numbers to focus on the differences between the prices at which they’ve bought and sold.

I’m going to leave this here. Feel free to point to it the next time people get too excited about a crypto price move…

In other news …

• The extradition of Do Kwon, founder of Terraform Labs, has been held up again.
• Here’s another take on how crypto will save AI.
• I mentioned last week that Chris Dixon, of a16z crypto, had released a book. Some folks feel he has spiked the tip jar.
• The group behind HyperVerse has proven difficult to pursue directly. So investors are going after the banks that provided services to failed crypto scheme.

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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