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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#103 - Two years and four months

description: A printout of a one-year calendar.  Photo by Paico Oficial on Unsplash.

Two newsletters, in back-to-back weeks? After I’d decided to dial back the release schedule? What gives?

Well, what gives is that I tempted fate last week. In a segment on the BItcoin halving, I asked:

What if something big happens after this newsletter goes out? I guess that’ll leave something to write about next time?

And … yep. Something did happen. Completely unrelated to the halving, though. But there was that, which in turn reminded me of something else that was coming up. Plus there was this other thing that looked kind of interesting.

So, here’s another newsletter. It’s a short one, though. Just three quick segments.

The first thing: a lot to say about a short time span

Binance CEO Chanpeng “CZ” Zhao settled with the US Department of Justice back in November. Last week, just hours after Block & Mortar landed in your inbox, he was sentenced to four months in prison.

Given CZ’s … shall we say slightly adversarial relationship with FTX’s Sam Bankman-Fried (SBF), it’s no surprise that people are comparing the two right now. Both are big names in crypto, an industry that manifests as a big middle finger to financial authorities. Both ran cryptocurrency exchanges, allowing other people to bypass the regulated financial system. Both stared down the DOJ and are worse off as a result.

The thing is, while CZ is facing just barely one semester’s time behind bars, SBF was sentenced to 25 years.

Why would SBF get a sentence that is seventy-five times the length of CZs?

1/ Let’s compare the crimes. CZ got busted for running a crypto firm that allegedly made it possible for bad actors to move money. SBF was convicted of fraud, in which $10B of customer cash disappeared.

2/ Compare their finances. CZ paid fines – about $50M of his own money, plus another $4B from Binance. It’s unlikely that SBF could foot that kind of bill if the offer were even on the table. And thanks to that $10B hole in the balance sheet, nor could FTX.

3/ Compare how they handled matters. CZ quietly made his deal with the DOJ, then waited for sentencing. SBF went on a media tour, swapped out his legal team a few times, and violated the terms of his bail arrangement while out on house arrest.

It would be cliche for me to declare three strikes, yer out as there were no doubt other reasons behind CZ’s deal. That said, even if all other matters were held equal, you just get the feeling that CZ would know to follow the white-collar crime playbook: apologize; keep everything low-key; and let the DOJ brag that they’re hard on crypto. That’s how you make it home in time for the holidays.

(I wonder: Will Do Kwon take note? What about Kyle Davies and Su Zhu of Three Arrows Capital? And what does Arthur Hayes think of that parade of crypto kings gone rogue?)

As a public service announcement, I will say Don’t Commit Crimes. Easy.

If you insist on committing crimes, please remember the rules:

  • Have money to fight the case. That’s how you carve out a sweet deal when you’re caught.
  • A short prison sentence beats a long sentence. It’s simple math.
  • Never seeing the inside of a prison wins overall. Stick to things like, say, running a prescription drug empire (cough opioids cough).

But, seriously. Just don’t commit crimes and you won’t have to remember those rules.

The second thing: another birthday

The first issue of Block & Mortar landed two years ago this week, on 04 May 2022.

I’ll spare you the lengthy retrospective. I’ll just say that quite a bit has happened in the web3 world since then and it’s been a treat to cover it all.

Thanks for sticking around. There’s more to come.

The third thing: moving artwork

Some artists release NFT collections in which pieces are variations on a theme. Each NFT’s attributes influence its price relative to other members of the collection. Maybe your CryptoPunk is more valuable than others because of its combination of hair and eye color. Or your pet rock NFT is worth a lot of money because it is rotated to a certain angle. That sort of thing.

Before you dismiss NFT art as a bunch of overpriced JPEGs, consider the parallels to physical objects. A watch with the attribute “worn by Sylvester Stallone in Expendables 2” will catch more than that same model when it hasn’t been on his wrist and in a famous movie. (Note that I’m referring to his Panerai Luminor Submersible, not the Patek Philippe mentioned in the article’s headline.) And then there’s this Financial Times piece describing how wealthy people have started personalizing the living daylights out of their Rolls-Royce cars. The price tag raises an eyebrow, sure – sometimes the customizations outweigh the cost of the base model – but I’m thinking about the secondary market. What happens when these people decide to sell their wheels?

It’s one thing to put “some random Rolls-Royce” on the auction block. Then, you get extra points for “a particular Rolls-Royce that was driven by Some Celebrity.”

What happens to the price when you sell “a Rolls-Royce, customized to the specification of Some Celebrity?” These aren’t just cars; they are four-wheeled works of art. They’re (sort of) portable, making them easier to sell than a palatial estate. Yet they are much harder to forge than an old painting. And they’re unique. A collector’s dream.

(No word on whether Rolls-Royce will issue NFTs of these cars as digital twins.)

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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