Podcast Summary
Exploring the Intersection of Art, Finance, and Gaming in Web 3: Web 3 is revolutionizing art, finance, and gaming through immersive digital experiences. Generative art, a unique form of digital creation, is at the forefront of this transformation, offering new possibilities for creators and consumers while challenging traditional notions of value.
The future of art, finance, and gaming is intertwined and evolving in the realm of web 3. During this episode of Invest Like the Best, Sam Engelbart and Richard Kim, general partners at Venture Fund Galaxy Interactive, discussed their shared thesis that immersive digital experiences will dominate how people engage. A notable conversation was with the head of the Whitney Museum, where they delved into the concept of art versus market. Sam discovered Art Blocks, a digital art platform specializing in on-chain generative art, which stood out due to its code living entirely on the blockchain. Generative art, as defined by professor Philip Gallanter, is any art practice where the artist uses a system to create a completed work of art with some degree of autonomy. This definition distinguishes generative art from algorithmic art. The conversation with the Whitney Museum head shed light on the idea that art and market can be intertwined but distinct. The evolution of art in web 3 offers new possibilities for creators and consumers, as well as challenges in understanding the value of digital creations. This conversation set the stage for further exploration of the intersection of art, finance, and gaming in web 3.
Art Blocks: Intersection of Art, Technology, and Speculation: Art Blocks combines art history, technology, and speculation to create a new platform for generative NFT art, bringing global scarcity and status to digital art, captivating a new audience, and challenging traditional notions of art value.
Art Blocks, a platform for generative NFT art, has gained significant popularity due to its unique combination of art history, technology, and speculation. Generative art has a long history dating back to the fifties and sixties, and Art Blocks provides a new way for this art form to bring global scarcity and status in the digital world. The platform's unique features, such as controlled randomness and algorithmic art creation, have captivated a new audience, many of whom were not previously art collectors. This intersection of art and technology has led to a passionate community, with some initially drawn to the market opportunities but staying for the art itself. The NFT space challenges traditional notions of what art is and who gets to determine its value. As the director of the Whitney Museum noted, art can be seen as independent of market forces or determined by the crowd through traded volumes and floor prices. Art Blocks and NFTs have the potential to expand the overall size of the art market and introduce new collectors to the creative process.
Tension between traders and collectors in NFT world: Traders and collectors experience unique dynamics in NFT world. Community, information asymmetry, and influential figures matter, but digital realm introduces new complexities.
The world of digital art, specifically NFTs, presents a unique tension between traders and collectors. For some, like the speaker who started as a flipper due to financial constraints, the lack of liquidity and community dynamics can make for an exciting, cult-like experience. However, as the number of wallets holding NFT pieces grows, a longer-term perspective becomes more appealing. Traditional art collectors, like Sam, bring valuable insights from the physical art world. These include the importance of community, the role of information asymmetry, and the impact of influential figures. Yet, the digital realm also introduces new complexities. The experiment by artist Dimitri Cherniaq, for instance, aims to shift the focus from trading to collecting. Ultimately, while the digital art world may present new opportunities and challenges, it's essential to remember that the principles of art collecting, such as the role of community, information asymmetry, and influence, remain relevant.
Exploring the Unique Experience of NFT and Generative Art: NFT and generative art offer a direct relationship with artists, a sense of community, and unique qualities that set it apart from traditional physical art, potentially attracting investors
The world of NFT and generative art offers a unique experience for collectors, different from traditional physical art. This new form of art, which is digital and community-driven, provides a more direct relationship with the artist and an opportunity to feel connected to the artistic process. The collectors in this space are a distinct group of people, and as the importance of generative art grows, there could be closer relationships with established art institutions and players. The thrill of being a patron to the creation of art and the sense of community are key factors drawing people to this space. If we consider the potential investment aspect, the beta or attractiveness of NFT and generative art as an asset class is yet to be determined, but its unique qualities set it apart from traditional physical art.
NFT Art Value: Beyond the Art and Community's Role: Investing in NFT art involves identifying artists and understanding community dynamics to capture value, as platform and community play crucial roles in determining long-term worth.
The value of NFT art lies not only in the art itself but also in the community surrounding the platform. The scarcity of traditional art contrasts with the seemingly infinite supply of NFT art, making it challenging for investors to capture value or beta returns. However, platforms like Art Blocks, with curated supply, and FXHash, with open minting, demonstrate that community plays a crucial role in determining value. Investing in NFT art requires identifying the artists who will create formative work on the platform and understanding the community dynamics that support long-term value. While there is uncertainty in the NFT space, it's essential to look beyond the creation process and consider the broader context of the platform and the community to assess the potential enduring value of NFT art.
NFTs serve as a hub for communities around interactive art projects: NFTs offer investment potential through defining artists and fostering community engagement in evolving art projects
NFTs (Non-Fungible Tokens) are more than just digital assets; they serve as a node for communities to gather around evolving, interactive art projects. These projects, like Matt Cain's Gazers, offer an active participatory process and potential for discovery, creating a sense of excitement and community involvement. As for investment, focusing on defining artists like Beeple or PIM, who are intrinsically tied to this moment in time, can be a safe bet in the long term. NFTs represent a new and cool expression of human creativity, and as such, it's not surprising that people with means want to collect them. However, deciding whether to include NFTs in an investment portfolio is a complex question. Our suggestion is to combine top-down critical narratives and curation with access to emerging artists and opportunities. By creating a platform that pairs leading artists and curators with collectors and investors, we can provide access to this space while fostering a permanent collection and tokenizing the engagement and passion of the collector community. This theme is likely to have staying power across various consumer markets.
Bridging the gap between traditional industries and the digital world with NFTs and generative art: NFTs and generative art represent a high-risk investment opportunity in the digital shift towards living lives online.
NFTs and generative art are a new asset class that belongs in the high-risk portion of a balanced portfolio. This idea of tokenizing engagement in games, virtual worlds, and art is a groundbreaking development. From Galaxy's perspective, the world we're talking about can be classified as crypto or web 3, and the thesis is to bridge the gap between traditional industries and the digital world. Galaxy Interactive, a division of Galaxy Digital, is a venture business focused on investing in the intersection of content, Web3, and infrastructure technology. The realization is that people are increasingly living their lives digitally, and this trend is only growing. NFTs and generative art are part of this digital shift, and while they can be collectively cool and creatively interesting, they should be viewed as a high-risk investment opportunity.
The digital world's influence on identity and opportunities for growth: Embrace the potential of building and creating in the digital world, rather than solely focusing on speculation. Web 3 presents opportunities for markets, price discovery, and lending in an environment of abundance.
The digital world is increasingly influencing how we define ourselves and our identities, with gaming and immersive digital experiences leading the way. This convergence of traditional gaming and immersive interactive entertainment with the financialization of digital assets presents enormous opportunities for growth and innovation. However, it's essential to approach this new web 3 environment with a builder's mindset rather than a zero-sum trader's mentality. Richard and Mike bonded over this idea, recognizing the potential of gaming worlds as robust economies and the monetization of digital objects as a means of building status and identity. The financialization of everything in web 3, as Richard explained from his FX trading background, offers opportunities for markets, price discovery, and lending. However, it's crucial to recognize that web 3 is an environment of abundance, not scarcity, and to embrace the potential of building and creating within this new landscape rather than solely focusing on speculation.
Earning tokens through productive participation in Web 3: Focus on productive participation in networks, DAOs, and projects to earn tokens, balancing desire and financial building blocks to avoid compounding instability.
The Web 3 world offers various ways to earn tokens beyond starting with significant capital or trading. Instead, individuals can focus on productive participation in networks, DAOs, and other projects aligned with their interests and values. However, the financialization of everything in Web 3, including markets and consumer spending, can be a double-edged sword. While markets can drive price discovery and innovation, they can also lead to psychological stress and missed opportunities. The author shares his personal experience of selling Ethereum too early due to FOMO and the negative impact it had on his long-term perspective. The author is particularly interested in the potential of lending as a financial primitive in Web 3, but emphasizes the importance of finding a healthy balance between desire and financial building blocks to avoid compounding instability. Overall, the key takeaway is that earning tokens through productive participation and avoiding excessive trading and financialization can contribute to the long-term sustainability of Web 3 engagement.
The financialization of virtual goods opens new opportunities for earning: People can earn from passions and skills through NFTs and DeFi, opening opportunities for those without financial resources.
The financialization of virtual goods through platforms like NFTs and DeFi is opening up new opportunities for people to earn from their passions and skills, rather than just consume. This is particularly exciting for those who previously did not have the financial resources to participate. However, it's important to be aware of the potential mental health and time management challenges that come with engaging in these financialized virtual worlds. A real-life example is that of a musician and artist, Tara, who has used her community-building skills to radically change her life through NFTs without taking on financial risk. While the financial opportunities are appealing, it's crucial to consider the psychic cost of the constant notifications and distractions that come with involvement in these virtual markets.
The Impact of Technology on Our Ability to Focus and Determine What Matters: Technology's constant distractions can negatively affect focus and self-purpose, but human creativity and desire to produce wondrous things will persist.
The constant barrage of notifications and distractions from technology, including email, text messages, and social media, can negatively impact our ability to concentrate, think, and determine what truly matters to us. This is a personal concern, but on a larger scale, it could potentially radicalize an entire generation if people's sense of self and purpose is tied solely to the financial aspect of these technologies. However, there is also a positive side to this, as people's innate desire to produce things that create wonder or awe, such as art, movies, or games, is something that can be bet on and is likely to persist and grow. The speaker's background includes a passion for film production and a career in media investing and building businesses in various sectors of the media industry, leading him to digital media and emerging media tech.
Exploring the intersection of video games, technology, and emerging trends: Understanding traditional storytelling and media is crucial for creating successful new genres of games, especially those involving blockchain and virtual reality. Great stories, whether passive or active, remain timeless and attract audiences in the Web 3 context.
The intersection of video games, digital technology, and emerging trends like blockchain and virtual reality has been a significant influence on the way we consume content and perceive value. This was evident as early as 2010, when video games were already pushing the boundaries of digital ownership and trading in MMORPGs. The speaker's investment in a video game studio, Seismic Games, led him down the rabbit hole of exploring emerging technologies like eye tracking and eventually Bitcoin and crypto. He emphasizes the importance of understanding traditional storytelling and media to inform the development of new genres of games, especially those intersecting with blockchain. The speaker believes that great stories, defined by their ability to resonate with universal human experiences, will remain timeless and continue to attract audiences, whether through passive entertainment or active engagement in video games. In the Web 3 context, having a great game is still essential, as people will only play and invest in high-quality experiences.
Designing sustainable tokenomics for gaming ecosystems: To create a successful gaming ecosystem, consider the community's shared values, design economic systems around them, and ensure both supply and demand are met, fostering a sustainable virtual world reflecting real life.
The economic structure and incentive systems, often referred to as tokenomics, are crucial elements in the long-term success of a gaming ecosystem. While fun games are essential, the design of these economic systems can significantly impact the wages and overall sustainability of the community. The community itself is the driving force, and the currency should be built around it rather than the other way around. The unifying force in a crypto-centered ecosystem is the shared values and interests within the community. To create a sustainable token, it's essential to consider both the supply side (why someone would buy the token) and the demand side (who would want to buy virtual goods in the system). Ultimately, a successful virtual world mirrors real life by offering value, trust, and a sense of community.
The Power of User-Generated Content in Gaming: User-generated content drives engagement and financial returns in gaming, but balancing community direction with clear guidance is crucial.
User-generated content plays a crucial role in creating engaging and sustainable simulation environments, especially in gaming. This content thrives best when balanced with top-down storytelling or direction. The success of platforms like Minecraft and Roblox demonstrates the potential for financial returns in gaming companies that effectively utilize user-generated content within a broader platform. However, investing in purely user-generated content projects can be risky due to the challenges of guiding and directing the community while allowing them enough creative freedom. The balance between user empowerment and clear direction is a constant tension that creators and investors must navigate in the evolving world of gaming and virtual experiences.
Creating rich, immersive worlds with top-down great player experiences: Future gaming platforms should blur lines between content and platform, allowing users to create and monetize, without disrupting immersion, by providing value for time and balancing extrinsic motivations.
The future of successful gaming platforms will be those that create rich, immersive worlds with top-down great player experiences, leveraging storytelling and mythology to inspire user-generated content. These platforms should not start as just a platform, but as a world with a compelling experience that users want to be a part of. The best games will blur the line between content and platform, allowing users to create and monetize their creations. However, it's important to avoid over-indexing on early successes in the blockchain gaming space and instead focus on bringing open market primitives to closed loop immersive worlds in a way that doesn't disrupt the immersion for gamers. This can be achieved by giving gamers value for their time in a free-to-play way, allowing them to earn a soft currency or grind currency through engagement, while also giving hardcore believers the option to buy hard currency and become truer owners. The introduction of these concepts to gamers in a way that they don't even realize it's crypto is a theme that is exciting for the future of gaming. The lesson from Diablo 3 is that enforcing marketplace functionality can result in players being guided by extrinsic motivations, so it's important to find a balance between allowing players to monetize their time and keeping the immersion intact.
Bridging the gap between traditional gaming and blockchain technology: Blockchain gaming presents challenges and uncertainties, with financial potential but unclear overlap with traditional gamers. Inflated valuations and lack of transparency make investing difficult. Bridging the gap between these two worlds is crucial for long-term success.
The intersection of traditional gaming and blockchain technology presents unique challenges and uncertainties. While the financial potential of blockchain games is significant, it's unclear how much it will overlap with the interests and skill sets of traditional gamers. The massive influx of capital into token projects has led to inflated valuations, but the lack of comparability and transparency in these valuations can make it difficult for investors to accurately assess risk and potential returns. The stress of financial complexity can detract from the core gaming experience, and finding ways to make blockchain gaming accessible and enjoyable for a wider audience is crucial for its long-term success. Ultimately, the future of blockchain gaming lies in finding ways to bridge the gap between these two worlds and create engaging experiences that leverage the unique benefits of blockchain technology without requiring extensive financial sophistication.
Misunderstandings in Web 3.0 and crypto gaming investments: Investors should focus on actual use in Web 3.0 and crypto gaming projects, rather than solely relying on token performance or financial KPIs.
The current state of Web 3.0 and crypto gaming investments is fraught with misunderstandings, particularly regarding the comparison of financial and actual use key performance indicators (KPIs). This misconception can lead to the funding of unproductive projects with exorbitant valuations, potentially skewing the allocation of productive capital. Furthermore, there's a general conflation of token performance and the success of games or the long-term engagement of users. It's crucial for investors to understand the concept of fully diluted token value and focus on the importance of actual use in these projects. Richard shared a personal story about the kindness shown to him by a colleague during a career transition, emphasizing the importance of being open to learning and adapting in rapidly changing industries.
Parental support fuels children's curiosity and growth: Parents play a crucial role in fostering curiosity and enabling exploration in children, leading to personal growth and success in life. Finding people who care about and support your interests can make all the difference.
Fostering curiosity and enabling exploration in children can lead to great personal growth and success in life. The speaker shared how his parents' support and encouragement of his diverse interests as a child helped shape his curiosity and drive, which has carried through to his professional and personal life. He emphasized the importance of finding people who you care about and want to be on the journey with. In the digital age, there are more opportunities than ever before to succeed in niche curiosities, and parents play a crucial role in fostering this curiosity in their children. Regarding the product discussion, the speaker shared how he named Canalys's new panel data solution, Candace, in homage to a popular data manipulation library and in a playful nod to the tradition of puns in computer science. He also discussed how the data science team at Canalys works with the investing teams to deliver curated output from data analysis, with most teams more interested in the interpretation and relevance of the data rather than the data science tools themselves. Roger was invited to share his experience engaging with the Candace product and making the intersection between data science and fundamental investing a reality.
Using technology for efficient data analysis in investing: Effectively using technology for data analysis saves time, reduces errors, and provides valuable insights for informed investment decisions, but it's crucial to tie data back to the investment thesis and relevance to the company.
Data analysis in the investment industry goes beyond just automating processes; it's about understanding what data matters most for the specific company and investment thesis. The speaker shares an example of how they used to manually calculate earning sensitivity for multiple companies, which was time-consuming and error-prone. However, with the help of technology like Canvas, they can now quickly and accurately determine earning sensitivity for multiple tickers, saving them significant time and reducing errors. This illustrates the importance of using data effectively to gain valuable insights and inform investment decisions. The speaker also emphasizes the need to tie data analysis back to the investment thesis and relevance to the company, as not all data is equally important. Overall, the use of technology in data analysis is a powerful tool, but it's essential to use it wisely and effectively to gain a competitive edge in the investment industry.
