#803 How To Evaluate NFT Projects w/ Andrew Steinwold

Andrew Steinwold is the managing partner at Sfermion, one of the leading NFT funds. He's an investor in OpenSea, Art Blocks and many other NFT projects. In this project, we discuss the growing NFT space, evaluating new projects, gaming and how to think about NFTs vs. NFT infrastructure. ======================= Today’s episode is sponsored by Abra. Based in California and backed by top VC firms, Abra is an all-in-one simple, secure app that allows you to trade over 110 cryptocurrencies, get 0% interest loans using your crypto as collateral and earn interest with up to 14% APY on stablecoins and 8.15% APY on Bitcoin. Join nearly 2 million users by downloading Abra from the Google Play or Apple App store. If you download the app today, you will get $15 in free crypto once you fund your account. You came, you invested — now conquer. ======================= Unstoppable Domains is THE #1 provider of NFT domains. These aren’t traditional domains, these are domains with superpowers. With your unique NFT domain such as pomp dot crypto or pomp dot nft, you can replace your long complex wallet addresses, verify ownership of your NFTs and join the 10’s of thousands of people who are now using their NFT domain as their Twitter and Discord usernames. Go to unstoppabledomains.com and get YourName dot crypto, dot x, dot nft or a range of other endings for as low as $5 and never worry about gas or renewal fees because with Unstoppable Domains you pay once and own forever! ======================= Nasdaq-listed BTCS was the first US-public company to secure today’s top layer one protocols. Recently, BTCS launched the beta version of its digital asset analytics dashboard! From across multiple exchanges, the BTCS Data Analytics Dashboard lets you evaluate your entire portfolio’s performance with plans to add year-end reports and yield earning on your crypto through linking to staking pools. Test out the BTCS Data Analytics Dashboard today at BTCS.com. =======================

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:02Anthony Pompliano?

  What's up everyone, this is Anthony Pompliano. Most of you know me as Pomp. You're listening to the Pomp Podcast, simply the best podcast out there. Now let's kick this thing off. Andrew Steinwald is the managing partner at Sferman, one of the leading NFT funds. He's an investor in OpenSea, Art Blocks, and many, many other well-known projects in the industry. In this conversation, we talk about NFTs, investing, how you at home can evaluate specific projects, and how to think about NFTs versus NFT infrastructure. I really enjoyed this conversation with Andrew, and I hope you do as well. Before we get into this episode, though, I want to quickly talk about our sponsors. Today's episode is brought to you by Abra. Based in California and backed by top VC firms, Abra is an all-in-one, simple,

• 0:45Anthony Pompliano?

  secure app that allows you to trade over 110 cryptocurrencies, get 0% interest loans using your crypto as collateral, and earn interest with up to 14% APY on stablecoins and 8.15% APY on Bitcoin. You can join nearly 2 million users by downloading Abra from the Google Play or Apple App Store. If you download the app today, you will get $15 in free crypto once you fund your account. You can go to abra.com to learn more. You came, you invested, now conquer. Abra, conquer crypto. Abra.com. Go check it out today. Today's episode is brought to you by Unstoppable Domains. Unstoppable Domains is the number one provider of NFT domains. These aren't traditional domains, these are domains with

• 1:25Anthony Pompliano?

  superpowers. With your unique NFT domains such as pomp.crypto or pomp.nft, you can replace your long, complex wallet addresses, verify ownership of your NFTs, enjoy the tens of thousands of people who are now using their NFT domain as their Twitter and Discord usernames. Go to unstoppabledomains.com and get your name dot crypto, dot X, dot NFT, or a range of other endings for as low as $5. And never worry about gas or renewal fees because with Unstoppable Domains, you pay once and you own it forever. Head on over to unstoppabledomains.com today to check out more about what they've got. Again, go there and you can get any domain with any ending for as low as $5. UnstoppableDomains.com. Today's episode is brought to you by

• 2:10Anthony Pompliano?

  BTCs BTCs is a NASDAQ listed company. It's the first US public company to secure many of the top layer one protocols. This quarter BTCs just launched the beta version of a new digital asset analytics dashboard from across multiple exchanges. The BTCs data analytics dashboard lets you evaluate your entire portfolio's performance with plans to enable year end reports and yield earning on your crypto by linking to BTCs sneaking pools. This groundbreaking dashboard is currently in beta mode. Test out the BTCs data analytics dashboard now by visiting BTCs.com. Again, that's BTCs.com. Go check it out.

• 2:48Speaker 01

  Anthony Pompliano runs Pomp Investments. All views of him and the guests on his podcast are solely their opinions and do not reflect the opinions of Pomp Investments. You should not treat any opinion expressed by Pomp or his guests as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his personal opinion. This podcast is for informational purposes only.

• 3:11Anthony Pompliano?

  All right, we're gonna bring on Andrew Steinwold next. I think we've got him here. Andrew, how are you doing?

• 3:18Speaker 02

  Doing great.

• 3:18Anthony Pompliano?

  Awesome, man. I have one question to get started. Well, first of all, actually, before I ask you a question, congratulations. I know you just had a young baby. How old is the baby?

• 3:28Speaker 02

  Baby is seven weeks old now.

• 3:30Anthony Pompliano?

  All right, so you're like two weeks behind me or so. What's the biggest surprise you've had so far as a new dad?

• 3:38Speaker 02

  So I thought that you were able to actually still do some work when you're taking care of the baby. You can do no work. Well, when you're taking care of the baby, it's two hands all like the full time and you literally have to pay full attention. So for me, that was by far the biggest shock.

• 3:53Anthony Pompliano?

  You guys see this? This is like dad talk right here. You two would know about it. Go outside.

• 4:00Anthony Pompliano?

  That's a little dad talk for you. All right. Now, second question I have for you. How the hell do I pronounce the name of this fund? Smirn? Is that how I say it?

• 4:08Speaker 02

  That was close. It's Sifermion.

• 4:10Anthony Pompliano?

  So, Jesus, you said that shit like you were drinking some tea in London, gonna just pick somebody. Say it again?

• 4:17Speaker 02

  Sifermion.

• 4:18Anthony Pompliano?

  Sifermion. Man, so you really weren't that close. Yeah, that was super nice. Yeah, that was nice of you to say I was close, but it's for Marion. Jesus Christ.

• 4:28Speaker 02

  Yeah, it just, it just, how it looks, Sifermion is basically the name of a hypothetical particle and the Whole thought process behind the name was, first of all, I want to do something super weird. Let's go up, you know, super weird because we're, we're investing in a weird asset class, which was NFTs and still is NFTs. And, uh, and the thought process was, okay, there's fermions, which are real particles and that makes up all matter. And there's the fermions, which is the, it, it basically, there's a theory called supersymmetry that states that every physical particle has this invisible partner that we can't see or measure. And, and my, my thought process was, okay, cool. Uh, we're not investing in actual land or actual swords or whatever. Uh, we're investing in the, in the hypothetical counterpart that we can't see or measure. And so it, it's supersymmetry

• 5:10Speaker 02

  states that every particle name with an S in front of it is a supersymmetric particle. So fermion is this fermion, a quark is a squark, a lepton is a slepton, and so on and so forth.

• 5:20Anthony Pompliano?

  How the hell did you learn about this?

• 5:22Speaker 02

  I, I am into particles. I'm not, you just Google essentially. Yeah.

• 5:27Anthony Pompliano?

  Well, is that, is that a hobby? Is that, is that what people like, is there like a particle community that, uh, that you guys all get together and talk about this?

• 5:35Speaker 02

  I wish. No, no, it's just a lot of Reddit, a lot of YouTube and, and Google.

• 5:39Anthony Pompliano?

  All right. And then sorry to, uh, kind of sidetrack here for a second, but these, uh, supersymmetric particles that we can't see or measure, is there any like indication that that's actually like a real thing or, uh, have they been confirmed in any way? Or is this just a hype? Like literally a hypothetical, like somebody one day was high and was like, hey, look at this great idea I have.

• 5:58Speaker 02

  No. So, so before basically 2019, scientists were like, okay, we were pretty sure this exists. We're, we're not positive, but the way the earth and the particles are situated, I don't really understand the science, but they're like, we're pretty sure that these exist. So I incorporated, launched the fund. It was September 2019. And then in like sometime in 2020, so there is a, you know, a kind of a paper that came out that was like, listen, uh, we're not really sure supersymmetry is even a thing anymore. And I'm like, oh, great. I already named the firm that, um, so, so, you know, hopefully, hopefully it's a, it's a, it's an actual theory, but as of now. Doesn't look that, doesn't look too promising.

• 6:31Anthony Pompliano?

  So people in the chat are already saying, uh, forget super symmetry. We talk about super asymmetry around here.

• 6:38Speaker 02

  I love it.

• 6:40Anthony Pompliano?

  All right, let's, um, let's jump into, uh, metaverse, digital goods, NFTs, et cetera. Uh, you just raised a hundred million dollar fund, give or take, uh, backed by some of the biggest names in the industry. And, uh, you're essentially saying, listen, not only is this stuff real, but there are very material investment opportunities here. Talk us through a little bit as to like, when somebody says to you, like, why are you excited about this space? Like, what, what's kind of the thought process in terms of focusing here versus all the other things that, uh, you could go do?

• 7:09Speaker 02

  Oh, man. Okay. So I guess first of all, if we all got together and we're some ad scientists and we're like, all right, we're going to design the most crazy, addictive, fun, exciting, engaging assets on earth. Those assets would be NFTs for sure. Uh, you know, these assets, they allow you to be, uh, social because you, you, you buy a board ape or something like that. You're part of the sport ape club. Uh, these assets allow you to display status. So instead of buying a Rolex, you're, you're again, buying a Crypto Punk or something and changing your Twitter profile. These assets, you, you become attached emotionally to them because you change your Twitter avatar to it or your avatar and LinkedIn or whatever to that asset. And then you're like, okay, well, I can't sell it. It's my identity. Uh, these assets are like, they have what I call like the human factor.

• 7:51Speaker 02

  And unlike crypto, which is mainly a, a game of economics and all the incentives are economic. NFTs have that human factor and that drives a lot of the behaviors in the space and makes, uh, makes it, makes these, the, you know, the speculation and the, the trading and the investing, uh, just to the nth degree, right? So, so that to me was kind of a, just from a market standpoint, really, really exciting. And, and I think that NFTs going forward are going to just going to continue to be, uh, these, these kind of weird, diverse new markets that didn't actually exist before. And, and they're going to thrive. And, and again, it goes back to the The human factor. So that's on that side. On the side of looking at what these assets enable over the long term, well, really, and this is going to sound sci fi, but really, these assets enable the metaverse to form.

• 8:33Speaker 02

  Because for, you know, in actuality, you know, I know Facebook and, and, and all these kind of companies are jumping into the metaverse. But in actuality, the metaverse just means the internet with ownership. And you can't have that without blockchain broadly, but also NFTs for all the digital goods and all the digital stuff that that you're kind of acquiring. And so if you look at it from market standpoint, super exciting, then you then you kind of look at it from the the metaverse standpoint. It's like, wait a second. These assets, NFTs, were the missing piece to the metaverse puzzle for it to actually form and come to fruition. Because before it's like, you know, we're living in this world of of internet today where it's essentially communist in nature. Where we're adding value to Facebook, we're adding value to Google, TikTok, etc. And we as users, we're adding the value, but we're getting nothing in return.

• 9:14Speaker 02

  And so what blockchain and NFTs really represent is that that internet of ownership where people are like, okay, well, I'm going to contribute to this platform, to this game, to this art platform, whatever. And I'm going to get compensated for that fairly, not not, you know, not, we're not going to get like super rich from our day to day online activities. But just being able to have part ownership or or potential upside within these networks and and products that we're using every day, that's super important. And so those are like the the two kind of big, big buckets that got me really excited. But initially, what got me excited was I was speaking to one individual. This is February of 2019, NFT MIC. It was the first NFT MIC. And NFT MIC is like the consensus of of NFTs. So it's like, you know, big deal. And I spoke to this one guy, his name is Jin, he's an absolute legend.

• 9:56Speaker 02

  And he was like, listen, he said this in different terms, but he's like, listen, 4.6 billion internet users, that's a total addressable population here. If there were a country, by far the world's largest country, these people are connected to a global, uncensorable 24/7 financial system, which is the crypto financial system, right? So the so the ease and and the cost of doing business is like just zero comparatively, right? And anyone in China or the UK or America or Kenya, wherever, can transact with each other instantaneously. So that's great. You're like, okay, biggest population, seamless financial rails. That's pretty. But then you add in NFTs, which are just digital property rights. So anywhere, anyone, anyone in the world can now, you know, own their digital stuff. That is crazy, right?

• 10:36Speaker 02

  And, and on top of that, these assets are user generated. So, so, you know, I think what blockchain did is it democratized the, the ability for people to create assets, especially like tokens. That, that was a huge step up in the democratization, democratization of asset creation. But NFTs bring that like down, you know, a hundred times because these assets are art, these assets are game items, these assets are, these are virtual land, these assets are collectibles. They're really approachable for everyday people. Versus some esoteric blockchain with staking and like transactions per second. It's like, that's too confusing. So, uh, those factors is, are, are really what makes this market the most exciting market in the world. And, you know, over the long tail, uh, NFTs will become bigger than crypto. I know it sounds weird, but NFTs will become bigger than crypto.

• 11:18Speaker 02

  And, and you know, what I like to say is crypto is the money of the metaverse, but NFTs are all the stuff in the metaverse. And so that's why, you know, I, I decided to focus my full attention to this market back in 2019.

• 11:27Anthony Pompliano?

  Explain that comment about, uh, NFTs will be bigger than crypto.

• 11:31Speaker 02

  Alright, so, so yeah, if you think about just real estate, every single, every single asset in, in, uh, in your house or, you know, your microphone, the computer, the everything. Um, and then you add in, you know, I guess naming, you know, decentralized naming. So people are, the domain name system is huge. When you apply that to, uh, any, any sort of, uh, decentralized naming system, that's going to be even larger. So if I have like Andrew, but there's a protocol that we're all using called like Ethereum, for example, and I can get andrew.eth and that, that is like the number one thing like that is, that is going to be incredibly valuable. That's, that's the example of an NFT. But there, there's just, there's a lot of use cases for NFTs because essentially NFTs are just a container. You can put anything inside. So today, the NFT markets are mostly made up of these kind of like toy-like, uh, use cases where again, it's like collectibles, it's gaming, it's, it's virtual land, it's art.

• 12:16Speaker 02

  These are fun, really big markets. I mean, art is like a $65 billion year market, collectibles, $100 billion year, gaming, $300 billion year. These are very large markets, very exciting, but they're still kind of, you know, kind of smallish compared to. Global markets in the future, NFTs are going to go into more regulated, heavy duty use cases like property titles, insurance contracts, derivative contracts, IP, all these kind of or music rights, et cetera, all these, all these more intense use cases. And the market size is going to grow dramatically. And the reason being is because the efficiency gains you get from using a global, you know, unsensible decentralized database for trading these assets or kind of showcasing that, okay, I do own this IP or yes, this contract was created on this date and is valid and very, very transparent, et cetera.

• 13:02Speaker 02

  Like that, that's going to happen. It's going to take time because those are the regulated markets. And the reason that these, these markets that we have today, these toy-like markets, that NFTs went in there and thrive right now is because these are unregulated. But NFTs are going to eventually completely take over every asset that has any form of value, whether it be digital value or physical value. And that is like the, the long-term vision.

• 13:23Anthony Pompliano?

  Got it. And so when you start to think about kind of how this is all playing out, there's various, I'll call them economies or platforms or areas that there's digital land, there's digital goods, there's, you know, all these kind of various assets being built within them. How much of this is like, if I go to Decentraland or one of these kind of individual, I think of almost as like an economy, I'll be able to buy assets and then they'll just stay within that economy versus I'll be able to buy a building or a car or a sword or whatever. And I'll be actually able to bring them in between all these different economies. Like, how do you think about interoperability between this versus no, ultimately there's going to almost be this like coalescing of liquidity around one or two of these virtual economies.

• 14:07Anthony Pompliano?

  And then that, that will be the winner, the other ones will kind of fall to the wayside.

• 14:10Speaker 02

  Yeah, what's great about, you know, being on this open database is that they have the ability to be interoperable. The issue today, and keep in mind, like 99.99% of the population didn't know about NFTs or never heard about NFTs before January of last year, right? So a year ago, no one really heard about NFTs. So we're still super, super early in this. And so, yeah, I, I think that the issue today with interoperability is that there's not a great incentive. So if I'm Decentraland, sure, I can go to the sandbox and have their assets be interoperable. That takes a ton of time, dev resources and just effort for making that happen. And the potential payout right now is minimal just because the user numbers are quite small. And so I think right now, you know, that's the biggest issue in terms of interoperability. But what's great is that you have the ability, right?

• 14:55Speaker 02

  So that's really important. I think that over time, as the populations get larger and more users come on board and the user experience, etc. Gets easier. I think that then we'll see kind of a, I don't want to say vampire attacks. I think there will be some type of vampire attacks where people are trying to maliciously kind of steal your audience. But I think that we're going to see a lot more like collaboration where people are going to, you know, have some sort of agreement where they say, all right, all the swords in my world are, you know, they work in your world and they're axes in your world or something like that. Right? And I think that's a super exciting prospect for individuals and gamers, especially because, you know, today, if you spend 20 bucks in Fortnite, you're not getting any of that. Like you're getting, it's a sunk cost, you're not getting anything out of it. But in the future, if you're spending 20 bucks in the central land or whatever, ideally you can, you know, use that same item and sandbox and then take it with you.

• 15:39Speaker 02

  So that's, that's going to happen. It's going to take some time for sure, but that'll definitely happen.

• 15:43Anthony Pompliano?

  Got it. And then when you start to think about these assets, how many of these are just you buy an asset and you can use it from a utility perspective? Versus there's like capital appreciation versus there's yield generation, right? If you look at, I don't know, like the Axie infinities of the world, YGG, Solid Ventures, all these folks. They're very focused, it seems like on yield generation, but how much of what you guys are doing is capital appreciation, yield generation, or it's just utility?

• 16:05Speaker 02

  Yeah, okay. So broadly, there's two types of NFTs, functional and non-functional. And we're definitely see kind of the, they merge together now. Whereas before it was collectibles and art, we're on the non-functional side. It's like what you see is what you get. And they didn't really do much. It was just, you know, enjoy your art or enjoy your CryptoPunk. Now it's definitely changing where, you know, board apes, for example, or other collectible assets that give some sort of functionality, like access to, private Discord or access to certain drops or whatever. And then on the other side of the market, you have functional assets, which is like virtual land and game items. And these items, they are potentially revenue generating. And I say potentially because, you know, for example, virtual land, you can rent out your land to other people. Or you can, you know, put a billboard up if you have a lot of visits to your piece of land and that can generate revenue there from ads.

• 16:49Speaker 02

  Or you can, you know, on the gaming side, obviously player earn is huge. And so you're able to generate yield by, you know, killing monsters and they drop these potions and then you. So let's put it for Ethereum. So I think that that's how we kind of look at the market broadly, but they are co-mingling where most assets are getting embedded with some sort of functionality today. And us as a firm, we tend to focus on just basically capital appreciation and identifying assets that we believe will will accrue more value long term. We're not really focused right now on the yield generation for a number of reasons, but number one, just being the the kind of technical technical constraints and bandwidth constraints, and also the fact that the market right now, the it's quite alpha rich. And so going down the route of yield generation is just

• 17:32Speaker 02

  more effort. And if we're able to generate, you know, outsized returns just from the the pure investing and, you know, just pure capital appreciation with less effort, then that's better for us. So yeah, that's probably how we look at the market today. But then also, like, when you dive deeper into the market, NFTs is a very broad category already, you know, and it's only but two years old, really, I guess. And, you know, virtual land, it has its own value drivers, gaming assets has its own value drivers. And so what we had to do is we had to dive into these markets and identify, okay, what's actually driving value within these worlds? And so like, for example, virtual land, the value drivers is really location, content parameters. So location, are you in Illinois? Are you in Manhattan? The content, are you a single family home or a skyscraper?

• 18:15Speaker 02

  The parameters is kind of like the zoning laws. So what is the height, width, length that you're actually allowed to build in this piece of land? And then if you go to gaming assets, it's really about utility. So if my sword does 10 damage, your sword does 100 damage, your sword is going to be more valuable because in theory, that sword, your sword will be able to generate more yield compared to my sword. And if you look at art, it's really all about artist reputation and brands. This is my opinion, but you know, if I make a Banksy Andrew, the NFT guy, no one cares, right? Because I'm not like some big time artist. If Banksy makes the exact same piece of art, it's going to sell for 5 million plus. And then if you look at the collectible side, this is probably the most esoteric, but it's really about narrative. And so, you know, to give a physical baseball card analogy, if I have the, you know, one of one Babe Ruth baseball card,

• 18:57Speaker 02

  everyone knows baseball, there's a big community of baseball fans, everyone knows Babe Ruth, he's really popular. And, you know, let's say I went, you know, got it graded by Beckett Grading Services, which is a third party grading service, and it was at 9.5 out of 10, so like Pristine condition and you know, all these bits of that story, they add to this value of narrative. And if you look at CryptoPunks, which is an example of a NFT collectible asset, you know, there's only 10,000 of them. They were given away for free in kind of a Bitcoin launch style back in 2017. They used to be considered the first NFTs on Ethereum. Now we know that that's not true, but they used to be considered that. So they're very early. You know, they're made by two geniuses, Brooklyn, et cetera, et cetera. So all these bits of this story, they add to that value narrative. And it really kind of drives the value to a lot of these non-functional assets.

• 19:40Anthony Pompliano?

  What's the craziest thing you've ever bought in this like whole world? What's the most insane thing? You're just like, yeah, I can't believe we bought that.

• 19:47Speaker 02

  Uh, the most insane thing? Um, I don't know. I mean, now it all seems normal to me, but I mean, just the concept of virtual land is so weird, right? So, uh, to, to have this idea that, okay, we're going to be spending, uh, time within these environments, some, some, at some point in the future, you know, and in some sort of VR capacity, right? Uh, now we're in like the pre-Napster era of these virtual worlds. So it's super, super early. And user experience, you know, we admit is not that stellar. Um, but that's a super weird concept because if you think about a virtual world, it's really just like a social media platform. Cause you go there, there's no objective. You can kind of run around. You talk to people with voice chat. You talk to people with text chat. You can attend conferences, concerts, pitch meetings. I've done a lot of pitch meetings inside virtual worlds.

• 20:29Speaker 02

  And, uh, and really your profile, the piece of land that you buy is your profile. So instead of just posting photos of yourself and kind of showing off in that sense, you can make a gallery, show off your NFTs. You can also post photos, photos of yourself if you want. You're able to, if you know how to code, you can make a mini game and actually charge for that experience. Pull up an ad, you know, you can make an e-commerce store. Like I have a buddy who, uh, back in 20, I think it was 2019, created a shoe store inside CryptoVoxels, which is another virtual world. And so he's selling his shoes and generating passive, and these are NFT shoes, selling, you know, generating passive income from that activity. I was like, dude, you should open up more locations, not in CryptoVoxels, but no, that's five or 10 more in CryptoVoxels, five or 10 in Decentraland and these other virtual worlds. Then eventually you should go public via a social token, right?

• 21:14Speaker 02

  And, and you know, give the holders of the social token, you know, let's say some, some revenue, uh, from the cash flow. I mean, obviously that's a clear security, but that'd be really cool. And maybe it's a governance in the, in the sense that they can decide like the next shoe style or something like that. Right? So I think that we're, we're on the cusp of this weird world of, of that's, that's, you know, these metaverse native businesses. Are going to be launching soon and it's going to be a whole like mirror economy and we're going to meet people in the future that are like, hey, what do you do? Oh, I'm like, I'm an axi farmer or something weird, you know, kind of activity like that. And that's going to be quite common, you know, in the next two to two to five years.

• 21:47Speaker 03

  Joe, Joe, what questions you guys got? So my question would be around play to earn gaming and kind of how NFTs fit into all of this. So like my understanding is that maybe there's three and a half or four billion somewhere kind of in there gamers worldwide. And that ranges from everyone from, you know, playing small games on your mobile phone to hardcore gamers. But a small portion of this is still play to earn. Do you think that we'll see a shift of like the total quantity of players towards play to earn where it's the majority? Or do you think it's more of just the people that are spending the most money in these games that shift to play to earn?

• 22:16Speaker 02

  It's a really good question. So, so what we saw with play to earn was it introduced a new type of gamer. Because before gamers just game because they want to have fun, right? So that's the whole purpose of gaming. And, and now we have people that wanting to earn income that are playing games and that's a totally new type of, of customer. And also that's a, that's a huge market, right? That's an absolutely massive market. Pretty much everyone in the world wants to earn money. So, so I think that going forward, most games are going to integrate some sort of play earn style system. And I think right now the issue is that it's oftentimes negating the fun factor, right? So if you're grinding, unless you, you enjoy grinding, but most people don't, unless you enjoy grinding and you're really just out there to try to generate yield. And in some sense, you know, that, that, yeah, it kind of takes away the, the fun factor.

• 22:59Speaker 02

  But over time, I think once, once it becomes normalized, people will just start playing the games as they would and they're going to be fun. And they're going to be earning, earning money while they do so. So, so I think that over time, these, these communities will just merge and these different kind of customer bases will just merge into one. And it's gonna be, oh yeah, I know I'm playing, I don't know, Halo or Call of Duty or whatever. I happen to earn some money. It's not like, oh, I'm playing this just for the reason of earning money. Cause, cause again, these yields will, will come down over time and, and, and the, the revenue that's generated will not be, you know, extremely insane over, over the course of, you know, five to 10 years.

• 23:30Speaker 03

  So I think the, the counter argument to that, right, would be that these games probably aren't going to be very good if there's community governance. And if people are trying to earn a small amount of, of income off of it, they want to more base it off entertainment where they can spend billions of dollars on marketing and kind of distribution for these games. Do you think that I'm imagining you see this kind of converging at some point where these games become basically one in the same where they're just?

• 23:51Speaker 04

  This is good if they're played or earned versus non.

• 23:54Speaker 02

  Yeah, exactly. I do think that right now it's such a novel concept like wasting. I can play. I can play video games and earn money like that's crazy. And a lot of people are motivated by that money right now. And, and you know, they will be in the future, but I think it'll be less so. I know it sounds kind of weird, but it'll just be like, it's like using a, you know, the future Uber, the future Facebook and the blockchain or metaverse, metaverse type version. Where you're getting compensated, not in, not in a big way, not earning hundreds of dollars, but small amounts of money. From the actions that you're taking within these environments, within these digital environments. So I think that over time, yes, like it will become totally normal and the fun factor will, will fully be there and, and you'll just be like, oh, I earned, you know, over the course of a week, I earned, you know, five bucks like playing this game. That's, that's pretty exciting.

• 24:33Speaker 04

  Yeah, gotcha. Andrew, thanks for joining us. I really appreciate it. Can you talk, you talked originally about the functionality versus community based NFTs? Um, and the difference in the projects. Can you talk about how you evaluate those?

• 24:44Speaker 02

  So how we evaluate functional versus non-functional assets?

• 24:48Speaker 04

  Yes, or just an NFT project in general.

• 24:51Speaker 02

  Yeah, okay. Yeah. So, so essentially, uh, this weird, this world is very weird and new and confusing. So we're like, okay, what actually matters here? Fundamentals, like fundamentals always matters. I mean, you can argue in crypto, like not always, but, but eventually over time it does. So what we look at is, is team, product, token economics, community, market, data, risks. Assess every project on those bare bones fundamentals. And if a project passes muster, we're like, okay, great. Uh, we'll use crypto voxels, which is a virtual world for this example. We're like, okay, great. Crypto voxels is a really cool, exciting virtual world, uh, fundamentally passes our, passes our basic bar of, of, you know, kind of a DD right there. And what we're going to do is, uh, we want to make an investment. So what we want to do is we're going to dive into this virtual world and we're going to figure out the, the value drivers. And so the value drivers are location, content parameters, right? That's what we figured out for most virtual worlds.

• 25:35Speaker 02

  And then we have to dive even deeper. It's like, it's a kind of three steps, dive even deeper and develop a thesis on, okay, what, what is our going to be specific thesis on investing in this specific virtual world? And so crypto voxels, uh, what we, you know, uh, I don't know if I want to dive to be, to you. But like basically we're like, okay, well, what areas are going to be valuable? Spawn is going to be very valuable because new players, they always enter in the same spot. Right? So any land around that same spot is going to get the most number of visits. Therefore, the most potential for revenue generation in terms of rentals, in terms of kind of billboards and, and you know, ad revenue in that sense are just kind of eyeballs in general. So, so that was a great play. And then also there is a, there's a downtown area called Frankfurt. And when that, when that was launching, uh, we, we were kind of first to, to market there.

• 26:19Speaker 02

  And that area had the tallest height limit within the whole map. Right? So our, our thesis was that, okay, you know, tallest height and tallest, the most buildable area. That'll just be wanted, a wanted kind of feature of, of these different virtual worlds in general. And so we made a big play there early on. And I remember entering, entering that, you know, that, that, that kind of market early on. And people were furious because we were bidding up, uh, we were bidding one ether on these pieces of land and, and no one up to that point had bid that high. The highest bid ever was like point seven or something like that. And so people were DMing me and pretty furious about, about what we were doing. We're like, listen, like I apologize and we're not trying to like mess things up, but, but we think that's going to be extremely valuable. So now we're the largest landholder within that downtown area.

• 27:00Speaker 02

  And, uh, and you know, you know, now it's going for each piece goes for 50 to, you know, 50 to 60, 70 ether. There's some that go for 200 ether. Right? So, so I think that it really depends on each, each, each game, each environment, each platform is its own world. And you need to identify fundamentals, value drivers, and then specific thesis based off of that exact platform or game or protocol.

• 27:21Anthony Pompliano?

  Andrew, when you think about how the average person, like how they should think about all this, uh, before we let you go, like, what is the framework they should use to, to kind of evaluate this stuff? Or, or how do you think that they should start to learn about it?

• 27:33Speaker 02

  I think just keep it simple. Like, I think that, that, that is like simplicity is key because this world is filled with influencers shilling their bags and kind of people talking about this and that. So I think that you have to identify, if you identify a game or product or virtual world, whatever you want. Just, yeah, just, just try to focus on, is this a fun experience? Is this something that I enjoy? Is this a beautiful piece of art? Like, I think that keeping it dead simple is probably the best way to, to go about this market because it is so new and confusing. Using and and really looking at, okay, you know, the, the, the team, you know, as a team accomplish, you know, have they built a game in the past? Now they're building a game. Have, have they done something that is, is this a piece of art to have they, has this artist created, you know, something in the past where they have a good reputation or a good kind of community base? Uh, if it's a collectible asset, you know, what is, what is it kind of the story

• 28:17Speaker 02

  here? What's the narrative here? And so I really think keeping it simple and keeping it, you know, light is the best way to go about this market. Uh, and then if you want to kind of, you know, do your homework and really dive deep, there, there's always that option. But I, I found that simple is always tends to win.

• 28:31Anthony Pompliano?

  Got it. Where can we send people to find you on the internet or find out more about the work you guys are doing?

• 28:35Speaker 02

  Uh, Twitter. So my Twitter is Andrew Steinwold. Uh, and, uh, yeah, you know, DM me if you're, if you're, you know, launching a startup in, in the NFT space. And I have a podcast as well called Zima Red. And so, you know, go, go check that out. And, uh, yeah, I, that's, uh, that's where I am.

• 28:50Anthony Pompliano?

  Got it. Well, man, listen, you, uh, you're doing big things. I think the way you think about this is fascinating to me and to many, many other people. So keep it up. I love the Twitter account. You're just firing out. He's just like, hey, what about this? What about this? What about? I'm like, yes, keep it going. I, I learned a ton from you. So I appreciate, uh, appreciate you put all the time and effort into me. On my hand, I just shitpost. So I, you know, a little bit easier for me.

• 29:12Speaker 02

  No, you, you are, you are the king. I, I learned from you. So yeah, definitely.

• 29:15Anthony Pompliano?

  No, it's all right. I, I, well, then that's going to mean a degradation of the quality of your Twitter account very quickly. So don't, be careful. Uh, all right, man. Listen, thank you so much for, for joining us. We'll definitely have to do this again in the future as, as this whole thing keeps growing, but, uh, but keep up the good work.

• 29:30Speaker 02

  Awesome guys. Thank you.

• 29:30Anthony Pompliano?

  All right. Later, buddy.