NFT Uses for Today (and Tomorrow)

OpenSea CEO and cofounder Devin Finzer and a16z General Partner Katie Haun talk about the latest use cases for NFTs and the "tokenization of everything." This video was recorded during a16z's NFT Summit, a conference featuring the best NFT builders and thinkers discussing the latest trends in NFTs, co-hosted with the Stanford Center for Blockchain Research. Find all the talks from the NFT Summit here: https://bit.ly/NFTsummit Check out a16z Crypto Startup School here: https://bit.ly/a16zCSS

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

• 0:00Speaker 00

  Welcome to the A16Z Podcast. I'm Zorin. Recently, A16Z and the Stanford Center for Blockchain Research hosted the NFT Virtual Summit, which brought together leading thinkers and builders on the topic of NFTs, or non-fungible tokens, which are enabling new creator and ownership economies to emerge. We've covered NFTs in other podcasts and articles, including a curated list of reading resources available at a16z.com/nfts. Today, we're sharing one of the discussions from the virtual summit, all of which were published on our A16Z live feed. This episode features general partner Katie Hahn, chatting with Devin Finzer, co-founder of NFT marketplace OpenSea, on the topic of NFT use cases today and tomorrow. They cover, quote, "the tokenization of everything." And to be clear, none of the following should be taken as investment advice,

• 0:45Speaker 00

  so please see a16z.com/disclosures for more important information. The chat begins with Devin, tracing the opportunities for creators and collectors of NFTs.

• 0:55Speaker 01

  So, back when Cryptokitties started, really the only application you could interact with with regards to NFTs was specifically Cryptokitties. Now, there's dozens of different art projects, there's dozens of different wallets, thousands of different creators who've come on board and started making NFTs. There's virtual worlds where you can bring your NFT inside of the virtual world and display it inside of a museum. There's so much stuff that has been built. And of course, there were a few events that threw fuel on the fire. You saw the launch of NBA Top Shot. You saw the big art sales from Beeple. But I really don't think that any of this could have happened

• 1:38Speaker 01

  without the gradual buildup of the early adopter tech enthusiast community just really cranking on building high-quality new experiences for people to try out with regards to NFTs.

• 1:52Katie Haun?

  Yeah, great. Well, the infrastructure certainly come a long way. And there are a lot of people building in this space now. One thing that you mentioned is, well, you mentioned a lot of use cases and I want to dive right into those. But before we do, you know, we, we think about NFTs when people are first starting to hear about them, really affiliate that with digital art. But of course, NFTs are about much more than digital art. We, we started hearing about music, collectibles, but even now, things like turning tweets into NFTs and blogs into NFTs. Like Devon, what characteristics, what can and can't be turned into an NFT? I guess is my question, like what characteristics make something good for becoming an NFT versus not?

• 2:30Speaker 01

  Yeah, I think ultimately what we're talking about is the tokenization of everything, right? If you look, if you actually zoom back and you think about kind of the beginning of Bitcoin and, and all the kind of crazy wave that we saw in 2017 with financial assets. That was really this trend of tokenizing all of the finance world, right? But now what people are realizing is that there's this whole class of digital and perhaps even physical assets that can be tokenized that really don't have as much to do with, you know, cryptocurrency, but really just have to do with kind of the regular internet that people are used to. And what's exciting is that there's, I would actually maybe bucket into two categories. One is there's the existing landscape of digital assets. So all of the things you mentioned, right?

• 3:15Speaker 01

  Game items, event tickets, domain names, you know, maybe even your Twitter handle could be an NFT one day. But then there's the, so those are the existing ones. And then there's the new markets that, you know, are sort of, haven't even really been dreamed of yet. And digital art, I would say, falls under that category. Digital art just really wasn't a market three years ago. And now we're, it's becoming one, which is really exciting to see. It's super weird and wacky. You know, you have these really expensive pieces that sell for tens of millions of dollars, but it's establishing itself as a category. And I think maybe one of the sort of challenges for the audience is what are other markets that,

• 3:58Speaker 01

  you know, are sort of like things that we, we haven't even really thought of yet. But to answer the question directly, I really think that there's very few things that you could sort of leverage this technology to, to really create, create a market around.

• 4:12Katie Haun?

  Well, you mentioned kind of physical and the digital and merging those two worlds. Like, how do you think about NFTs in that context? Like, something I wonder about is, you know, you've talked about ticketing, right? Obviously, right now, we have physical tickets we can hold in our hands or backstage passes. Talk to me about merging the physical and the digital worlds with NFTs. And by the way, like, why would I want an NFT as a ticket or backstage pass instead of physical?

• 4:42Speaker 01

  Yeah, well, I think there's a couple of pieces to it. With an NFT, the exciting thing about it is the moment you turn something in an NFT, it sort of plugs into all of the existing crypto infrastructure. So when you make an NFT, what do you kind of get out of the box? One is you get a marketplace, right? You can go and buy and sell it on OpenSea. So you sort of get some degree of, at least as long as there's demand for your NFT, you get some degree of liquidity. You also get, you can plug it into the crypto DeFi ecosystem. So if it's a high-value NFT, you can imagine taking a loan out on that NFT. And again, all of this stuff doesn't require any, you know, talking to like specific companies or any integration overhead.

• 5:26Speaker 01

  It's just, you basically get this with that primitive. So why tokenize a physical asset? Well, one of the interesting things is, and we're starting to see experiments with this, is people are holding in their own custody physical items, but issuing NFTs for them so that they can be traded around many times before they're actually redeemed for the physical asset. And that's interesting because then they can basically be plugged into that free-market crypto ecosystem without sort of having to kind of build your own peer-to-peer marketplace where you, you know, you potentially have to be transferring that asset many different times from person to person every time it sells. You can instead get all the benefits of tokenization.

• 6:10Speaker 01

  Now, it's not necessarily going to work for every single physical asset immediately, but we are already starting to see some interesting experiments with people trying that out.

• 6:20Katie Haun?

  It sounds like the extra piece then that NFTs provide in the context of physical goods, which is the words that come to mind when you're describing this is more freedom, right, and more choice for people who own the good. They could go sell it, like you said, they could go trade it, they could use it as collateral. So it sounds like that that's what NFTs give over just the physical item. Is that correct?

• 6:42Speaker 01

  Yeah, and I would say they they give access to sort of a brand new economy of in a very early economy centered around blockchain and crypto, right? And plugging into that economy has some pretty interesting benefits.

• 6:58Katie Haun?

  Well, you've mentioned, and I know you and I have talked several times about the different use cases you see, and I always find that really exciting. Talk about some, you mentioned museums. Can you talk a little bit about virtual land and some different use cases? Because I always think that's really exciting when you start talking about that.

• 7:16Speaker 01

  Yeah, I'm a huge fan of kind of what's going on in the virtual world space. And I think one thing to remember with that particular space is it does take time for these things to evolve. So especially kind of when you're dealing with things that are game related, that have longer development cycles than your traditional web applications. These things are pretty early, but they're really getting quite interesting. So with regards to virtual land, the idea is that you could have a virtual world with essentially plots of land where if you buy the land, you can then build on top of the land, like you would with regular real estate, right? And so, in fact, OpenSea, as a company, we were looking to set up a headquarters

• 8:00Speaker 01

  in one of these virtual worlds. And I actually went to sort of the equivalent of a virtual real estate agent to figure out how, you know, how do I get a good deal? Because the land was somewhat pricey. So now you have you have the economy around the land. And then what's interesting about that is you can build, you know, build houses on top of this, build museums on top of it. And what you can do is you can bring in NFTs from other projects, right? So for example, in one of these Virtual worlds called crypto voxels. A big thing that people are making are museums of crypto punks, which crypto punks, for those of you aren't familiar, is kind of one of those most famous

• 8:41Speaker 01

  early NFT projects. I like to call it kind of the first candidate for a true digital antique. But people are creating these museums of crypto punks inside of crypto voxels. And you could even imagine as time goes on, it being possible to bring in NFTs that represent something more sophisticated than just an art piece. So in my background here, I've got a Zed Run racehorse, and there's a game centered around racing these virtual horses. But you can imagine bringing those horses into a virtual world. And again, there's no direct affiliation between this project and those virtual world projects. But they all kind of interoperate really nicely. So that's why I think

• 9:25Speaker 01

  virtual worlds are exciting. They're kind of a first glimpse at some sort of metaverse type ecosystem.

• 9:32Katie Haun?

  Yeah, when you talk about virtual land, I think about all of the limitations in the physical world, like zoning laws, right, or restrictions and easements. Like, how do you think about that in a virtual context with virtual land?

• 9:44Speaker 01

  Well, I'm no expert on this, so I'm just sort of speculating, but I actually have heard talks of similar sort of restrictions, right? So you don't want like the casino next to the school or something like that, right? Like, you know, similar types of policies that can be implemented. What's interesting is, you know, we have had these sort of virtual economies for quite some time. If you look at Second Life, it was a quite a large economy, but the thing about it was, you know, it's a closed economy, right? So it's centrally controlled. That's fine. Like, there's absolutely nothing wrong with a centrally controlled game economy. And they will continue to sort of persist, but there's a whole design space that you can explore if you decided to create a free market economy.

• 10:29Speaker 01

  And that's what some of these virtual worlds are experimenting with is allowing people to essentially transact in crypto, be a lot more entrepreneurial, and then have the assets sort of backed up in a much more robust way than they would if they were just on a central game server.

• 10:47Speaker 01

  But I think to answer your question, a lot of the same problems that we have in the physical world will start to emerge as well.

• 10:55Katie Haun?

  Wow, that's so interesting. In talking about kind of things like projects like Decentraland and virtual land, what else do you see other than just museums? And then obviously, those virtual museums are populated with NFTs. You mentioned that. Do you think we'll see storefronts kind of crop up or all the things? Like, what other kind of use cases would you see in these virtual worlds?

• 11:17Speaker 01

  Yeah, a couple of cool ones that we've seen are storefronts for sure. So now there's like wearable clothing inside of Decentraland. I think there's even some like fashion going on in Decentraland. So storefronts for purchasing fashion items and things like that. Those are starting to become more of a use case. The other one that I think has been big this last year is virtual events, right? So I actually went to a concert inside of Decentraland. It was funny, like everyone was kind of emoting. And, you know, like, it was mainly like, you know, people chatting and like, I think it's still, there's still some development to be

• 11:58Speaker 01

  done there. But it was kind of cool to sort of have this, you know, these virtual events where anyone can pop in and attend. So those are, yeah, those are two things I'm excited about. And then there are sort of games inside of the virtual worlds as well. So like, there's a game called Battle Racers that built their entire game on top of Decentraland. So those types of use cases are interesting.

• 12:23Katie Haun?

  Wow. What about for on the creator side? Like, what benefits do creators get? You know, I imagine, for example, you talked about you just went to a virtual concert. Imagine the tickets were NFTs. Is that correct?

• 12:36Speaker 01

  I think it was free to attend.

• 12:39Katie Haun?

  But imagine if tickets had been NFTs to attend a virtual concert or a virtual event. What kind of things then do creators get out of doing tickets or backstage passes with NFTs?

• 12:51Speaker 01

  Yeah, well, generally speaking, I think what's exciting for creators is that creators can have a much more direct relationship with the people who want to support them. So if you think about Instagram today, you're creating all of this interesting content, but much, most of the value is being captured by the platform itself, kind of due to how the business models work, right? Advertising-based business models don't typically give a lot of revenue back to the people who are contributing the content. So NFTs really changed the math, right? Now, you're essentially selling a digital asset and, and receiving revenue directly from that sale,

• 13:33Speaker 01

  as opposed to this more indirect business model where you're sort of beholden to the platform. And what I think is interesting about that is you can sort of layer on various degrees of utility. So you could have NFTs that are pure collectibles, where really you're just buying the asset to kind of support that person and you're, you're hoping that there will, you know, maybe, maybe you're just buying it, you know, out of pure support, or you're maybe thinking that there'll be some resale value if that person becomes more successful in the future. Or you can layer on utility around, you know, backstage passes or event tickets, or like a free chat with, you know, a dinner with someone, those sorts of things. It's really, the world is your oyster when it comes to what you could attach to the NFT.

• 14:18Speaker 01

  So I think, yeah, I think it's kind of early days for experimenting, but there's, you know, I think there's already a lot of creators who are starting to realize that this is a huge opportunity.

• 14:28Katie Haun?

  Yeah, I'm all of a sudden thinking no more mailing lists, right? Like, there's no need for that, no need for spam email, because it allows people to interact, these creators to interact directly with their fans or people who want to use these products and services.

• 14:43Speaker 01

  That's right, yeah.

• 14:44Katie Haun?

  You've talked about also mixing or remixing NFTs. Can you describe what you mean when you talk about that? Just for those in the audience who aren't familiar with the concept. I think this is super interesting.

• 14:56Speaker 01

  Sure, so this was actually something that was talked a lot about when NFTs sort of first started, which was this idea that now you have more and more NFT projects. You have these assets that are owned by users and you can sort of compose them in interesting ways. So one of the folks who works with us at OpenSea today, he actually built maybe one of the first kind of layer two games on top of CryptoKitties back then. So what he did was he said, oh, you know, it's pretty cool that you own your CryptoKitty. Well, maybe you could accessorize it with a hat, right? And so he built a game called Kitty Hats, which again had no affiliation, direct affiliation with CryptoKitties, but they launched their own NFTs.

• 15:41Speaker 01

  And then when you bought these hat NFTs, you could like add them to your CryptoKitty. Even going a little step further, you could imagine like, you know, maybe there's some other game out there where, you know, it's like CryptoPuppies, again, completely separate game, but you could then a third-party developer could come and they could say, instead of creating my own NFT project, I'm just gonna, I'm just gonna say, okay, bring your own CryptoKitty, bring your own CryptoPuppy, then I'll create this game that allows you to battle the two, right? Versus, you know, sort of starting from scratch. Now, a lot of this stuff, I'll admit, is a little bit far out. And I wouldn't say that much of it has come to fruition quite yet,

• 16:23Speaker 01

  but I think, you know, we're still in the infrastructural phase and once this becomes just such a basic primitive that, you know, you can really rely on.

• 16:34Speaker 01

  You know, people be able to bring their own NFTs to an application, then some of these other more sophisticated things I think could be really interesting to experiment with.

• 16:44Katie Haun?

  Yeah, and I think some of these, like you weren't even imagining, right? Like, I remember you telling a story recently, can maybe you could share this with that, it's about the designer that you met through the, or maybe you didn't meet her, but who was studying and paid off her student loans. Can you tell that story, just to demonstrate the breadth of how we don't even know it's coming in this space?

• 17:04Speaker 01

  Totally, yeah. So I think, you know, there are now a lot of folks who are, who either have been in the crypto art scene for some time, or starting to explore it, and are really making a name for themselves in this new niche. So, for example, I was giving a talk at the Fashion Institute of Technology about, you know, kind of educating people on how they could get involved. And I had, I heard from the instructor that one of the students who had gone to the talk last year, before everything was so crazy, had basically, you know, started becoming a crypto artist and publishing her work, and had paid off, you know, had made enough

• 17:49Speaker 01

  money doing that, that she was able to pay off her student loans. And then you also hear about people who are kind of quitting their day jobs and doing this full-time. Now, I'm not suggesting that people necessarily do that, but it is really interesting to see sort of the jobs of the future emerge, right? Where a long, you know, a while ago, when folks are still worried about kind of the effect of automation on jobs, but there was this idea that there would be a new class of jobs that would emerge from kind of these technological trends. And this is, you know, this is sort of one of those examples, right? Where people like that virtual real estate agent are now taking on completely new forms

• 18:33Speaker 01

  of work, because there's new asset classes and new demand coming.

• 18:38Katie Haun?

  Right. Well, maybe also, we know a lot of commercial lease space is available in certain cities after, you know, COVID. But it is interesting when you talk about virtual real estate agents. And this is actually a category that we're starting to see. And I think that just demonstrates the breadth of this category. It's not really just about digital art. Even that is a huge category. Thank you so much, Devin, for joining us. This is really exciting.

• 19:05Speaker 01

  Thanks for having me.