Fractional | AMA with Andy8052

NFTs have exploded in 2021, but many coveted pieces are far out of the price range of average DeFi citizens. Enter Fractional, the new protocol for buying, selling, and minting fractions of NFTs. This breaks apart NFTs and allows anyone to unlock NFT liquidity and open the door for community involvement. To detail this step forward in crypto culture, we bring on Fractional lead dev @Andy8052 for a Live AMA. ------ 🚀 SUBSCRIBE TO NEWSLETTER: https://newsletter.banklesshq.com/ 🎙 SUBSCRIBE TO PODCAST: http://podcast.banklesshq.com/ 🏅CLAIM YOUR BADGE: https://newsletter.banklesshq.com/p/-guide-2-using-the-bankless-badge ------ BANKLESS SPONSOR TOOLS: ⚖️ ARBITRUM | SCALING ETHEREUM https://bankless.cc/Arbitrum 🍵 MATCHA | DECENTRALIZED EXCHANGE AGGREGATOR https://bankless.cc/Matcha 🔐 LEDGER | SECURE YOUR ASSETS https://bankless.cc/Ledger 🦄 UNISWAP | DECENTRALIZED FUNDING https://bankless.cc/UniGrants ------ 📣 SMARTCON | Register for Smart Contract Summit 2021! https://bankless.cc/SmartCon ------ Resources: Andy on Twitter https://twitter.com/andy8052?s=20 Fractional https://fractional.art/ ------ Not financial or tax advice. This channel is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. This video is not tax advice. Talk to your accountant. Do your own research. Disclosure. From time-to-time I may add links in this newsletter to products I use. I may receive commission if you make a purchase through one of these links. Additionally, the Bankless writers hold crypto assets. See our investment disclosures here: https://newsletter.banklesshq.com/p/bankless-disclosures

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

• 0:10Ryan Sean Adams?

  Welcome to another Ask Me Anything. Today, we have Andy8052 from Fractional. Fractional is a place, a new project just came out where you can actually fractionalize an NFT, or you can buy a fraction of an NFT. This is a really cool NFT money primitive, I suppose, David, because I know you're in the market for a CryptoPunk, right? You're still in the market for one?

• 0:32David Hoffman?

  Yeah, I submitted my bid yesterday, but it took me a while to get over the hump of allowing that Ether to be removed from my wallet. As people know, I'm an Ether Maxi, and so parting with a whole CryptoPunk's worth of Ether was a tough decision. Bid hasn't been accepted yet, though, so maybe I use this platform instead.

• 0:50Ryan Sean Adams?

  You can still change your mind. Well, so if you do change your mind, instead of buying an entire CryptoPunk with Fractional, you can actually buy a percentage of a CryptoPunk. That's the idea. Maybe you want 5%, maybe you want 10%. You don't need to own the entire thing. So this is super cool money primitive. Guys, we are going to get into it. As always, with these Ask Me Anythings, we are live streaming on YouTube. So if you have a question, throw it into the YouTube chat. We will try to get to your question. We have a ton of questions lined up ourselves for Andy. Before we begin, David, we should just mention, because it's coming up next week, the SmartCon Summit. This is the Chainlink Smart Contract Summit. It is going to be August 5th through the 7th. We're going to be hanging out, at

• 1:34Ryan Sean Adams?

  least on the 5th. We've got a panel that day, EIP1559, we're going to talk about. Hopefully, it will have just shipped, like either the day before or that morning. We're going to be talking about that. We've got some ETH bulls on the panel list that I think you guys will recognize. But there's going to be 200 leading projects there across DeFi, NFT projects, three days of keynotes, workshops, and panels. Talk about automated market makers, layer twos, MEV, everything. This is an awesome way to get educated on DeFi if you haven't yet. Best thing, it's free. Go sign up for that. We have a link in the show notes. Educate yourself. Guys, we are going to be right back with Andy from Fractional. But before

• 2:16Ryan Sean Adams?

  we do, we want to thank the sponsors that made this episode possible.

• 2:21David Hoffman?

  When you shop for plane tickets, you probably use Kayak, Expedia, or Google to compare ticket prices. So why would you limit yourself to just one exchange when you trade crypto? When you make your trades, you want to make sure that you're getting the best possible price on your trade and that you aren't paying high gas costs that you could have otherwise avoided. That's why you should be using Matcha. Matcha routes your orders across all the various DeFi exchanges on Ethereum, Polygon, Binance Smart Chain, and gives you the best possible prices without taking any commission. Matcha has smart order routing that splits your order across multiple liquidity sources if Matcha sees that it gets you better pricing. Trading on Matcha is super easy because it pools the liquidity for me into a single, easy-to-use platform and that has even saved me multiple times from accidentally picking the wrong DEX to trade on

• 3:05David Hoffman?

  and accidentally getting a bad price. Matcha also allows for you to make limit orders on-chain so you can set and forget your DeFi trades and they will go through automatically while you're away. New to Matcha is an integrated fiat on-ramp. You can purchase crypto directly with your credit or debit card and have that fiat be instantly traded for any token that has liquidity. When you're making a trade, head over to matcha.xyz/banklist and connect your wallet to start getting the best prices and most liquidity when you trade your crypto assets. Arbitrum is an Ethereum scaling solution that is going to completely change how we use DeFi. If you've been using Ethereum for the past 12 months, you've probably noticed the high gas fees and the slow confirmation times that have been plaguing DeFi. Too many people want to use Ethereum and it doesn't have enough capacity for all of us.

• 3:51David Hoffman?

  That's where Arbitrum comes in. Arbitrum is a layer 2 to Ethereum, which means Arbitrum can increase Ethereum's throughput by orders of magnitude at a fraction of the cost of what we are used to paying. When interacting with Arbitrum, you can get the performance of a centralized exchange while tapping into Ethereum's level of security and decentralization. This is why people are calling this Ethereum's broadband moment, where we get to add performance onto decentralization and security. If you're a developer and you want to save on gas costs and make an overall better experience for your users, go to developer offchainlabs.com to get started building on Arbitrum. If you're a user, keep an eye out for your favorite DeFi apps building on Arbitrum. Arbitrum has been working with over 300 teams, including Ethereum's top infrastructure projects,

• 4:35David Hoffman?

  and will be opening up to all users shortly. There are so many apps coming online to Arbitrum, so you may want to pack your bags in preparation for the great migration to the Arbitrum Layer 2. To keep up to speed with Arbitrum, follow them on Twitter @Arbitrum and join their Discord.

• 4:53Ryan Sean Adams?

  Hey guys, we are back talking fractional. This isn't Ask Me Anything. We have Andy8052 here. Andy is a DeFi Dgen, but he's turned NFT maximalist. At least recently, he's known as the guy with the Crypto Punk with the Beanie. If you've seen him on Twitter, he just announced his new platform. That's fractional. It's a platform to fractionalize NFTs across many owners. Andy, great to have you, man. How you doing? How you doing?

• 5:20Speaker 02

  I'm doing well. Thanks for having me. It's exciting to be here after watching very many of these online.

• 5:25Ryan Sean Adams?

  Dude, it's really exciting that you built this and you shipped it. I know the NFT community is super exciting, excited about it. NFTs are not in a bear market, despite what people may have told you a month ago or two months ago. This is boom time, man. We just had Myla Kunis NFT sell out last night. Like, it reminded me of the old days when CryptoKitties brought down the Ethereum network. Gas prices were spiking so high. So, NFT bull runs is a good time to ship your product. Tell me, Andy, answer this question first, if you would. Why would someone want to fractionalize an NFT?

• 6:06Ryan Sean Adams?

  Tell us why, and maybe define what it means to fractionalize an NFT for folks as well.

• 6:13Speaker 02

  Yeah, for sure. And definitely, NFTs are no way in a bear market. It's pretty insane. It's been a pretty fun couple of months.

• 6:24Speaker 02

  But yeah, so as far as wanting to fractionalize an NFT and kind of what that means, fractionalizing NFT is taking currently an ERC-721 token and putting it into a smart contract and generating an ERC-20 token, which works basically just like the other DeFi token you would see on Ethereum or anything like that. At that point, the tokens all just kind of are, they're going to sit in your wallet like in MetaMask or in your, like your Zapper and you can trade them on Uniswap or Sushi Swap or anywhere else you would so desire. And really, the one main difference is that, you know, there's, there's a scenario where you could have a buyout where the underlying NFT is purchased and

• 7:09Speaker 02

  then you would have a chance to redeem those fractions of your NFT for Ethereum to, well, kind of once the NFT has been pulled back out into the real world. As far as why someone would want to fractionalize something, you know, I think there's a lot of reasons. One, maybe if you're a creator and you exclusively make one of one artwork and you want to have, you want to try to reach a wider audience, maybe you're, like you're someone like X Copy where any one of your one of ones now is going to be hundreds of thousands of dollars, but you want to try to have a way to reward all of your early adopters. You could fractionalize a piece of work and give everyone 5% of the, of the NFT fractions. For example, if you

• 7:50Speaker 02

  are maybe a collector and you bought some CryptoPunks that are now worth an irresponsible amount of your portfolio, but you don't want to sell all of them. You still love your CryptoPunks. Maybe you have a, an ape that's worth $4 million now and you want to fractionalize it and sell 50%. And that way you still kind of own that ape and you're, you're still connected to that ape, but you can maybe be a little more responsible with your money. I don't know who would want to do that, but I'm sure there's someone out there who want, who would want to be responsible. And lastly, I think a really like basic example is I have a lot of friends who have bought CryptoPunks together or bought other NFTs together and they're just sitting in one person's wallet or they're sitting in a multi-sig and this is just a

• 8:32Speaker 02

  really easy way to kind of create a trustless scenario where you all can, can hold something together.

• 8:38Ryan Sean Adams?

  Wait, you mean your friends bought something together? They went in on purchasing a CryptoPunk? Like they pulled their ass, like their money and bought a CryptoPunk?

• 8:47Speaker 02

  Yeah, so I've done that as well before. But I also have friends who own like five different guys who all own one fifth of a CryptoPunk.

• 8:55Ryan Sean Adams?

  Really cool.

• 8:56David Hoffman?

  So Andy, is this specifically meant for like one NFT at a time? Or could you also do like bundles of NFTs and put multiple ERC 721 tokens into the same contract? And then fractionalize that? Is that also what you're going after? Or is that a different product that maybe you're not as focused on?

• 9:17Speaker 02

  Yeah, so I would say yes and no. It kind of depends. There are some really great products like NFTX and NFT20 that are focusing on kind of this like, you know, you can pool multiple NFTs that are all like kind and kind of create like this floor index of NFTs. We're not really going after that specific use case. But we do support fractionalizing multiple NFTs at the same time. And a really cool example of that is there's the Art Blocks Curated Set on Fractional, which is one of each of the first 31 Art Blocks Curated drops.

• 9:55Speaker 02

  And so that like is a really awesome basket of 31 NFTs that has a meaning and a reason why you would want to own a piece of all of them as opposed to just one individual one. So yes, but we also like to have kind of a little more meaning behind the baskets as opposed to just a bunch of random stuff all put together.

• 10:17David Hoffman?

  Andy, would you say, Ryan, you're muted. Andrew, would you say that this is a financialization application of NFTs? Or and like as in it's less about the NFT world and more about adding finance upon a layer of NFTs? Or is this also unlocking cool new things specifically in the NFT realm?

• 10:39Speaker 02

  You know, I think it's it's kind of a bit of both, and it really depends on the the person who's using the platform. In a way that that's pretty, pretty cool, I think, where there are some people who, after we launched yesterday, just said, I'm really excited that I now own 5% of an X copy, or 2% of an X copy. And so for that person, it's not a, it's not a financialization thing. It's just that they couldn't afford to own a full X copy, and now they, now they feel like they're a collector, and that's special to them. But it does, you know, breaking down a, a non-fungible token into a fungible asset does obviously unlock a lot of really powerful things that have already been made and battle-tested in DeFi, which don't totally work with NFTs. And so, for example,

• 11:22Speaker 02

  I'm very excited about the idea of being able to use like a lending protocol with a fractionalized NFT. For a lot of really small NFTs that are fractionalized, it might not make sense. It might, you know, we probably are gonna need some new products and new primitives to be built as far as how those would work. But if you have a, an NFT that's, say, like the Beeple first 5,000 days that sold for $69 million, that's a large enough NFT where if you were to fractionalize that, those, you could make a good case that, you know, either Maker should support that, or Ave, or Compound. So there definitely are going to be cool use cases that can be unlocked like that for some of the really high-value stuff.

• 12:01Speaker 02

  And then there's also, you know, there's so many cool things that are being built in DeFi, and so this does allow NFTs to be plugged into those relatively seamlessly.

• 12:08Ryan Sean Adams?

  Andy, I have a quick question, just to clarify, when you were talking about how, like, this is set up to begin with. So if, let's say, somebody owns, you know, 51% of a CryptoPunk, and I own 49%, who decides whether that CryptoPunk could be sold? I think you mentioned something to the effect of, like, if I am maybe a minority fractional owner of that CryptoPunk, then I, if, if it is sold, then I get the ETH proceeds from that sale? Is that how it works? Or like, who actually decides how this thing could be sold? And if I'm a, maybe a minority owner,

• 12:51Ryan Sean Adams?

  am I just kind of along for the ride? I just get, you know, reimbursed? I don't have a choice whether this thing is sold or not? How does that work?

• 12:57Speaker 02

  Yeah, good question. So

• 13:00Speaker 02

  Probably this, that whole portion of the platform is probably the most complicated part of what we're doing. And it just kind of comes by the nature of the beast. It's a hard mechanism designed to to build around. Just in general, okay, you fractionalize an NFT, how do you put it back together? And then that it's pretty important. The way that our, call it a buyout, the way that our buyout system works is we have a reserve price, which is if you've ever bid on something on like Zora or Foundation, when an auction hasn't started yet, they have their reserve price that once someone deposits that amount of Ethereum, then an auction will actually start and it'll create like a 24 hour auction. Our system works relatively similar in so much as we always

• 13:42Speaker 02

  have a live reserve price where someone can come in and deposit that amount of Ethereum to start a buyout. The buyouts are a little bit longer. They default to seven days and could be anywhere from three to 14 based on kind of what the initial person who fractionalizes the NFT thinks is best. So with the live reserve price, anyone who holds tokens is able to vote on what they think the reserve price should be. And we take a weighted average of everyone's votes at any given time to decide what the reserve price is. So if you will say in a situation where you owned 49% and someone else owned 51%, the 51% person would have a slightly larger say in in the reserve price than you would. But one other

• 14:26Speaker 02

  important caveat there is we also have a minimum quorum of 50%. So you don't have to set a reserve price. And if you weren't if less than 50% of of the fractional token holders are not setting a reserve price, then it's essentially not for sale. And you would need 51% to all agree that basically to come to say, we agree that it should be sold. They don't have to all agree on the exact same reserve price, but they have to agree that the piece is for sale.

• 14:55Ryan Sean Adams?

  Okay, so in order for the CryptoPunk to be sold, over 50% of the fractional owners effectively have to like agree that the thing should be sold. And then the remaining, you know, call it 49%, if there's 51 who wants to sell this thing, the remaining 49%, they would be along for the ride, but they also get to like vote on the price at which they'd sell it, proportional to their fraction of ownership. So they're along for the ride in that like it's a forced sell if you're a minority owner, I guess. But you do have some influence into the price at which you sell, is that the case?

• 15:39Speaker 02

  Yeah, yeah, exactly. And so say, you know, say the 60% of token holders all have agreed that, say one guy owns 60% and he's like, I want to sell this thing for 10 Ethereum. But then you own 20% and you're like, no, I think that's way too low. I want to sell it for 25 Ethereum.

• 15:58Speaker 02

  The reserve price then at that point would be, you know, based on the math and your average, like your token weight somewhere in between those two desired prices.

• 16:07Ryan Sean Adams?

  Interesting.

• 16:08David Hoffman?

  Why, why do some token, tell me the logic between behind why some token holders can dictate the prices that others sell their tokens at? Isn't that kind of like getting in the way of the free market?

• 16:21Speaker 02

  No, I think there's a little bit of confusion here. So it's not that, basically, so essentially if you do not set a reserve price, you essentially have set your reserve price to zero. That's what the default is. And so when you have set your reserve price to zero, you are not voting on a live reserve price. You said I'm actively not participating in this. Everyone who is actively setting a reserve price is creating the current.

• 16:49Speaker 02

  Live market for what the NFT can be bought at. As long as 51% of people are actively voting on that reserve price, then it is effectively for sale. And if you come in and say, hey, if you're one of the people who isn't voting and you think people are voting poorly, you can then actively start to vote as well and have an active vote and say in what the price should be. And so then at that point, say you had 10% of the tokens and 51% were voting at any given time. Then there'd be 61% voting because you've now started to also be a part of the group of people who are token holders and voting. So it's like essentially an opt in vote of what any NFT should be sold at at any given time.

• 17:33Speaker 02

  And you have as much agency as you want in that system to participate. And if you don't feel like participating, you don't have to. But assuming majority wants to, that's what's going to win out.

• 17:46David Hoffman?

  So where in the process does this reserve price and voting actually become relevant? So this is not when after, this is some point after where somebody who owns a high value NFT comes to fractional, put it in the contracts and then they fractionalize it. Those fractionalized tokens go out into into the world, into into all throughout Ethereum. And then once people buy those fractionalized tokens, that's when this voting takes place to dictate the reserve price for future buyers who are now interested in this secondary market of these tokens. Is that correct?

• 18:22Speaker 02

  Yeah, so essentially the the reserve price is just for anyone who would want to buy the entire NFT.

• 18:29David Hoffman?

  Ah.

• 18:30Speaker 02

  So, so for example, currently, like taking a very explicit example of like the Art Blocks curated

• 18:38Speaker 02

  fractionalized bundle, based on the numbers that I had from like this morning, it might be different now. The the live like trading valuation of the Art Blocks curated bundle was about 175 Ethereum. The reserve price was 230 Ethereum. So essentially, token holders were saying that, you know, even though we're like the tokens are currently At one particular valuation.

• 19:00David Hoffman?

  Right.

• 19:01Speaker 02

  We are not comfortable selling the entire bundle of them unless someone were to start an auction at two hundred and thirty.

• 19:07David Hoffman?

  Okay, and so this is actually how you can give assurances to DeFi apps like Maker or Ave or Compound to use these tokens as collateral. Because if they were to ever be sold, and that was one of my questions, is that like if you can actually forcibly sell these tokens. That is, that's scary for a DeFi app because then the token, well, it sounds like it'll just get revoked from a collateral in Maker Dow or Compound. But because you can give assurances that it's going to be sold for a certain amount of value. You can actually tell, you know, Ave Compound is like, well, the token is gonna get revoked, but instead it's gonna be Ether there as a replacement. And Ether is the best collateral in DeFi.

• 19:48Speaker 02

  Yeah, and that was actually like a really important part of kind of how we were building this is, so say there is a buyout and all of a sudden. So you, you own some tokens for the Five Eyes X copy piece. And you have them deposited in Uniswap and you're providing liquidity. If there's a buyout and now you have some redeemable amount of Ethereum. It's, your tokens don't go anywhere. They basically are now just pegged to some amount of Ethereum. And, and then at that point, you can, whenever you're ready. Pull those out of Uniswap and then go to the, go to Fractional and redeem those tokens and get your Ethereum.

• 20:26David Hoffman?

  So Andy, you and I are both a part of Pleaser Dow. You're a much more active member, member than I am. But Pleaser Dow is famous for owning a bunch of high value NFTs. And I would imagine that Pleaser Dow would be very, very interested in leveraging this platform in order to get further and further liquidity. On their, on their NFTs. So this seems to be like a perfect product for specifically high value NFTs. With a lot of prestige to them, to see how, how liquid can we actually make these things? And I think that's actually going to be the big experiment coming out of Fractional, is a question of like. How liquid can we actually make like the Edward Snowden NFT or the People Pleaser NFT?

• 21:08David Hoffman?

  So that's actually kind of a question to you, like, I know this is entirely speculation. Fractional is just a couple, a couple of days old. But how liquid do you think these things can get?

• 21:20Speaker 02

  Yeah, you know. Who knows? I think one of the one of the fun challenges with this is trying to figure out what the best way for people for there to be secondary market trades of these things like right now, we're super actively not participating in that.

• 21:36Speaker 02

  You, if you, if you fractionalize something and you want people to be able to trade it, you can go to Uniswap and make a liquidity pool. It's been pretty surprising so far. I guess I've never really had used Uniswap V3 with some of the like a significantly lower value asset. So for example, I think the five eyes fully diluted valuation is maybe $450,000 or something like that, which naturally, if you wanted to try to trade any like serious amount of value there to buy into that, you'd expect really bad slippage, but people were providing liquidity on Uniswap V3 and it really wasn't very bad.

• 22:18Speaker 02

  I was really impressed. It was, I think there was almost like $300,000 of volume in the first day of buying these, uh, these NFT fractions, which is really cool. Ryan, you're muted.

• 22:30Ryan Sean Adams?

  Did you say $300,000 of value?

• 22:33Speaker 02

  Of volume, yeah.

• 22:34Ryan Sean Adams?

  Of volume?

• 22:35David Hoffman?

  It's not volume.

• 22:35Speaker 02

  Yeah, buying into trading five eyes. Yeah.

• 22:40Ryan Sean Adams?

  I, what, so what's super interesting here is I'm kind of like racking my brain. I mean, like there, there's, there's some things that I feel like, um, you know, are, are natural to share, right? Like, you know, I'll share my bike. Uh, I'll, you know, I have a pizza. I'll share a slice of pizza with you, right? And then like, there are other things where like in life, you kind of want your own, you know, like I'm not sharing my underwear with anyone, you know, like that's mine. Right? Like, but like art is sort of interesting because, um, you haven't previously in the physical world been able to share it. Right? If you think about like a, um, You know, a Banksy piece of art. It's not like you can take that piece of art and like chop it into pieces.

• 23:25Ryan Sean Adams?

  And like, give it to you all your friends. Or it's not like you can like, get a thousand people and go in on a piece of art and each own some percentage of what you're, you know, where you're trying to best because these are like physical things like, you know, I don't want just a slice of a painting. I want the whole painting in my house. I can't fractionalize it. But with NFTs, you can fractionalize it. Um, I guess maybe my question is, this is like a, it's not just a new primitive for DeFi. It's a new primitive for ownership in general. If that makes sense. And like, I'm wondering what it's like, because I've never owned a collectible with a group of strangers.

• 24:07Ryan Sean Adams?

  Right? If I had Magic the Gathering cards, like they were mine, like they weren't mine, plus my friends. We didn't like pull things together. They were just mine. What is it like to own a collectible with a group of friends or a group of, even a group of strangers that you have to share? Is some of the magic lost? When you do that of like owning a specific thing?

• 24:28Speaker 02

  You know, I think sometimes probably, and it depends kind of what your goals are, what your end game is. But I think there's also something really awesome about it because like, one of the things that's been very evident in crypto and Ethereum primarily and NFTs especially is like, community is so important with all this stuff. And there's something to be said for having a random group of people all who came together in a decentralized protocol online, who now all have a vested interest in this thing. And maybe they want to display it in crypto voxels and they say, in order for you to see it, you have to own 1% of the, of the NFT fractions.

• 25:07Speaker 02

  Or if you want to like have your name on the plaque to own it and you can create these like really, really cool communities and stuff. And that's something I'm really excited to like continue to build. We haven't had a ton of time to really start getting into that yet because we've been trying to build much more of an MVP. But I think that, you know, with the right, with the right technology and the right tools in place, it can actually be like very empowering to the group of people who are all owning this thing together. But there definitely is always a time and place where people want to say like, look at this badass thing that I own myself. And it just kind of is two different scenarios.

• 25:41David Hoffman?

  Andy, we were talking earlier about the blasphemous nature of putting a crypto punk as your avatar if you don't actually own it. But when it comes down to the world of fractionalizing it, like, where do you think that line is? And I know this is kind of only going to be determined by social consensus, but I want to get your opinion. So like, say, say, somebody fractionalizes a, an alien crypto punk that they own, and they only fractionalize 49% of it. So they still own 51%. Are they still allowed to have that alien punk as their avatar?

• 26:13Ryan Sean Adams?

  That's a really good question.

• 26:14Speaker 02

  It's a really funny, you would be shocked. Maybe not. I hear that question all the time. But the funniest part is I get people who ask me, they're like, am I allowed to use this?

• 26:25Speaker 02

  I am not the Twitter police. I don't really care what you make your profile picture. But so there was people were talking about this on Twitter Spaces on Monday, and it seems like a lot of people were basically saying, yeah, if you own a percentage of this thing, even a small amount, like, you own it, do what you want with it. I'm sure some people will give, give someone a hard time, or be like, oh, you don't actually own the full thing. But I think in general, if you can signal that you are in some way, like, attached to this thing, people will probably get over it and, and be okay with it. But it'll be

• 27:08Speaker 02

  very interesting to see how that all plays out. I don't really know. It'd be awesome to be able to have some type of representation of your, your ownership, like, in the profile picture and what that looks like. And it's something we're pretty actively thinking about is how do you maybe issue a special NFT to someone who owns 10% of an, of an NFT, or something like that. Maybe you could use that instead.

• 27:27Ryan Sean Adams?

  As you're talking, Andy, it's, it's just crazy how all of this is like, it's all socially enforced, isn't it? It's all layer zero enforced, right? Like, you know, are you allowed to have a crypto punk in your Twitter avatar if you only own 1%? Well, it's not really up to you. I mean, there's, there's nothing legally. You're not going to get thrown in jail if you do that, right? There's no, there's no Ethereum police at your house, right? But like, You know, there, there could be some social stigma attached to doing that. Like you could be a LARP-er, you could be a poser, you could like not be achieving the signal that you're trying to receive with, with, with CryptoPunks. It's so fascinating. But I, I do wonder, just to follow up on David's

• 28:08Ryan Sean Adams?

  question, if this could potentially cause actually an unintended side effect, which is like a dilution of the value of some of these things. So if it comes to pass that social consensus says, hey, if you own over 10% of a CryptoPunk, you're allowed to use it as your avatar, or you're allowed to like, you know, flash it around in, in social media. Does that dilute the value of owning an entire CryptoPunk? And could that decrease the value of CryptoPunks over time? What are your thoughts on that thought exercise?

• 28:43Speaker 02

  Yeah, it's an interesting question. I would say no, primarily because even if you, if social consensus was 10% of CryptoPunk means use it as your profile picture, that's still at most 100,000 people in the entire world who could use a CryptoPunk as their profile picture. And now if you're making the barrier to entry even lower for getting to that point, you probably actually have more people who'd be interested. I think if you told people that you could own a CryptoPunk for $5,000 right now, and there were 100 million of them, you probably would have a lot of, a lot of demand to, to do that. I think, I think in general, like,

• 29:24Speaker 02

  society is always going to appreciate owning single things, especially like the uber wealthy. Like realistically, someone who can afford to buy an alien CryptoPunk is probably not very interested in owning a fraction of like a zombie CryptoPunk. That's not, it doesn't really do anything for them. Outside of maybe, you know, they want to be a part of a particular community that springs up around one or something. And so people like to emulate.

• 29:55Speaker 02

  Really wealthy people in in life in a lot of ways. And so I do think that there is always going to be demand to own to own individual ones. Regardless of whether or not you can own fractions.

• 30:08Ryan Sean Adams?

  I I think I'll, I think I buy that, Andy. I think that that that could very well be the case. Now I'm gonna, I'm gonna flip this and give maybe the the bull case for NFTs with something like fractional. It's out there, which is like you are providing this, this protocol is providing NFTs. Something in the finance world they would call a liquidity premium. Right? So like NFTs are not super liquid. You know, like ERC20s are much more liquid. But NFTs, you kind of have to sell all or nothing essentially. But you are taking a an illiquid asset. And essentially creating a a protocol to unlock the liquidity of underlying all of these assets.

• 30:53Ryan Sean Adams?

  And I wonder if that's actually could contribute to NFTs as a whole being more valuable. Because, hey, I I'm not locked into owning my, you know, 50 million dollar people piece forever. If I buy it, right? Like, I can always like sell 90% of it and still keep 10% at any point in time. So I'm on, I I get some additional value from that purchase. Because I'm not locked in because there is this liquidity liquidity premium. That now fractional has kind of added to all NFTs. So I do think this could be a boon for the space.

• 31:33Ryan Sean Adams?

  And this protocol could actually increase the value of all of the NFTs that are in existence. Particularly the more expensive NFTs. What's your take on that?

• 31:43Speaker 02

  Yeah, I I tend to agree. It was actually, that was kind of how I started thinking about doing fractional in the first place, funny enough. So I was very early in NBA Top Shot. And I was like, one of the largest spenders on the platform for a long time. I was basically just yield farming during the past summer and buying basketball moments. And as I was buying more expensive stuff, I was having, you know, there was a ton of people like the the floor level moments on the site were just like flying like crazy. But it was, you know, harder to sell something that was $50,000 or $100,000.

• 32:19Speaker 02

  And so I was like. Okay, I want to buy this thing and I think it's actually worth a million dollars or will be, but who is the market of people who want to do that? But there's a lot of demand for these cheaper things. And I think in general, if you have something like CryptoPunks is the easy example, but I think the CryptoPunks aren't going anywhere. It's very easy to make the case of why someone wants to own a floor CryptoPunk. I think it's very easy to make the case of why you would want to own an alien CryptoPunk right now, assuming you could afford it. But there's kind of this thought of like, okay, if I'm going to spend $10 million on an alien CryptoPunk, and I think that it's like 100x undervalued and this thing is going to be worth a billion dollars one day. Who is the billionaire who wants to buy a $1 billion alien CryptoPunk?

• 33:03David Hoffman?

  Yeah.

• 33:03Speaker 02

  That's like the hard conversation to have, but I bet there are, you know, 100,000 people who want to buy a piece of a billion dollar alien CryptoPunk, just to say that this is so cool, I own the rarest of the rarest NFTs. And I think it unlocks something there that's really, really powerful and it helps people feel more confident making really high-end purchases where they don't want to be the greater fool, but it's not even like necessarily a greater fool, it's just like a, there's no one richer than me to buy this thing.

• 33:36David Hoffman?

  Andy, I see this project falling in line with two very big themes that we've seen in DeFi over there, well, DeFi really over the last three years, but really we've identified it lately, it's capital efficiency. All DeFi apps are evolutions on capital efficiency and what fractional seems to me is capital efficiency for NFTs. Like that was what Ryan's question was and that was what we were talking about right now. It's like, how can we make NFTs, which are inherently a financial asset, right? Like anything that's a token on Ethereum is inherently part of DeFi by the very nature of it being a token. And now we are getting into the world of capital efficiency for NFTs. So my question to you is like, is this just the start? Like what do you think?

• 34:19David Hoffman?

  And especially as someone who is paying attention to the quote unquote NFT bear market, which actually wasn't a bear market, apparently. What do you see the trend coming from all these applications that are being built in the quote unquote NFT bear market?

• 34:32Speaker 02

  Yeah, I mean, I think that kind of what we're doing right now with NFTs is really, really just, just like the most low hanging fruit available. And so like it's the, the correlation or just like moving from real world collectibles to digital collectibles. It just makes so much sense. It's very easy. It's the easiest pitch in the book. It gets more complicated when you say, what if you have like all of the non fungible assets in the world are now non fungible assets on the blockchain and all these different types of things. And so I'm really, really excited about what it looks like when, you know, we're fractionalizing charged particles or we're fractionalizing Uniswap fee three liquidity positions, although those don't like totally make sense. I had a long conversation with some of the guys from Uniswap about it and we came to

• 35:17Speaker 02

  the conclusion, maybe it's not the best thing. But just in general, the idea I'm very excited about as DeFi finds itself in places where there are these non fungible assets that represent different positions and different things that are happening in protocols. That's going to be like a massive, massive place to fractionalize things. And, you know, maybe you have an NFT that represents vesting tokens that vest over the next two and a half years and you can fractionalize that and kind of sell at a discount because you want to get out of your position earlier or you have like all these different weird things that could be happening or insurance positions or there's a lot of different fun stuff that can happen there.

• 35:57Ryan Sean Adams?

  Guys, we are going to be back with Andy in just a minute. We've got so much more to cover, including some questions that are coming in. Want to find out what exposure to fractional NFT gives you versus something like NFTX. Talk about how Andy launched this. Talk about some of the wilder use cases you can imagine in the future. But before we do, we want to thank the sponsors that made this episode possible.

• 36:21David Hoffman?

  Living a bankless life requires taking control of your own private keys, not your keys, not your crypto. That's why so many in the bankless nation already have their Ledger hardware wallets, which makes proper private key management a breeze. But the Ledger ecosystem is more than just a secure hardware wallet. Ledger is the combination of the Ledger hardware wallet and the Ledger Live app. And if you're using To seeing all of your crypto services and favorite D apps all in one place, Ledger is where you want to be. Not only does Ledger let you buy crypto assets straight from the app, but it also hooks into decentralized exchange aggregators like Paraswap, which makes sure that you are getting the best prices on your trades without your assets ever leaving your control. DeFi never stops growing and the Ledger Live app grows alongside with it.

• 37:04David Hoffman?

  So click the link in the show notes to see all the DeFi apps that Ledger Live has and stay tuned as more and more apps come online. And if you don't have a Ledger hardware wallet, what are you even waiting for? Go to ledger.com, grab your Ledger, download Ledger Live and get all of your D apps all in one place.

• 37:23David Hoffman?

  Bankless is proud to be supported by Uniswap. Uniswap is a new paradigm in asset exchange infrastructure. Instead of a cumbersome order book system where trades are matched with other humans, Uniswap is an autonomous piece of software on Ethereum, which is what Ryan and I call a money robot. No human counterparties or centralized intermediaries, just autonomous code on Ethereum. Input the token you want to sell and receive the token you want to buy. Something brand new in the Uniswap ecosystem is the Uniswap Grants Program is now accepting applications for grants. We have been saying this for a while and we'll say it again. DAOs have money and they are in need of labor. If you think that you have something to contribute to the Uniswap DAO, apply for a grant to Uniswap.

• 38:07David Hoffman?

  Just look at the size of the Uniswap Treasury. It's almost $3 billion. This mountain of capital is looking for labor. Do you have something of value to contribute to the Uniswap DAO? No matter how big or small your idea is, you can apply for a UniGrant at unigrants.org and help steer Uniswap in the direction that you think it should go. That's exactly what we did to get Uniswap to be a sponsor for Bankless and you can do the same for your project. Thank you, Uniswap, for sponsoring Bankless.

• 38:38Ryan Sean Adams?

  All right, guys, we are back with Andy. We're talking all about fractional NFTs and the new protocol called fractional, which allows you to turn your NFTs into fractions. Really exciting protocol. I've been pumped. Well, Andy's been talking about this. It's really unlocking some new use cases. You know, I want to ask about kind of the NFT speculators. Like, after certain, you know, fashion, NFTs are the purest form of speculation. Like, I respect that. You know, remember that the ICOs of 2017, you thought you were actually buying like, something valuable, like some sort of money, maybe some utility token, whatever that was. Like, NFTs are just flat out like, it's worth whatever the market says it's worth, you know? And like, I appreciate

• 39:19Ryan Sean Adams?

  that and respect that. So people want to speculate on these NFTs. And I think there are a lot of folks that don't have the time, maybe that that we have in crypto, and maybe that you've spent on this, Andy, being a NFT maximalist, and like figuring out the next hot NFT project before it happens, like getting into NBA top shots when it was just like, a new thing, for example. And they want exposure to this asset class. There is a platform called NFTX that I think you mentioned earlier, which we've talked about before on Bankless. And I think what this allows you to do basically is get exposure to sort of CryptoPunks as a class, or, you know, mask

• 40:02Ryan Sean Adams?

  NFTs as a class, an entire asset class, and allows you to sort of speculate on that. It seems to me fractional is doing something different, where it's giving you exposure not to like, an entire class of assets, like all the CryptoPunks, or all of the mask NFTs. It's giving you exposure to a specific piece, like a specific NFT in itself. Fractional exposure to that. I think that's the way of looking at it. But how would you kind of compare and contrast NFTX versus fractional, and the use cases for somebody who just wants to speculate in this space and bet on the next big NFT?

• 40:40Speaker 02

  Yeah, I actually think, I think you did a really good job kind of explaining it.

• 40:45Speaker 02

  But yeah, NFTX typically is going to track with with the floor price of any given collection. So it tracks pretty closely to the floor of CryptoPunks with like their punks vault. And that is like great for what it is. It works really nicely. I'm a big fan of NFTX. I've used it before and it like unlocks some very cool things you can do. But as you were saying, like I think it struggles, it has struggled to find a way to handle significantly more expensive things like their the zombie punk vault that they're like index that they have. It doesn't see very much volume and I'm surprised by that because it like, I think people would like

• 41:28Speaker 02

  to have exposure to zombie punks given the given the choice to. And I think it just kind of comes with the nature of how valuable the assets inside of them are, that it just gets really hard. You can't totally scale it unless you had just an insane amount of liquidity coming into it. It's very hard to get one full punk zombie share from NFTX to ever redeem one. And so, yeah, I think that's where fractional kind of can step in and play a really nice role where it would never make sense to put an alien CryptoPunk in in NFTX in its current form. But it works very nicely in fractional where if some people might just want to have exposure to the best of the best and kind of really focus on like super high end NFTs or really,

• 42:12Speaker 02

  really rare one of ones or stuff like that. And that's kind of the major difference. But as I said, you did a good job explaining it.

• 42:19David Hoffman?

  Is there a case where something like NFTX could actually tap into the power of fractional and kind of improve exactly what your concerns are with like not really being able to offer exposure to all of the full spectrum of punks. But now that you can fractionalize more punks and more varieties of punks, could NFTX kind of solve some of the concern you just talked about?

• 42:39Speaker 02

  Yeah, I actually had a interesting conversation with Alex from NFTX about this. And I think there could be some really interesting solutions for primarily something like a zombie punks. Where say we basically would make a special way to signal that this is a fractionalized like zombie crypto punk. And then you could deposit those fractions into NFTX or NFTX could just do that in the backend. When you deposit zombie crypto punks. And so then you could basically NFTX would act as an index of all the different fractionalized zombie crypto punks. And you could withdraw a piece of that, which would just be, you know,

• 43:20Speaker 02

  some percentage of one of the particular zombie crypto punks as opposed to having to withdraw an entire one. And it would almost act as like a like a set protocol-y style wrapping system around fractional, which would help unlock some some really interesting liquidity and more like just taking price action on the on the asset class.

• 43:43Ryan Sean Adams?

  So Andy, I'm curious how fractional would handle situations where you have an NFT that has some like utility in say a game like, let's say I have a God's Unchained card. For example, it's a very rare card, very expensive card, but like that needs to be used in in the gameplay of God's Unchained inside of my deck, right? How would that work or is fractional really not set up to do that? It you maybe it's the case that fractional is just kind of set up to give you sort of upside exposure into the value of that. But when it comes to utility, you have to kind of reform the thing together in order to get utility in a gaming platform like God's Unchained or Axis. Can you talk about that?

• 44:29Speaker 02

  Yeah, so for our current version, basically, one of the things we wanted to make sure that we could do was allow a lot of security for the For the users who are buying these NFT fractions to not have to worry that there's going to be a governance vote that rug pulls them and moves the NFT out or something like that. And so you can't interact or like use any of the starts to get significantly more burdensome for the, for all these NFT fraction holders to have to be watching for governance votes and all the things that go along with that. But what I'm, what we've been actively thinking about, and I think this will probably be some part of some later versions is very specific fractionalization for different assets that have utility.

• 45:10Speaker 02

  Where say maybe for an Axie, we partner with Yield Guild. And the one thing that your Axie can do when it's fractionalized is like be given to Yield Guild to be lent out to a scholar. And so it has very, very specific function calls that would allow for very specific and like safeguarded actions. So that way you don't have to worry that, you know, you're going to wake up and someone, 50% of the token holder has voted to just transfer to a random wallet or something like that. So to add right now, we will not support it, but in the long term, I think we can make ways for people to feel safe, but also be able to support these cool and interesting utilities.

• 45:46David Hoffman?

  Andy, a question I have is regarding the metaverse. And everyone kind of has their own definition for the metaverse. And so I actually kind of want to ask you to define the metaverse from, from your own words. And then how does fractional impact tokens in the metaverse? The metaverse is very, very tied with NFTs and, and digital assets. So question to you, what's, what is the metaverse in your words? And how does fractional as a platform fit into that?

• 46:13Speaker 02

  Yeah, you know, I think, I don't think anyone really totally knows what the metaverse is yet. I think that's kind of, that's part of the beauty of it. But to me, it's really just any online world where people are doing things together and interacting. And like, the metaverse is just going to continue to grow in how expansive and interesting it is. But it like, kind of already exists. It just is basically the internet. But, but what I, what I'm excited about with fractional in particular, and just like NFT fractionalization in the metaverse is it actually is just like, can be way more powerful than. What fractionalization unlocks in the real world because it's all programmatic.

• 46:54Speaker 02

  And so, for example, like there's an app called, or there's like a web app called Picasso, I think, where you can fractionally own a real home with your friends. And it's all through legal documents and you like set up time. It's basically like a time share, honestly. What's significantly cooler, in my opinion, is you could fractionally own land in crypto voxels with your friends and it is programmatic that who gets access to this land and when they get access to it. And you can like, you don't have to require, you don't need some middleman to set this all up for you. It all just can be done on chain. Or say you have fractional ownership of a piece of artwork and you're able to like only

• 47:37Speaker 02

  allow certain people to view it, or you're able to like vote to display it in a museum in a metaverse or something. It like, it unlocks a lot of really interesting use cases where having fractional ownership can mean so much more than just like, just what it would be in the real world where you just say, yeah, I own a fraction of this. Instead, it can unlock a lot of really exciting things for people based on not even just utility in so much as like a Zed run horse or something, but utility in displaying it and showing it off to your friends or, or using property in a metaverse or something like that.

• 48:15Ryan Sean Adams?

  It's interesting, these terms like, like property in the metaverse that you used. You know, I was reading some stuff from Mark Zuckerberg last week and he talked about Facebook as being a metaverse company, right? That's how he sees Facebook in the future, which is sort of interesting to me, but also like, also kind of dystopian to me. If, you know, Facebook ends up owning all of the property on the metaverse, right? Which is why I hope bankless listeners are, are kind of, you know, getting this vibe from, we were talking about property, we're talking about ownership, right? Blockchain platform, public blockchain platforms like Ethereum are the only things that we have on the internet that allow you to own digital things. They're like property rights.

• 48:59Ryan Sean Adams?

  System, systems for the internet and they're public and they're neutral. So that Mark Zuckerberg and Google and like Apple or any of the big techs don't end up owning all of our digital property online. That's how, that's why this stuff is so important. I just wanted to fit that in there somehow, Andy. I'm, I'm wondering if you have any, uh, any reflections on that? Like the importance of owning our own property on the metaverse. Why is that important to you?

• 49:29Speaker 02

  Yeah, well, you know, I think what's cool about it too with metaverse is it's unlimited. And so it's not like, uh, what is it? Like Blackstone is apparently buying all the property in the US. Like it's not the same, it's not the same thing. They can't just buy up all the property, then we'll just, we'll, we'll.

• 49:44David Hoffman?

  We'll make more, right?

• 49:45Speaker 02

  Doesn't matter. Yeah. And, and so I think that's what's really cool about it. And that's something where, you know, again, like, NFTs in general and, and fractional ownership of them, and just like creating all these interesting primitives for people to have more control over what they own and how they own it and what they do with it. It's just like really, really important and very exciting to be building.

• 50:05David Hoffman?

  Andy, can you dream up your wildest use case for fractional? Like if somebody really wanted to like leverage fractional to, and it's to the nth degree, like what, what's something crazy that they could really do with it?

• 50:18Speaker 02

  Man, I, you know, I've seen some really, really interesting stuff around like, some stuff that's, it's not that crazy, but I think it'd be awesome, like a meme marketplace where you have like every time, like the origin of every meme is a fractionalized NFT and you're able to create these marketplaces of what makes it, what, what memes are popular, what memes are being used and all these different types of things. I think in general, like the idea of, of marketplaces around different fractionalized things that are like the source of truth of this is that thing. And now people are able to trade, trade it up or down based on its value to whatever they decide the, the value is, is really fun as kind of like a slightly more realistic thing.

• 50:59Speaker 02

  Outside of that, I'm, I'm really into the ideas of like fractionally owning property, like real life property and everything that comes along with that. And like, you know, it's, it's a very long ways away, but like real world assets and everything that comes along with that. And I've been very excited to kind of see makers start to onboard more real world collateral and all that kind of stuff. I think that's going to be really huge in the, in the NFT space and in fractional and. I don't know what it's going to totally entail and there's going to be like incredible amount of legwork that needs to happen before it really is anything tangible, but I'm very excited for that whole space to continue to grow.

• 51:36David Hoffman?

  One of my favorite subreddits, I don't know if you're familiar with it, but it's called our meme economy. And this, this was a very popular subreddit before, before Ethereum, really before NFTs. And it's a subreddit joking about how different meme formats are propagating across the internet. And so like they, and it has nothing to do with crypto, right? So there's no actual money involved. It's not like Wall Street Bets. It's just kind of a joke. And some popular, some, some new meme format will come out and they will identify this like, oh, this meme format is hot, like buy, buy, buy. And then, and then the meme format will like propagate throughout the internet. And then you'll start to see like Walmart start to use that meme format as like advertisements on Reddit or Twitter.

• 52:19David Hoffman?

  And then they're like, Walmart's using the meme format, sell, time to sell, time to sell. And so like this energy is on Reddit and like, there's some sort of energy to like, figure out how to monetize and make like prediction markets on memes. And so maybe, maybe that is actually what fractional enables in the long term.

• 52:38Speaker 02

  Yeah, it's like one of those weird things where I have no idea how it would actually work or why someone would want to use it. But I've had multiple people say, Hey, I kind of want to use fractional to do this. Like, well, if multiple smart people all think this is like a, an interesting idea, I'm sure some things that have come out of it at some point. But it'd be a fun one.

• 52:55David Hoffman?

  Andy, what's on the roadmap for fractional?

• 53:00Speaker 02

  Oh, man. A lot of things. So kind of, we have a lot of stuff UI UX based around, just like making it really, I feel like fractional can be a gate, a great gateway to buying NFTs and getting involved in the crypto space in general. And also a great way to teach people about DeFi and stuff. I've had to, I've been teaching a lot of people how to provide liquidity on Uniswap and all these different things who are coming from the NFT space, maybe haven't done that. And so there's just a ton of legwork to be done there to keep making that better and better. And also make it feel really exciting to collect things. You know, what is, how do you get excited to own 1% of a, of a CryptoPunk? For some people, it's easy. For some people, maybe that, like seeing the ERC20 token in their, in their account balance isn't that exciting because they own a million different

• 53:45Speaker 02

  ERC20 tokens. So that's one thing. Alongside that,

• 53:50Speaker 02

  You know, trying to stay up to date with layer two scaling and everything that comes along with that. And fortunately, we really only have to go where the most valuable NFTs are right now. We don't have to make any hard decisions of what's next, but we're keeping very actively, we're very actively watching optimism and Arbitrum and ZK rollups and Polygon and everything to go along with that to make sure that we're able to support whatever, wherever there's really valuable NFTs, basically, and give people a good experience. And then lastly, kind of like I was talking about having these specific fractionalized NFTs that are able to use their utility and really, and really unlock some cool stuff

• 54:32Speaker 02

  and some fun composability between different applications and stuff like that. So kind of a lot of things, but.

• 54:39Ryan Sean Adams?

  Andy, this is really exciting. And you know, thanks for telling us all about fractional. It's a really cool project. Glad you built it. In closing, I think we have just a couple of questions because we don't often have a, an NFT maximalist on the bankless podcast. So we want to make sure we use that, that expertise here. And I'm super curious as to like, you've dabbled these markets for a while. How do you personally go about finding the next hot NFT project? Like, what attributes do you look for, for the magic? Because to the, to the, to the amateur, this all feels very like, oh my, it's, it's meme economy. You're just kind of like shot in the dark. I don't know if this is going to be successful

• 55:22Ryan Sean Adams?

  or hot or not. I don't know why crypto punks are worth like what they are. How do you find the next hot thing in NFTs?

• 55:31Speaker 02

  Yeah, to be honest, I'm not that good at it. But one of the nice things around it is like, you don't really have to. So where NFTs I've noticed as someone who's been in DeFi for a long time and kind of doing all the DeFi stuff as well. NFTs have this layer of emotion attached to them that, you know, a valueless governance token can't really have. You can get emotionally attached to one just because you've participated and been active, but there's something about collecting art and something about, you know, just buying something and having it be yours and it's one of one and it's yours and that's special, that is very hard to replicate in normal markets. And so you don't always, you

• 56:13Speaker 02

  don't need something to be the next big thing for it to do well. You need like a few really rabid, like rabid fans who are like, this thing is amazing. I want as much of it as I can get. And so an example is there was a, an art blocks drop recently called the eternal pump, which is also an amazing name. And there was this one guy who's this anonymous NFT whale who just showed up recently named Vincent Van Deau. And he has bought like almost a million dollars worth of this NFT over the last like week. And like in order for you to do well buying that, you didn't need the entire market to go, oh, this is the best NFT ever. I want to buy it. You need one whale to say, these are really cool. I want to own a bunch of them. And so it's a totally different market dynamic from like trading DeFi tokens or trading Ethereum

• 56:58Speaker 02

  or Bitcoin. And so I think it's just finding stuff that you think is legitimately good, where if that doesn't happen, that sucks, but you have artwork that you like. And then also trying to, trying to identify like what makes, why did Vincent Vando want to buy a million dollars of this NFT? And it's really cool. It's a very cool generative piece, but I don't really know what made it so special to him that he wanted to do that. And trying to find whether it's a community that's really excited about it. And even if the price is down, maybe there's still a lot of people who are building interesting things or just talking about it a lot. And that was, you know, like art blocks, a lot of the art block stuff is like that. And it's been so crazy. And the same thing happened with CryptoPunks where there were just really, really fans who loved CryptoPunks. And eventually that like kind of spreads.

• 57:40Ryan Sean Adams?

  It seems like what you're saying is like, stay in the community and just buy what you like.

• 57:44Speaker 02

  Yeah, I think that's really the way to go.

• 57:45Ryan Sean Adams?

  Don't overthink it.

• 57:46Speaker 02

  Yeah. And it's, it's very much so a space where even more so than, than DeFi, where one, one hit is worth like so many misses. For example, like bored apes. If you minted a bunch of bored apes because you thought they looked cool, you could have minted every other profile picture project that has come out since then, and you definitely are still doing all right for yourself.

• 58:09David Hoffman?

  Andy, last time we talked, you talked about how you think like you believe in the, what I've heard of the CryptoPunk fat protocol thesis. As in like ultimately all value flows back to CryptoPunks. Now, unfortunately, I'm asking you this question before I get my hands on my CryptoPunk, not after, but I'm going to ask it to you all the same. Why do you think that's true?

• 58:32Speaker 02

  Yeah, so it's a hard question and I, I think that CryptoPunks are like this really, really special project that. So one, there's never gonna be any more of them. And so that makes it very easy, like the, you know, the Bitcoin fixed supply meme fits right in with CryptoPunks, except it's better. It's a better, it's a better meme than Bitcoin's fixed supply.

• 58:56Speaker 02

  Because you know, you don't have to actually secure CryptoPunks. There's other stuff for that. We don't have to get into that conversation. And then alongside that, they look cool. So a lot of people say they don't. I think they look cool. But I don't really think that matters very much. People buy very ugly clothing that costs thousands of dollars because other people say it's cool. And so that doesn't really matter. And then basically it has created the narrative that it is the first NFT project. Some people will argue it isn't. There's some other stuff called like Ethereum that was really old. I don't really know. It doesn't matter anymore. The narrative is it's the first NFT project and it's like, it's kind of crossed this chasm into like, it's really, really cool to own a CryptoPunk.

• 59:37Speaker 02

  And I don't, for me at this point, for that to change, I think Ethereum has to like fail as a project. And I'm also, you know, basically betting my entire life that that's not going to happen. And so at that point, like what else needs to happen for them? And I get a lot of in down to people saying, hey, I'm trying to trade this NFT for a CryptoPunk. I'm trying to trade my five board apes for this CryptoPunk. I'm trying to trade this and this for a CryptoPunk. I don't get many, very many people who say, hey, I have a CryptoPunk. I'd love to get some of your insert other NFT here. That just like doesn't happen. That's not a, not a conversation. And there's, I think there's a reason for that. And it's because it's kind of the end game. It's, it's like the ultimate NFT to own. And I will say that.

• 1:00:21Speaker 02

  If you had asked me five months ago, would there be other profile picture projects that people cared about a ton? I probably would have said not for a very long time, if ever. I have changed my opinion on that a little bit, just because it's very clear that 10,000 CryptoPunks isn't enough. And so there's more than 10,000 people who want to have a profile picture. And that's where Bored Apes have been really, really interesting and Cool Cats and all the other millions of ones. Which ones end up like winning out of that? Who knows, but I think we're gonna kind of my, my latest theory on all this is we're gonna have these like seasons of punks. And so, or seasons of profile picture projects. And so punks is the first one. So they're like the ultimate grail profile picture NFT.

• 1:01:01Speaker 02

  And then this new wave of NFTs, they have Bored Apes and Cool Cats and Wicked Craniums and all this other stuff. And those will all, you know, some will be worth something, some will. And then you'll have a new wave of, of stuff that comes in a couple of years. Whenever there's like the next NFT wave of things and that they'll have their own projects.

• 1:01:19David Hoffman?

  Buy, buy, sell, sell, sell.

• 1:01:22Speaker 02

  Yeah, exactly. But at the end of the day, there could only ever be one first NFT project and one first profile picture project. And so like, no matter what narrative happens, no matter what changes, like that narrative is like set in stone. It can't go anywhere.

• 1:01:37David Hoffman?

  I think that was a fantastic answer. And so my, my last question to you, Andy, is, and we kind of started the show with this as well is there's been this, you know, meme going around in the last couple of months is that NFTs are going through a bear market. But people who have been paying attention to the NFT industry don't agree with that statement. So maybe you could give us, update our, our mental models as to what's been going on in the NFT industry for the past two to three years. Why, why do people think that it was a bear market and what's actually true?

• 1:02:07Speaker 02

  Yeah, so you know, I think basically what happened was there was. An insane amount of hype around like the Christie's auction for CryptoPunks and CryptoPunks like went really, really crazy before then. They got to like a 23 Ethereum floor or something, which is higher than they are now even.

• 1:02:23David Hoffman?

  Only by one, the floor is at 22 right now.

• 1:02:26Speaker 02

  I know, it's crazy. It's insane. But so I think like.

• 1:02:29David Hoffman?

  That's what I know.

• 1:02:32Speaker 02

  Oh, I know. It was kind of like this, this event that was a little bit outside of the normal hype cycle of of NFTs. Where like it was very much so a, an event that was affirming to people's like theses and their beliefs. But it was so exciting that it kind of like ramped things up too quickly. And so then after that, naturally, there was going to be this little bit of a lull. But very soon after that, Board Ape started to really pick up. And that was where we started to see these other profile pictures pop up while punks were kind of not moving. And so I think there was a subset of people who basically said like, no one really seems to care about people as much as they used to. And CryptoPunks are going down, so it's an NFT bear market.

• 1:03:14Speaker 02

  But at that same time, like all these other NFT projects were exploding and Art Blocks was really starting to pick up steam. And now like, I mean, Art Blocks is doing a couple million dollars of trading volume a day. Board Apes are doing a couple million dollars. Punks are doing millions of dollars. I mean, Axie is just doing like 20 million dollars a day in trading. It's, it's crazy. I think that you have to just like kind of remap that. As I was saying before, there's so many new pockets of communities that are building up around all these different projects. And, and so you can't just look at what's the CryptoPunks volume, what's the CryptoPunks floor? And who's buying stuff on Nifty Gateway? I think a lot of those people have moved and now they own Board Apes and they're aping into stuff on OpenSea Drops and Art Blocks.

• 1:03:58Speaker 02

  And it's just kind of evolving. It's not really slowing down.

• 1:04:03Speaker 02

  Fantastic.

• 1:04:04Ryan Sean Adams?

  Fascinating, Andy. Yeah, thanks. Thanks for that insight, too, and for updating our mental models on that. It feels like the NFTs as a collectible asset class are still continuing to go up, but there are these waves of collectibles that become popular and then kind of change in and out, right? So, baseball cards to Beanie Babies to something else, right, would be the old world analogy. Now, of course, we are in the NFT world and you are fractionalizing them. Thank you so much, Andy, for spending some time with us today on Bankless with this Ask Me Anything.

• 1:04:33Speaker 02

  Yeah, thank you for having me.

• 1:04:34Ryan Sean Adams?

  Guys, of course, none of this has been financial advice. Crypto is risky, DeFi is risky, NFTs are risky. You could lose what you put in, but we are headed west. This is the frontier. It's not for everyone, but we're glad you're with us on the Bankless journey. Thanks a lot.

• 1:04:50David Hoffman?

  Hey, we hope you enjoyed the video. If you did, head over to Bankless HQ right now to develop your crypto investing skills and learn how to free yourself from banks and gain your financial independence. We recommend joining our daily newsletter, podcast, and community as a Bankless premium subscriber to get the most out of your Bankless experience. You'll get access to our market analysis, our alpha leaks, and exclusive content, and even the Bankless token for airdrops, raffles, and unlocks. If you're interested in crypto, the Bankless community is where you want to be. Click the link in the description to become a Bankless premium subscriber today. Also, don't forget to subscribe to the channel for in-depth interviews with industry leaders, Ask Me Anythings, and weekly rollups where

• 1:05:33David Hoffman?

  we summarize the week in crypto and other fantastic content. Thanks, everyone, for watching and being on the journey as we build.