May 24, 2022

More Luna fallout, GameStop, and tracking cheese

Welcome to the Block & Mortar newsletter! Every week, we bring you the top stories and our analysis on where business meets web3: blockchain, cryptocurrencies, NFTs, and metaverse. Brought to you by Scott Robbin and Q McCallum.

Things Are Still Going Wrong™: More Terra/Luna fallout

You may recall from our previous newsletter – or, perhaps, from pretty much any other news source over the past couple of weeks – that the cryptocurrency space has had a rough time.  A lot of this was connected to the collapse of the TerraUSD stablecoin and its sibling token Luna.  The Luna freefall is over for now, but there's still plenty of cleanup to do.

Terraform Labs CEO Do Kwon has floated some ideas on how to get everything back on track. But he's also a little busy, as Korean financial authorities have asked him to drop by for a chat.  Which may be tougher for him to manage, now that the Terraform Labs legal team has left.

(We're not sure of the exact circumstances of their departure, but your Block & Mortar editors know that it's rarely a good sign when your attorneys say "peace out."  We also know that broadcasting to social media may not be the best way to find a new legal team, but that's another story.)

The TerraUSD/Luna crash was a reminder that investing in cryptocurrencies involves a  risk/reward tradeoff.  That is built, in part, on the lack of government involvement in the space: you can make a lot of money, very quickly, but there's no SEC or FDIC equivalent to soften the blow if you lose it all.   Galaxy Capital CEO (and, shall we say, decorated Luna investor) [Mike Novogratz echoed a common refrain](https://twitter.com/novogratz/status/1526970321890312192%20(which%20points%20to%20https://s27.q4cdn.com/973063916/files/doc_news/2022/A-Letter-From-our-CEO-Mike-Novogratz_5.18.2022.pdf) from the wider financial space when he pointed out:

[I]t’s important that less experienced market participants only risk what they are comfortable losing. I’ve often said people should allocate 1%-5% of their assets to the space.

You can't win if you don't play, sure.  You also can't lose.

Robinhood and GameStop … but for something else

One of the first steps in learning about DeFi is to setup a wallet to hold your tokens and NFTs. MetaMask has long been a popular player in the space, with alternatives such as the Coinbase wallet.  Or even a hardware wallet like Ledger, if you're handling serious amounts of cryptocurrency.

You now have even more choice, as retail trading platform Robinhood and former meme stock GameStop are launching their own wallets.  (Never mind that these two had something of a … very newsworthy relationship not too long ago.)

The diamond-hands-rocket-emoji app was recently in the news again because of Sam Bankman-Fried’s 7.6% stake in the company.  Robinhood is carving out a place for itself in DeFi by offering commission-free crypto trades, and hopes that the wallet is a user-friendly gateway for its stock-savvy user base. It has even promised to cover customers' gas fees … though perhaps that part of the plan was formed before the Otherside mint?

Getty dips its toes into the NFT space

From pro basketball to auction houses to even The Vatican, groups that hold libraries of digital content are offering NFTs.  It's no surprise, then, that stock photo giant Getty is getting a taste of that NFT action through a partnership with Candy Digital.

It'd be easy to write this off as Old-School Company Tries the New Hotness.  We've certainly seen a lot of that in the ML/AI space, where companies dove in because they felt like they were being "left behind" in the trend.  So we expect to see the same with web3. 

But in Getty's case, the web3 connection makes a lot of sense: they manage a catalog of more than 450 million digital images; their business involves licensing those images; and NFTs are commonly treated as deeds to digital goods.  Getty may as well (carefully) explore what's possible. 

That said, the company's announcement did not go into detail on licensing terms.  Perhaps, after this first round, Getty will manage some portion of their photo licensing through blockchain technologies?  Time will tell.

So much more than JPEGs

The headline going around is that DJ duo The Chainsmokers will use NFTs to share royalties from their latest album "So Far So Good" with fans.  (If you squint just right, this is not too far from Bowie Bonds.  Though it's probably lighter on the regulatory side of things.)  As NFTs are variable-priced assets that can be bought and sold, we expect there will be some interesting correlations between price movements and band-related news such as tour dates.

The 5,000 NFT holders will split 1% of the revenue from streaming, though.  And artists routinely point out that streaming revenue is very small.  So we don't think the revenue share is the big story here.

Frankly, what we find more interesting is how The Chainsmokers are using those 5,000 NFTs to build a community.  NFT holders get perks such as tickets to live shows and access to a private Discord channel hosted by the band.

Business owners, take note.  This is another example of organizations using NFTs for tickets, group membership, and VIP passes.  Those old paper ticket stubs serve as souvenirs and bragging rights, so it's no surprise that we're now seeing the digital equivalent.

In case you actually want to feel your metaverse experience

While the world is still sorting out a firm definition of "metaverse," one common thread involves building on concepts from the video gaming world.  Game controllers have long offered haptic feedback, which provides an extra element of immersion by shaking and buzzing in reaction to in-game events. But the company Skinetic is taking it to a new level with their haptic vest.

By emitting vibrations at key points along the body, in sync with what's happening on-screen, Skinetic's vest can simulate the feeling of wind, rain, and even explosions.  Still, there's the question of how much simulated "reality" we'll want to bring with us into metaverse properties. The answer will depend on the experience at hand.

“It's only valid if it comes from the Blockchaine région of France…”

We're fast approaching a time when companies will shoehorn the term "blockchain" into anything they do_,_ just to lay claim to using the technology. So we admit that we were a little skeptical when we saw this headline about mixing blockchain and cheese. But barely two paragraphs in, we realized that this was about a serious supply chain and fraud-prevention matter

Like many European products, true "Parmesan" cheese has a protected designation of origin, and according to the Parmigiano Reggiano Consortium (the official trade group for the cheese) the amount of fraud is almost as big as product sales: Authentic Parmigiano Reggiano sales are around $2.44 billion while fraudulent cheese is a $2.08 billion market.

When the revenue from fake goods is roughly the same as that of the authentic variety, that's a problem.  The Consortium, in partnership with Kaasmerk Matec and p-Chip, addresses this fraud by pairing transponders embedded in cheese wheels with blockchain-based "digital twins" that represent the physical goods.  

This sounds like a practical application of blockchain technology.  If we can follow blockchain transactions to track provenance of digital artwork, why can't we use it for goods in a supply chain?

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Note: We’d like to thank Shane Glynn for reviewing early newsletter drafts. Any mistakes that remain are ours.