Crypto Noobs: Let's keep it understandable!

Episode 17. Do you think NFT´s are nonsense? You should listen to this!

December 03, 2021 Alexandre Fuchs & Gabriel Riesco
Crypto Noobs: Let's keep it understandable!
Episode 17. Do you think NFT´s are nonsense? You should listen to this!
Show Notes Transcript

Episode 17. Do you think NFT´s are nonsense? You should listen to this.

We talk about NFT´s, what they are now, where they can go in the future, how to understand their value and the potential disruption  they could create in different industries.

We  discuss:
- What´s an NFT at its most basic
- Different chains and markets where they live (Ethereum, Tezos and Solana)
- Why again you need to ignore the noise to understand the signal
- Where can you find value?
- NFTs as proof of authenticity
- NTFs as a new model for all Artists and Intellectual Property creators
- How artists can generate royalties for a life-time.

We do not provide financial advise in any form.  All information is our opinion and for entertainment use.

Every Podcast we add a video or podcast we think of as Value add:

Robert Breedlove:
The Ultimate Macro Framework with Raoul Pal
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Gabriel Riesco:

Welcome, everyone to a new episode of the crypto noobs. Podcast. Hello Alex. How you doing? Good. Okay, so we're gonna dive in right away. Today, we're gonna talk about a very hot subject, which is NF T's. It's creating a lot of agita. Some people don't understand it. Some people think it's nonsense. Some people think it's a bubble. But the reality not everyone knows what NF T is. I'm not a huge expert, but my understanding and if to make it simple, if you don't know what an NF t is, you have to understand right away, it's a collectible. If you understand, if you understand collectibles, you're going to understand NF T's. If you don't understand collectibles, just don't play the game, because then you're not going to understand collectibles. And then you're not going to understand what NF T's are, which is like a double, double draw for you. But anyways, having said that, Alex, what is an NFT?

Alexandre Fuchs:

So, so I've gone down the rabbit hole on this one again. NFT just stands for non fungible token to make it super simple, just definitionally what it means is that what you're buying is not the same as other individual units. So for example, when you go and buy Bitcoin or Aetherium, or any of the usual cryptocurrency or crypto assets, whether you own this particular Bitcoin, or that particular Bitcoin doesn't matter, every bitcoin is kind of the same the same way that $1 is $1. So if I give you $1, you give me $1. Bill, we haven't really, you know, nothing has changed since you know, similarly in the real world, if I have a trading card, and I give you a trading card, you give me one back then the specifics of that trading card, baseball card, whatever, or arts or Picasso or whatever, is obviously what's important in trying to figure out the value of one NFT versus another NFT. So the market as it exists right now or how it's been developed. So at the very beginning, the way to think about it is it again, it says back to the blockchain a decentralized system, so that you can account for individual tokens, but this time, not fungible tokens, the way that we all understand Bitcoin Aetherium and the rest of the blockchain is to work. This is just passing around transactions where you're passing around the same token, the same fungible the same elements back and forth between people who are buying and selling Bitcoin buying and selling a theorem and so on, so forth. In this particular case, you're tracking individual tokens.

Gabriel Riesco:

Okay, so tokens, let me let me stop you there for someone that doesn't understand what fungible is, what's the difference between fungible and non fungible?

Alexandre Fuchs:

Sure. So fungible just basically means the same fungible means that if you were to put it together, it would essentially and you would have pulled one out, it would be the same than the one that you put in. And so water is fungible, right? If you add water to water, whatever water you take out of the tub, or you know, receptacle is going to be water, right? If you put 10 Picasso's in with 10, Matisse and 10. So then what you may take out of that box may not be 10, Picasso's, it could be one bigger, so for Matisse and twos, or whatever it is, it's not fungible because they're not the same.

Gabriel Riesco:

Got it. Okay, so keep going.

Alexandre Fuchs:

So, so what's new about this is that so now you have a technology that allows a very public in a public decentralized way, again, let's not forget the pillars of what blockchain technology is about decentralization, that instead of having to get something authenticated by Christie's or by, you know, the manufacturer, or the initial artist or anything like that, what happens at the genesis of the of the individual token, the creator of the token, ascribes, you know, this finds creates the token, whichever way they want, but it's not recording a way that nobody can challenge whether it is authentic to the person who created it, or it is authentic to the specifics that were given to it to start with.

Gabriel Riesco:

So in other words, it's a guaranteeing the authenticity, the originality of

Alexandre Fuchs:

the yes, on top of a couple of different things. So basically, if you want to put a poem and you want to write a poem, and you say, Okay, I have a poem, I'm the first one who wrote this poem, nobody else did. Or script or anything, any intellectual property, right. So for example, in Europe, what you do if you write a script is that you take the script and you register it to some national agency that says, I wrote this first right. In the United States, for example, just kind of funny what you do is that you put the script in an envelope and you mail it to yourself and you never open it to make sure that you have something that has on the outside date stamp that says that inside of this is this work product that you did that you can always prove to anyone and anybody in court that you were the one who wrote it.

Gabriel Riesco:

Yeah fellow that you're better off doing the trademark and whatever

Alexandre Fuchs:

you agree that's your property, but of course, by But in this particular Yeah, but again, going through the trademark process or registering process or anything like that is expensive, timely, and so on so forth, right? In this particular case, what you have is something really cheap, very simple. Basically, that cannot be corrupted, if you believe, obviously, in the underpinning of the technology, where you can say, I have written this poem, I'm now creating it as a token, it will timestamp, it will say, This is mine. And I can go out and put it out there as being mine. Right. Now, for artists, you can ascribe anything to it, anything to the properties of that token. So what's happened is the first market it's developed is this kind of Digital Arts where, you know, people just don't want to buy a token for the purpose of a token, they want to buy a token because it has something right. So the first market was developed, which has developed is the idea of attaching a JPG file an image or GIF, and animations, something of graphical nature. And the way to think about it is that the Genesis if you want to think about who would get the beginning of this market, or of this technology would be people would have two skills, creative skills and technology skills. Creating an NF T is actually something you know, let's say complicated, but not super simplistic. It's technical, you have to have a lot you have the means you have to do certain

Gabriel Riesco:

SWAT there, say you have, like a piece of art or a real piece of art. And you're the artist and you you painted that. What's the difference between that real piece of art and an NFT, you keep talking about tokens, I don't want people to confuse

Alexandre Fuchs:

Well, that's important that they shouldn't confuse it. Because what you have is a token, not something physical, it is only a token, a

Gabriel Riesco:

token is the NFT.

Alexandre Fuchs:

The token is the NFT NFT non fungible token is the token, now you add to the token, or you put in a token, certain properties, something. So this is what I'm trying to say at the very beginning, first markets is putting to the NFT. A image and then you promises the artists that you're not going to create another NFT with the exact same image, right, in order to be able to create a market because if you kept on creating and kept on selling, then it doesn't have so then you have the whole concept of scarcity. This is very similar to limited edition and photographic prints are the photography is or other pieces of the on markets where somebody creates something, and now they make it available for sale. In this particular case, again, all you're buying is a token, you're not even buying the JPEG, the JPEG is just an attribute, it's it's like a piece of data which is attached to the token, right. But if the artists the Creator has structured or, you know, behaves in a certain particular way, which means that they're not just going to resell three times 20 times 500 times the same thing. And which is the basic understanding that already exists in real art, which is that, you know, a painter doesn't usually repaint the exact same painting 14 times in order to sell it, those mechanics are more or less the same, right. But again, what's important is you're not buying the JPEG, you're not buying the image, you're buying a token. And for the moment, again, we're very much at the beginning of all this at the very beginning of all this, the tokens tend to have a JPEG attached to it or GIF, or something, which is the art creation.

Gabriel Riesco:

Yeah, and some people get confused with, I just want to add this here, because you can't you can copy a PDF and, you know, spread it all over the internet. And so I've heard before saying, well, what's the value of having something that can be copied? Well, when you, that's when you need to understand collectibles, right? If you have like the Mona Lisa, right? It's not the same having the Mona Lisa, the original painting, one of these are certified. And that is the original, of course you can do, you can print and you can do posters, you can do all kinds of stuff from the Mona Lisa, but they're not going to be as valuable as the original Mona Lisa. So an NFT gives you to my understanding, gives you that ability to say okay, this is the original, and I can prove it. And that's kind of the one of the one of the values of the NFT, that once you have that, that is original, of course, if you have the choice of buying the original, or the copies, you're going to want to have the original because that's where the value is. But to my understanding, you can do other stuff with the NF TS with like smart contracts. It gives you much more a play of a game, not just for the artists for but for the whole. It's a way to

Alexandre Fuchs:

Yeah, I want to get away from the word game because I think obviously there's always game theory and kind of actors behaving in different ways in this new marketplace. But what it does is that it records this token Remember again, this the token that's unique on onto a blockchain and then that makes that token tradable, which means that you can sell it as an artist. And as a collector, you can collect it as a collector, you can sell it to another collector, as a broker, you can invest in it, you can create a portfolio, you can do all these kinds of things. And it mimics if you want so very much many of the attributes of the existing art markets, which is that, sure, you know, an artist, a dealer could try to create a number of different versions of something. But if you are a believer in this particular artist, and that artist is the original mentor, the original person created the the token right, then you have a direct link between you in the original artist and control vertical.

Gabriel Riesco:

Let me stop you there. You said a word minute, can you explain to someone that doesn't know what the main thing is?

Alexandre Fuchs:

Sure, the easiest thing is right, it means writing to the blockchain or basically creating so you know, you have you are creating a token, minting the token is creating the token onto the blockchain of which are many blockchains that is, and you have now created, it's now once it's created, you have an inventory as the artist, and you can put that inventory on the marketplace for people to see and buy just the same way. That's the equivalent, it's always very helpful in this to try to make the parallel in the real world, the same thing that you're in, in the studio, you're in front of the canvas, you're making a painting, you're taking a picture, you're doing something, it's something that when you create something, that's the main thing, and you have an inventory as the

Gabriel Riesco:

artist, have you meant it to anything?

Alexandre Fuchs:

I have, yes. Okay.

Gabriel Riesco:

Can you describe the process? How do you do that? So

Alexandre Fuchs:

the process without going into the details of which chain is relatively? Okay,

Gabriel Riesco:

so what did you meet? Is the start there? No. So

Alexandre Fuchs:

I, I entered an image, right, like I admitted the images or other things, but basically, what you need is

Gabriel Riesco:

like a photo. Yeah, let's just say, okay. It's just an example. It doesn't have to be personal. So it's, it's an example of mine one. All right.

Alexandre Fuchs:

Well, that gets into trouble. Let's say that I doodle something and I decided to then have to make a picture and make a circle, I do something I put fill it with color. I'm in Crayola mode. The next step, next up is let's say I take a picture because it has to be digital. So I can transform, I can scan it, I can take a picture, I can do something, but I will. Let me. Let me try.

Gabriel Riesco:

Let me just remind you an NFT is a digital asset, because that's it. That's an important thing to understand. Because that's why I'm going through the process of what you did. So people can understand. Yes,

Alexandre Fuchs:

but it's but it's not, it isn't. It's not that we're going to confuse people. If we go down that road, I need to keep it simple, right? The NFT is only the token, you're attaching a JPEG, you're attaching something to the token. So it's very important not to think that the JPEG itself with the image itself, or the art itself, is the token it is not a token is just an entry in a database. On the blockchain. If we go down that road, we're going to confuse some people. So we're trying to make a little bit of clarifying assumptions. But basically, if you if you are trying to, because remember that you could create an NFT for anything, you could create an NFT for a piece of intellectual property, you can create it for poem, you can create an NF t for the for a car, you can create an NF T for Absolutely. For music for it for something music or anything, right. So right now, we're only talking about a very small subset, which is where the market is right now. Which is where graphic artists who have technology skills have put in their art as an attachment to a token and then sold that token with which the art follows.

Gabriel Riesco:

Okay, so it's so let's go back to the process of how you were meeting that so we can understand exactly okay, I don't

Alexandre Fuchs:

want to spend too much time on it because it's not an easy process and we're gonna lose people. So it's just you basically go somewhere, you need to set up a wallet, which means that you need to have an identity on the blockchain. As an identity a blockchain you can write the blockchain as an ID. When you write to the blockchain, you incur fees which are paid in the token of the blockchain. So in this particular case, if you are in a theorem blockchain and you decide to do in the theorem and ft, you then use a service that will mint it, you will pay them for minting it, you will pay some fees. And now you will be given an address or details for that NFT on the Ethereum blockchain, once it's on the blockchain, I really can see it. It can be traded, you can do anything with it, and is the most important thing that I want to make sure we get to quickly is that you can set royalty rates for that individual piece. And that's the most important thing that artists content creators and people don't get understand where 95% of the market is not there yet. We're only people who happen to have technical skills, advanced technical skills and creative skills. Understand this now, but this is where this is going. You can as opposed to where the world is now where you can sell a piece of art and then through The Gallerist at a very large commission, if anybody knows what the galleries takes of the selling price 50% Usually you never participate in the appreciation of your work ever after you're done, right. So you can only create new series new works and so on so forth to create new revenues in this particular case, and NFT has the magical ability to set a royalty rate since everything has to go through the blockchain. If you sell a piece of art to someone, and they go on to sell it to somebody else, you will participate at a rate that you decide at the very beginning when you meant

Gabriel Riesco:

when you say you, you are

Alexandre Fuchs:

your artist. So if I'm an artist, I go in Mint I set up, I don't set a price, there's no pricing involved in the minting, you're just creating something on a blockchain and as a result of a blockchain, you then go out and you then go out and make it available for sale. If you want to, you can get it for yourself, you can just mint it and have an NFT if you want to. But let's say that you go out and put in market buys, you sell it to someone you start to Gallery, sell it to a collector, whatever it is, any transactions after that with the gallery, resell it to somebody else, whether the collector sells it to somebody else, you have set the royalty which is set in stone for the life of the NFT. We're automatically your wallets, because again, remember, you started out having an identity on the blockchain, you will earn royalties.

Gabriel Riesco:

So every time that NFT is sold, the artist, every time that that happens is going to collect a royalty from that transaction, correct? Yes. And that's where it becomes super powerful. And this is where one of the, say qualities of the NF T's is these potential and royalties, which can change a lot of different industries, their music industry comes to my mind, because I'm a musician, but also the art and many other industries. There is a lot of nonsense to on the NF T's and some people confuse the nonsense with the marketplace and the real face. Can you talk about that?

Alexandre Fuchs:

Yeah. So now stepping away from the objective and kind of fact Base to, you know, Alex's idiotic opinions. To me, this is a very immature market, right, it's a very early market. So few things. The market for NFT started with Aetherium chain, the theorem chain is a proof of state is a proof of work chain now transitioning to proof of stake chain and has been beleaguered for a long time by very, very high fees, right, which means that it is very expensive to mint, anything on the chain. Right. And to super simplify. Again, many people will disagree, but the way I think about it, there are basically two types of artists in the theorem chain, there are people buying, why should say artists and collectors buying. Again, this, many people will not like this status symbol tokens, which is that you see a lot of collections, which are very, where again, they have been constructed a series of one, so every individual token is unique. But it's part of a collection that looks very, very similar, which are derivation on a theme, board, ape, Scripto, punk, so on so forth, where basically, you can create 1000s of unique pieces, which either through generative arts or through actual work are very similar. And then people can go out and buy those at extremely high prices in some cases, and very often use them as avatar on their social networks. profiles, and then use them essentially as a belonging, group membership token, right. So

Gabriel Riesco:

in that case, it's kind of like having jewelry in the internet, right? It's like, okay, I, this is my avatar, this is my image, I'm using this. And if you know about this, you know that I spent a million dollars on exact avatar. So he says,

Alexandre Fuchs:

exactly, and by definition, like anything, like people will buy the lottery or whatever it is, are different levels. And now some that got some millions, sometimes 100,000, some good cause 20,500, and whatever, you know, wherever you are, you are where you are, and they're all the pressures to try to be in the highest group that you possibly can for all kinds of bragging purposes. Again, I'm I'm not decrying it, I'm just trying to describe it because I understand why it exists. It's a social formation makes a lot of sense. Perfect. The second type of artist that is on there is an audience that already has a following in the real world where some brokers and themselves have decided people David Hockney, many others go to the NFT markets as another product to sell to their collectors so Christie's Sotheby's will organize and manage the transition for very well established artists. So if you want to think of the artists pool as being very big, medium and small art astride the very big artists can go to a market like the NFT and go out and put their work on it and find new if that's new collectors, possibly, but certainly new products to sell maybe to existing color.

Gabriel Riesco:

Yeah, and if you're an artist, I don't think this is a substitution of your real life. It could be perfectly well in addition, think of it, if you have like a real painting that just painted and you want to sell it for sale, or you sell it for $5,000, once you sold that painting, that's it for you that painting is gone, you got your $5,000, there's nothing else you can do. Obviously, they keep selling for more money, your reputation is going to go up. So your value as an RD is going to go up. But with NF T's is a little different, right? Can you explain why, if you do an NFT of that same painting, and you meant it in a way that that NF T's original, it's, there's only one and you can mean that. But also you can meant on the NFT itself on the token that the you're gonna get, say 5% of the royalty and the percentage you can choose as an artist, you can do 5% or 2%, or whatever percentage you want. But you can make it like you can you can get 5% of the royalties every time that that NF T cells and changes from hand to hand. And that's the difference, right? That you can still sell your painting. So

Alexandre Fuchs:

every time I want to get there, I don't want to get there yet, because for the moment we've just described selling the token itself. Now there's a whole market to build, where you sell a token which is attached to a pice piece of physical art or physical, intellectual property, right? I don't want to go there yet, because it complicates things a little bit a little bit. But the point being that, yes, you're right, in the future, not yet, because you don't see it yet enough. But in the future, it is very logical for an artist to sell an NF T along with a piece of real physical arts, in order to be able to prove its authenticity, and also be able to collect royalties. And there's a bunch of game theory incentives, it's kind of complicated, but as to why it should kind of generally be the case that the NFT will follow the physical piece of art, because you could also imagine that people would sell the NFT separate from the piece of art. But again, NFT is the proof of authenticity, or the piece of art itself, don't want to go down that rabbit hole, because that gets very, very complicated. But that will be built. And we'll talk later, perhaps, you know, the idea of a service that actually helps artists go out and put their art onto the blockchain. And then in that particular case, they can try to sell special series, which is digital art only, or they can try to attach physical art to it. Let's try to continue them down this. So eath is very expensive, and is very active, it can represent close to 10% of the eath gas fees, maybe more, meaning that the activity on the blockchain can you know, the NFT represent a very substantial portion of the activity there, right and the demand for, you know, for for for activity on the Ethereum blockchain. So of course, the problem we have that structurally, is that medium and small artists just can't participate in something which is that expensive, it cost you if it costs you three to $500, to listen individual piece of arts, then you're then going to go and sell for 50 bucks, that doesn't make any sense, again, to understand gas fees is important, which means that every time that you buy something on a chain, you need to record the ownership onto the blockchain, there are fees associated, which are called gas fees, right? So

Gabriel Riesco:

so people can understand these save you, if you if you buy right, something for 50 bucks. Let's say for example, that what will be the fees for that, and you can make the number up

Alexandre Fuchs:

not to say that whether you sell a box or for $500,000 are still going to be 500 bucks.

Gabriel Riesco:

Exactly. So it makes sense to buy something for 500,000 Pay 500 bucks, but it doesn't make any sense to buy something for 50 bucks and then pay fees for 500 bucks, you agree with the money?

Alexandre Fuchs:

Agreed? So because of that? Sure enough, there are other call them side chains called them other block chains that exist that have developed independently other art markets, right? And the two that come to mind are the salon on one side and tezos on the other side, right? And there is a cottage industry, there's a materially number of artists who are trying to use both because again, they're the gas fees are negligible, negligible. So they're pennies in order to mint pennies in order to sell right? The value is different. We can discuss where the value is, but you know, there again, for medium and small artists, that's where you go, you go to this. And again, it's going away from the factual to, you know, to more opinion, there seems to be a very active Create a community around the tasers chain. It's messy. But just to make a statement backed with, you know, not enough research, the average quality of the work on the tasers chain seems to be significantly more artistically driven. Then on Solano on eath meaning that on Solon and eath, you see way more of these trading card ish type of projects, collections, things that are kind of the same. And maybe you want to call them social collections, but something which is, again, collections of in have unique items, but which are very similar in large numbers, which is which are much more where the market is now, if you want to think of when the market is not for NF T's and for digital NF T's. But if you want to think of where the art markets historically has been, always has been, it's a very decentralized market with every artists having their own voice expressions on so forth. And that's what you find on tasers a little bit more. So if you go to, there's a place called here and now in Latin called HC in its Nunc, or objects, for example, which are two curated marketplaces, you if you go through that your average experience, let's say as a traditional art collector is a little bit more consistent with what you've lived in the past. What's interesting there is that, you know, you can you can, you can find a lot of art there, there's a lot, there's a lot to

Gabriel Riesco:

do. Okay, for someone that doesn't understand this fully. Correct me if I'm wrong, but the difference when you say you meant or you're buying an NFT, so on on Aetherium, or Tasos, or Solana, the difference is like you're paying in different tokens when you're doing theory on your being with eath. When you're doing your data you're paying with cash, right? You're dealing with a Solana, you're paying it with with songs. So that's just to clarify, because this can get pretty messy, if you don't know what we're talking about.

Alexandre Fuchs:

No, and that's the point and again, the the price of tasers, the price of Soldotna. And the price of eath moves around all the time so that the price of the art itself is influenced by the currency. There's a lot of it's a very messy overall, it's very interesting. These are not organized markets. So this is early and as it is early, there are many things to learn and to understand and and you know, hurdles to get over to summarize, right, buying an FTS selling and FTS minting and FTS is technically complicated for the average person. It is not something that most artists are going to do by themselves. For a little while. Now, you could have said the same thing about using a cell phone or whatever it is, at whatever point and so on so forth. But right now, that's more or less where we are, right. So if you want to think about there's a couple of things to talk about, right. So ultimately, artists and collectors should probably not care which blockchain This is on as long as the blockchain survives. So the fact that you have small artists and kind of a fervent creative community on the tasers, Blockchain, and you have these kind of more established communities on the east blockchain, this, my sense is going to be some kind of realization that's going to happen at some particular point. And there's true probable events on the horizon, which may make this happen, which is at Coinbase, not having been allowed to commercialize their land product, which was their, you know, their next big product, which was where they would basically allow you to earn money on your crypto, funnily enough, which was, which ESEC stop them from from doing the lending part. Yes, the LEND program, which funnily enough for Gemini, and other people already have one that's gonna get into that. They have announced that their next big thing is going to be in fts. Right. And what that means is that they're most likely going to build some tools for collectors, perhaps artists and some software to go out and do that. And it's very possible that they will build a new kind of social mechanism that that I think is needed. We'll talk about that maybe later. But coin base is very likely and they have already Yes, and now today, they're going to be somewhat blockchain chain agnostic. So they will have a theorem I would assume, but they also will open it to design to Solana which basically means if to a coin base customer buying arts. What do they care if it's on Aetherium or Tehsil. So So now, in that respect, until coin base with its brand and its marketing muscle can make that point quite heftily and the same thing will open sea open sea is the largest marketplace on the Ethereum blockchain, and they have announced that they will add other blockchains To the recollection

Gabriel Riesco:

of the open seas marketplace for what, for eath

Alexandre Fuchs:

for three or in part in the largest one. So one basically where we're most of the volume on the CRM happens. So, the point is that you can imagine fairly quickly. So again, step back NFT is, is a very, very large in the applicability of NF T to business models, creative models are distinct models, is at its infancy, it is mostly focused now on digital art. In that digital art, there is an inconsistency between the marketplaces and then consistency between the gas fees and consistency between the values, which provides in my mind a little bit of an arbitrage and, you know, kind of happy hunting in certain chains for interesting artists or certainly art that you'd be interested in. There is also as you described, a future my mind because it's not really there yet massive applicability to physical art, which is to attach a token to physical arts. And then one thing that we haven't talked about is entirely other models, we can talk about a couple of examples but where an NF T can provide the same future royalty revenue and authenticity, stamping for entirely for completely different industries. So as you know, I'm into collectible cars and old cars and Indian markets and even to some extent in the new markets what happens is that very often you have companies that will modify your car or modify new car modify an old car restore restore a car and add to it a lot of their intellectual property DNA artisan Marines and so forth and and resell that car or give you back the car for a very large fee. So let's take an example of singer, which is a company that takes a Porsche nine elevens, and then will transform a, you know, what used to be a 50 to $150,000 car and, you know, put a lot of effort into it and make it a million dollar car. But the way it gets to a million dollars is very often they'll do the work for X amount. And then somebody who wants to jump the queue or somebody who doesn't want to wait or somebody who wants your car will pay the person who use singer to refurbish their car, you know, two, three times what they paid. Again, in the last couple of years, I've been quite hot. And this is true. All around to in real estate. It's true in many different places where somebody who has intellectual property knows how to do certain things, transforms an existing item, or creates an existing item, but only gets paid for the first transaction. So Sr, for example, will take your car, charge you $500,000 give you back the car, and that and that $500,000 is the revenue that they're going to earn, they'll get some benefit out of you driving it around and seeing it and so on, so forth. But that's basically what their businesses are like, it makes much more sense from a revenue point of view. For them, perhaps to sell the car a little less expensive, but to have a royalty stream attached every time that car sells because with cars, what you've seen Univer universally and with real estate and other assets, you've seen flippers, you've seen people who have done government work done. And then after that somebody who doesn't want to wait or has more money than patience, or taste, or any of these things, go out and beat up the price. And the original value creator, if you want in this case, does not participate in the revenue. So if you think the value creator here is singer, knots the flipper, then this is a model that you can imagine a lot of these companies adopting right where the car would go with the NFT, the NFT would prove the authenticity of the car, it will be attached to the car and you know, then generate royalties for the original creator.

Gabriel Riesco:

Yeah, and the point behind here is that this is a huge benefit for the creators. For artists, creators in general.

Alexandre Fuchs:

Yeah, I mean, just again, to wrap it up for because we get into all the details, they want to think about it as an artist historically, very, very often, in many industries, not all not in music, not in film, not in other things usually doesn't get to touch royalties in any major way. And even in film and even in music. Those royalties very often are calculated in very nonsensical ways. Certainly very opaque ways, right. So anybody who has ever dealt with film rights, music rights, and trying to do any of the accounting behind what your royalty stream is, will know that the studios, the record company, and so on, so forth, do very creative accounting in terms of how they apportion costs and so on so forth, in order to minimize what your royalties or rights were and they are usually improved royalties, not revenue royalties, except in certain cases. And therefore a model like this one could be a very interesting one for many artists to have, if you want control over the relationship, right?

Gabriel Riesco:

Yeah. And that, to that matter also, especially, specifically music, because I'm a musician. So I know you need third parties like ASCAP or Skye in Spain that need to collect the royalties and actually send them to you later. So that intermediary is kind of gone with the NF T's when you when you're new when you meet it, right?

Alexandre Fuchs:

Possibly, I mean, there's a lot to, you know, artists have to be comfortable. Buyers have to be comfortable, there's a lot of, but a lot of things are going to happen before have to happen before this ever becomes a thing. But you can see why the market forces from the outside would make it a thing.

Gabriel Riesco:

And how the potential to be very disruptive in that sense in a lot of industries.

Alexandre Fuchs:

Yes. So going back to art, specifically what we know the thing. Again, this is a very messy place. It's not mean structured yet. But what's interesting is that the blockchain makes it possible for you to know a lot of things that you don't really know in the real world of art, meaning, as a artist, you get to know exactly who your collectors are, you get to know exactly what else they own. You get to know what pricing happens after you've done your initial sale, you get to understand what other artists, your collectors are collecting your relative pricing compared to other artists. There is an enormous amount of information and theory and transparency that is not available in the normal art market. And which by the way, has made the existing art markets very, you know, very opaque and perhaps manipulated. Perhaps, you know, I don't want to get into polemic about this. But basically, the way to think about it is that it is a tool for decentralization for recreating relationships between collectors, curators, intermediaries, and artists. I think I'm presenting unprecedented, right? And the more artists go on to that method. Yeah, you got to get past certain things. Yeah, you got to start understanding what a token is versus what the art is. Yeah, there's a number of probably legal and regulated like regulatory things that need to be clarified. But ultimately, the Promised Land is very attractive. And I think the people who have value, right, so in my mind, collectors add value, artists add value. intermediary can add value. And the fun in that respect. What I find interesting is that that's true opportunities out there that are that are kind of not not formed yet. Right? And that's not really not really there.

Gabriel Riesco:

We're flirting with those ideas. Yeah, exactly. Okay. Yeah. Let's finish with that. Let's talk about this idea. Because it might not just be an idea. Yeah. Yeah, it's a, it's, it's a service that, well, there's two very valuable for artists for creators, but go ahead and go Well, there's

Alexandre Fuchs:

two things that need to be built. Right, but the first one that needs to be built for sure. And again, you know, we'll talk about what we what we end up doing. But the first one is artists 95% of the artists community will not go through the mental heartburn, of trying to mint NF T's manager, that empty collection, figure out how to sell it, figure out who buys it, do any of that stuff, right? And therefore, and I think Coinbase may do some of that, perhaps, but independent companies that on behalf of artists manage the royalty, the minting, the management, the marketing, the royalty accounting, all of which is relatively simple to do. To earn the trust of the artist and manage that relationship well allowing them to very simply put some of their work initially perhaps does digital but digital plus physical and eventually anything onto the blockchain and management managing that. service on behalf of the artist for the artist is necessary in order to grow the market you most of the artists we all know would never spend any time doing this.

Gabriel Riesco:

So this will be for say an artist that has some paintings but is not savvy enough or doesn't want to put any time into maintaining an understanding of this. This is kind of an agency that will do the minting for them and will take care of all the the process of like royalties and marketing and putting on our marketplace and maybe what we can buy it or sell it is that basically the the area

Alexandre Fuchs:

Not nothing getting further but the end of the second one which is related. The first one is that you can see what other collectors are collecting. You can see what other artists who is who owns the same artists or, or pieces that you own or any other that's on the blockchain. It's available but the tools are are painful. It is the experience of trying to create for you a network. In order to be able to act upon this information, discover new artists, discover new collectors, and look inside people's collections, promoting your own collection. The Marketplace stuff is built, more or less. It's all hinky. But it is kind of built so that if you have something for sale, you can put it for sale. But the aggregation, the social tools, the commenting the sharing, the tagging, content tagging, the organization of all of that data, which exists on blockchain is messy is is is there available for programmers is not there for the general public. So the ability to go out and put together a coherent, simple social experience that allows you to discover new artists to be able to tag them comment on art, share its post it look inside collections, do maybe some simple analytics, track some of the analytics, save somebody's information for you to use is coming as well, the same way that any other asset is built, things have been built.

Gabriel Riesco:

So that will be like a platform that is well organized and user friendly. So yeah, more access of this. collectors. Okay. Well, I think that was a very interesting one. Hopefully, this will open a little bit of your curiosity about NF Ts and hopefully you understand a little better on why they're so hard now and why. It's everyone's talking about it, but not everyone understands what they are. And not everyone ought to understand who can differentiate what's nonsense, or what real value or potential value, Tim, anything you want to add Alex?

Alexandre Fuchs:

No, I think this is an interesting topic.

Gabriel Riesco:

All right. Well, thank you so much. Have a great weekend.

Alexandre Fuchs:

Thanks very much.

Gabriel Riesco:

We'll see you in the next episode.