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Audio and transcript from the March 17th, 2022 installment of “Conversations with the Coop” with Mason Nystrom, a Senior Research Analyst at Messari.
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Crypto Texan: All right. Hello, everyone. Welcome to Conversations with the Coop. This is where we source questions from the Index Coop community to gain insights from today's leaders in crypto and DeFi.
I'm your host, Crypto Texan. And today on the show, we have Mason Nystrom, who is the senior research analyst at Messari Crypto. Mason, thanks for being here with us today. How's everything going?
Mason Nystrom: I'm great, Tex. Thanks for having me on.
Crypto Texan: Yeah, absolutely. We usually like to start these off with if you could just give us your background and how did you get into the crypto space?
Mason Nystrom: Yeah, absolutely. I feel like the saying goes, that everyone comes into crypto during a bull market. And so I entered in 2017. I was doing my MBA out in Hong Kong and really just wanted to start working. And so I started working for a local cryptocurrency exchange out there.
Like most people, loved the 2017 run up and even in 2018, when things came crashing down, I still knew I wanted to be in crypto for the foreseeable future. Came back to the states, joined Consensus where I was on their marketing team, did everything from content to a little bit of strategy work for a lot of their portfolio companies.
And then finally made my way towards Messari where I've been for over a year and a half now as their first Web3 analyst which means like Web3 infrastructure, social tokens NFTs and some of those more emerging trends.
Crypto Texan: Can you give us a little background on Messari as well? When did Messari get started and what void is it trying to fill in the crypto space?
Mason Nystrom: Yeah, absolutely. Messari was started in 2018. You can think of us as an intelligence platform for enthusiasts, professionals and institutions. We have a variety of products across research, across real time events monitoring as well as a governance platform where individuals can track a variety of different governance proposals in DAOs as well as vote directly from our platform. We're really trying to put together what the Bloomberg Terminal for crypto would look like.
Crypto Texan: Yeah. You also forgot to include awesome convention host because I was at Mainnet last year and I had an amazing time there. You were there too. I remember you were on one of the panels as well.
Mason Nystrom: Yes, Mainnet is our flagship conference last year was our first one and this year's is going to be back in New York and it's going to be bigger and better. I don't know if tickets are on sale yet, but I highly recommend everyone attend because it's definitely a very high signal conference. We custom curate the content to what we want. It's really just a really fun time.
Crypto Texan: Do you have a date for that, for the one this year?
Mason Nystrom: I don't off the top of my head. If we do, it'll be on our website though.
Crypto Texan: Okay. Okay. In your role as a senior research analyst at Messari, what does that role entail? What does a senior research analyst do?
Mason Nystrom: Yeah, so my specific role as research analyst involves looking into a variety of protocols within my coverage sector and creating reports based on sometimes quantitative analysis, sometimes qualitative analysis. And so for example, that could be analyzing the NFT market and aggregating data sources, whether it's on Dune or CryptoSlam! or somewhere else to look and see if there's any insights that can be drawn about the market or qualitative, which might be something like focusing on digital land and examining the bull and bear case for what that might look like.
Crypto Texan: Yeah. And I remember when I was getting into the crypto space around the same time as you, 2017, there weren't a whole lot of different sub-sectors of the crypto economy. It really just felt like payments blockchains or smart contract blockchains.
But really, just thinking back, those are the only two. What parts of the crypto space interest you the most or what is your research based on because now we've got DeFi, Layer 1s, Layer 2s, the Metaverse, Web3, DAOs, the data economy, crypto infrastructure. Where is most of your research done?
Mason Nystrom: Yeah. It's so fascinating to watch crypto expand and it really has gotten to the point where you're not able to focus on every single sector to any degree. And so I would say for the most part, I don't really touch let's call it like scalability, like L1s, L2s or DeFi. And I tend to focus more on either the Web3 infrastructure side or the consumer side.
And so the consumer side being NFTs, DAOs. And then from the Web3 infrastructure side, that could refer to file storage protocols or data layers or other types of... You can think of it like what would it take to rebuild the internet stack into decentralized protocols? So something like ENS or handshake might fall in there. That's how I look at the Web3 infrastructure component of it.
Crypto Texan: Okay. Let's just kind of get another broad view here and then we'll start honing in on some specifics, but how do you see crypto and the Metaverse I guess just from a broad macro sense right now? It feels like NFTs have gone through their own speculative bubble. Just where do you see all this right now, if you were to step back from a macro sense?
Mason Nystrom: Yeah. That's really a great question. I think that as the Metaverse is top of mind for a lot of people, the natural question is where does crypto fit into it? And so I think a really simplistic view is to look at the Metaverse as this front end layer where you have experiences, you have games, you have worlds that are AR, VR or even 2D.
When you talk about giving those worlds meaning, I think that you can quickly come to things like digital property rights, identity and these other types of primitives that we've grown accustomed to having in Web3. I view Web3 as this back-end infrastructure for the Metaverse. I think that it's going to take at least a decade for this to play out, but I do see them becoming more coupled over time.
Crypto Texan: I guess when you see people on Twitter saying, "Get a job in Web3. I love working in Web3." Should they really just be saying like, "Get a job working at a DAO." Because it feels like your definition of Web3 might be different from what a lot of other people's might be.
It sounds like you feel like it's more of just like the infrastructure, like Chainlink in the graph and Filecoin, I guess. What's your definition of Web3 and DAOs and the Metaverse just so we can kind of differentiate those three.
Mason Nystrom: Yeah, absolutely. I think this is... Terminology has become challenging. Whereas I used to refer to Web3 as just the infrastructure side, Web3 has been re-branded to mean crypto as a whole. And so that could include layer 1s, it could include DeFi.
While Web3 now encompasses all of that, I just view Web3 infrastructure as like a subset, which would be graph, chain link and those types of protocols. As far as DAOs, DAOs and NFTs goes, I think those are really just primitives of Web3. They can be applied to anything. An NFT is just a file standard. A DAO is similarly really hard to sub-sector because you have both like protocol DAOs, which might be something like Index, but you also have more social DAOs, which could be something like Friends with Benefits.
Crypto Texan: Yeah. I also feel like crypto has kind of been a unique place in the world right now. I think from a price section adoption standpoint, we're in a little bit of a bear market, but then when you look at some current events that are happening in the world, like with the Canadian trucker protest situation and Canada almost weaponizing the financial system against them and then like people in the Ukraine, there's been a lot of talk about Bitcoin's role there and maybe not so much Ethereum's role or other digital assets as much.
Do you feel like this is bringing the core, the first value proposition to the mainstream? Or are we just in this bubble on Twitter where we just say, "Bitcoin fixes this."
Mason Nystrom: I think it has been a watershed moment for some individuals. I think the Canadian trucker situation with closing bank accounts is pretty applicable to how most people don't realize the financial system can work against them.
I'll caveat with this, like I'm not a political strategist. And so this is all just a guess, but I think Bitcoin's role is becoming increasingly clear. It just represents this non-sovereign asset. Ethereum on the other hand potentially represents this credibly neutral monetary system. Because you have to have like over-collateralized loans right now in Ethereum, there's limits to what your average individuals going to use Ethereum for.
What I actually think is the most interesting midterm use case from a political perspective is stable coins. Because if you think of something like USDC or digital dollars, that's really such a much more interesting dynamic when you talk about increasing dollarization around the world or vice versa for any other type of country's currency. The potential added controls, the ability to audit a monetary supply, combine it with IP addresses and track payments. I don't think it's necessarily the solution that everyone thinks it might be. I think there's going to be potential political implications as well.
Crypto Texan: Would you consider yourself a maximalist in any way? Do you lean towards the Bitcoin side or the Ethereum side or are you just more of like a generalist in, I guess, a crypto maximalist?
Mason Nystrom: Yeah, I would say I'm agnostic in terms of chain. Obviously, I'm a researcher and so I try and follow the data. In some places, Ethereum obviously is large really dominant. But I think that Bitcoin has its place Ethereum and other L1s will compete for their role and whatever ends up providing the best user experience, the best solution is going to win out.
Crypto Texan: Do you think Bitcoin is a boomer coin? Do you think Ryan Selkis is a boomer because he loves Bitcoin so much?
Mason Nystrom: I don't think Ryan is a boomer. Ryan, I think, I would call him incredibly pragmatic. I think that BTC has largely become like, let's call it, the benchmark for crypto at this point and time, if you're looking at a portfolio.
That might even be like too generous and you might even say like for any type of fund, their benchmark might be like a 50/50 split portfolio of BTC and ETH. I'm under the impression that Bitcoin is never going to be a medium of exchange. Like it doesn't make sense to spend a deflationary asset and to be completely honest, in my opinion, I don't think Bitcoin needs to be anything more than just a non-sovereign asset. That to me is a good enough use case. I think that Bitcoin has its place in this world.
Crypto Texan: Well, and there are NFTs on Bitcoin as well. I think the Pepe cards or I forget what it is.
Mason Nystrom: Yes.
Crypto Texan: Do you have any familiarization with that since I guess your focus is more on the Metaverse NFT Web3 side? Because that's one of the big, I guess, things that people say against Bitcoin is that you can't really... It's not composable. You can't build on it. But people have been able to put NFTs on it. How does that work?
Mason Nystrom: Yeah. To be honest, I don't follow what's happening on Bitcoin as much from like the NFT side. It's just honestly, not as interesting as what's happening on Ethereum or other Layer 2s or other chains. I think that Bitcoin largely isn't going to find adoption there. And if it does, it might be giving up some sort of security guarantees or it just might not have anywhere near the user functionality convenience cost that people are going to grow accustomed to over time. While I admire a lot of people who are trying to build DeFi on Bitcoin, build NFTs on Bitcoin, I'm largely unconvinced that that will be a fruitful path.
Crypto Texan: Yeah. I totally agree with you there. I think the true value proposition of Bitcoin is not to be a place to store your NFTs or a place to do DeFi. It's just self-sovereign non-state money and a way for people well to opt out of the traditional financial system if they choose to do so.
But let's transition to a little bit more of your specialty and I'm focusing on the Messari 2022 thesis, which I'm a big fan of these thesis that come out every year. One of your main focuses or things that you're bullish on in 2022 and I'm just going to read these off here is modularity, NFT platforms, the Metaverse Index, which is an index coop product, a Web3 infrastructure pool, creator monetization, cosmos, data availability layers, ZK-Rollups, Coinbase, USDC, Metaverse infrastructure, governing tools and loyalty point exchanges.
We're going to touch on quite a few of these, but first, out of all those from the time that that was released to now, has anything changed, like stuff that maybe you were more bullish on at that time that you're less bullish on now or vice versa?
Mason Nystrom: That's a great question. I think I'm still largely bullish on most of these concepts. I think NFT platforms is going to be interesting just because there are a new slew of competitors that are coming out.
Like you have individual like call them specialized marketplaces for call it music. And then you also have aggregators that have emerged and stuff started doing considerable volume, like Gem and Genie. I think that I didn't expect that market to subset as quickly. And so I've started to reevaluate, where all that plays out. But for the most part, I think everything else, I'm still quite fascinated.
Crypto Texan: Yeah. Let's focus on the Metaverse now. Just conceptually, like what do you feel like Web3's role in the Metaverse is and what other types of Web3 infrastructure need to be built in order for the Metaverse to gain mass adoption?
Mason Nystrom: Yeah, I feel like the Metaverse has kind of been this re-branding of AR and VR and right now however, you want to define it, whether you want to look at interesting virtual worlds like The Sandbox and Decentraland or if you want to say that the meta versus happening more in the existing like Facebook-type realm, all of them are converging to the same point, which is they're going to try and issue tokens. They're going to try and add digital property rights to the assets. They're going to try and build user profiles. So call it identity amongst different wallet address says.
I view Web3 as providing a lot of that tooling and infrastructure for the Metaverse. I'm actually more interested in like the AR component over like VR. I just think it's like inherently more social and more interesting.
But if you think about it from how do we tokenize VR and AR assets, that's still fairly nascent. You have a couple of companies that are doing it. So you need infrastructure from that point of the perspective. If we want to build a Metaverse on a credited neutral tech stack, then you need everything from computation to storage to indexing to the name services.
I think all of those things are, are protocols are applications that are being built in crypto and we'll hopefully see more adoption and as the Metaverse built on that tech stack versus whatever Facebook creates.
Crypto Texan: Yeah. You said something I want you to elaborate on a little bit and that's that you feel like AR, you're a little bit more bullish on AR versus VR. Can you just elaborate on that a little bit as to why?
Mason Nystrom: Yeah, absolutely. This is just like a personal opinion. I grew up playing video games. I loved RuneScape as a kid. While I see the gaming world continuing, I think VR still obviously has a long ways to go before it gets to a point where people want to spend a significant portion of their time there on a daily basis.
AR to me is so much because you're just bringing that technology into the existing world. If you think of successful AR applications, whether it's like Pokémon GO or even Snapchat filters, there's such an interesting monetization perspective there, because I could totally see a world where Snapchat is just issuing filters as NFTs and you're just connecting that and that allows you to use the filter. And so different types of AR exists. Some are just from your phone and then others can be from different types of hardware. To me, that's just a more compelling vision of technology in the future than VR at this point in time.
Crypto Texan: Yeah. And something that I thought that I would see slow down and it has slowed down significantly to what it was about around this time last year was the profile pic NFTs. What are your thoughts on those? Have we reached the point yet to where enough is enough or are there going to be some blue chips that still maintain this value? We can also touch on the APE token for the Bored Ape Yacht Club that just dropped, but what is your general thoughts on NFTs as PFPs?
Mason Nystrom: Yeah. If you were to ask me this question when I first started Messari, I definitely would not have guessed that PFPs, avatar NFTs would've taken off as significantly as they did. I view these PFPs, these avatars as the equivalent of consumer new consumer brands. And so if you compare it to something like Supreme or Louis Vuitton, the key value that someone is providing is that social signaling that status good.
And so from that perspective, I think that you're going to get some PFPs that stick around, continue to be valuable. What Twitter did with allowing people to verify NFTs I think only further cements the value of them because it further ingrains this idea that this is unique, this is mine, I do own and I can showcase it.
As that continues, I think more and more just like we have tons of consumer brands, like they will continue to release those types of projects. But I do think we'll start to see a pretty big gap between those that are successful and those that are not.
Crypto Texan: Yeah. Another thing you mentioned in the 2020 thesis was the Metaverse Index. I'm also curious, what has your involvement been with Dark Forest Capital and AG who are the methodologists behind the Metaverse Index and what are your thoughts on indexing in general as a financial tool to help people diversify?
Mason Nystrom: Yeah. I've worked with Dark Forest and AG a little bit. My role to be completely honest has been fairly minor. Initially, I helped review the methodology and then I kind of have reoccurring meetings with them to review assets that might qualify for the index or to discuss what might be coming down the pipeline in terms of assets that are launching just to potentially get ahead of what the index might have to include.
I think they've done an incredible job with MVI and I'm really excited that Meta Portal, which is their new entity is also launching a gaming index called Game. I think that the MVI from its like first construction because it is methodology based was less appealing than it is today just because it's a Testament to how much the industry has grown.
I think for the most part, I would own every asset in MVI today based on its current makeup. I do think that that kind of just shows the power of indexing. If you were to ask me, if Axie would've done well last year, I thought it would, but I could not have predicted its success. I could not have predicted the success of The Sandbox and Decentraland.
And so an index just allows you to remove your own subjective judgment. And so I think that it's definitely a valuable tool in any investor's portfolio, especially those who just want broad exposure.
Crypto Texan: Yeah. You bring up an interesting point there. Do you feel like some of these Metaverse protocols, the tokens, do you feel like the protocol justifies the price of the token? Like Axie Infinity, I forget what it's market cap is right now, but imperative to like other assets within the space, it does seem a little high. I think you can say that with Illuvium too. I don't even think they have a working product out right now. Are you still as bullish on this space given the recent price action or what are your thoughts there?
Mason Nystrom: Yeah, so obviously none of this is financial advice. Just kind of get that caveat out of the way.
Crypto Texan: Yeah, absolutely.
Mason Nystrom: But a big criticism I've always had and continually have of crypto is that the valuations are astronomical compared to call it what is built at any given time. I think that there are a few reasons for this.
One is crypto is inherently speculative. And so you have a lot of capital that is just ready to enter the system. But I also think that in certain sectors or sub sectors, there's a lesser amount of real players of like competent teams from the onset. And so a premium gets applied to a lot of those protocols companies or assets.
I am someone who on my tombstone that will read like, "Fully diluted value matters." And I'm okay with not investing in something because I take the approach of a long term investor. And so I look at fully diluted value. I think that it matters if you're looking to invest in a long time horizon. I do think that to your point, some things are overvalued and it just takes time for the market to sort that out.
Crypto Texan: Yeah. I'd be willing to bet that the people who are in the Discord right now listening to this live and the people who are still interacting on Twitter, when gwei is low relative to what it's been the past two years, I'd be willing to bet that these are the people who are actually here for the longer term.
Maybe like in a bull market, it might be better to focus on just the valuation market cap based on the circulating supply, but in a bear market, when you're looking more long term, maybe focus more on the fully diluted valuation. Is that what you're saying? Or do you feel like you should just focus on it regardless if you have a long term investment horizon? Not financial advice.
Mason Nystrom: Yeah. My personal philosophy on investing is that you have to know what type of an investor you are. Everyone thinks that investing is just one game, but it's actually multiple games depending on the type of investor preference for.
And so if you're a short-term trader, you have to understand that game is much different than if you are a long-term investor. And so someone like a hedge fund is going to look at just a circulating supply versus like a venture fund with a five to 10 year lock-up.
The supply is irrelevant because liquidity doesn't come for a decade anyway. I tend to look at my portfolio construction on the later half in terms of like a long term investor, just because I find that that's more compelling to me rather than chasing the next trend.
Crypto Texan: Yeah. I agree. Speaking of the next trends, it's a good segue, I feel like we're starting to find all these new avenues and pipelines to onboard new users into the crypto space, which also helps alleviate some of these short term price dips.
I feel like people that came in during... Start doing a play to earn protocol or game, I feel like they're sticking around and they're paying a little bit more attention to people that would come them into the space just to speculate on the price of Dogecoin. I feel like first, it was just like non-state money was the thing that got people in here in cryptography. And then it evolved into DeFi, which got some of the finance bros involved in the space. And then it moved on to NFTs, which started to bring in the creator economy.
Do you have any speculation onto what is next? What is that next pipeline that's going to be built that will bring in the next generation or the next class of crypto users?
Mason Nystrom: That's a great question. My intuition is that NFTs are, let's call it the most consumer facing application of crypto that we've had. DeFi was interesting to a subset of people, smart contracts to a subset of people, Bitcoin to a subset of people. But NFTs are by and large, I think one what get the majority of users into crypto in the foreseeable future.
If we think of NFTs and their natural progression, their evolution, the first really breakout use case was art. The static image makes sense something static is going to be the easiest lift for an NFT. And then we are progressively getting more dynamic in terms of what NFTs can offer, but also how they can be incorporated into other types of applications.
And so I view that as one very fascinating adoption that will bring more people into the space. You've seen it with music NFTs. You'll probably see it with video, you'll see it with other types of content as well. Like the other aspects that I see as being fairly consumer friendly are obviously DAOs, social tokens.
You have platforms like JuiceboxDAO that were used for the Julian Assange NFT purchase donation as well as for Constitution DAO. That to me is just Kickstarter on steroids and crypto inherently enables anyone to fund anything. And so that to me is like a clear progression in terms of okay, we let anyone form a company. Now, we're just letting anyone kickstart their own project, whether it's going to be small or large. And so those are definitely two trends that I see continuing in the future.
There is from the more development side, a lot of infrastructure being built out that will potentially enable new applications on top of them as well.
Crypto Texan: Yeah. Let's talk about that infrastructure side too. What are some protocols or projects that you're looking at that are building out that infrastructure that's needed?
Mason Nystrom: Yeah. From the NFT side, I think you have financial infrastructure increasing NFT liquidity, to buy, sell exchange, I think is really important. As I mentioned previously, you have a lot of protocols that are marketplaces like NFTX, you have obviously art marketplaces like SuperRare and then the aggregator space that is making it easy to batch by and batch list on a variety of different platforms.
The other last piece of NFT infrastructure, that's really exciting is just indexing across a variety of blockchains. We're now at a point where Flow, Solana, Ethereum have billions in NFTs that have been traded cumulatively and how that plays out in terms of like what platform becomes dominant for NFTs or do certain platforms become more used for let's call it like more permissioned NFTs is also like a really interesting question that I don't necessarily have an answer to. I'll pause there and then we can get to the other type of infrastructure.
Crypto Texan: Okay. Sure. Yeah, you can keep going. That's fine.
Mason Nystrom: Okay, cool. From the other types of infrastructure and this might beat more from the like computation storage side of things, you have protocols, storage protocols like AWI, Filecoin which is built obviously, incentivized by IPFS and they're starting to have like their Layer 2 moments and ways to incentivize even further scalability there. So like Bundlr, for example, is a Layer 2 solution on top of AWI that has been fairly successful.
And then you have other existing protocols like Livepeer that have started to really come into their own once they had their 2020 stream flow upgrade which enabled GPU usage that really catalyzed a strong adoption for Livepeer from a transcoding services provider. And then additionally, you have other types of similar type of resource networks like Akash, for example, that allow CPU usage and are going to turn on GPUs, which I think are going to further catalyze adoption. Render Network is another example of like a network usage protocol that is important for rendering NFTs or images in the Metaverse or any virtual world.
Crypto Texan: Yeah. I think some protocols that you haven't touched on, when I think about data storage and I guess like indexing and some of this Web3 infrastructure is, along the chain link and the graph lines, is there a reason you didn't mention those or are they just like so popular it's not even worth mentioning?
Mason Nystrom: Yeah. I think that they're fairly... They're some of the most known protocols when it comes to like Web3 infrastructure, the graph is in a league of its own with indexing chain link obviously. It's fairly utilized. It's out of the box solutions for... It's a random number generator. It's Oracle services. It's fairly utilized. I think they've been around for a decent enough time that they're just more discussed.
Crypto Texan: And then like Livepeer is just like... It's so hilarious to me for some reason because I think I got airdropped some LPT tokens back in 2018 just randomly into some old Ethereum wallet that I hardly use anymore. And then it really came into its own last year and it... Does it really take that long from like, I guess 2018 to late 2021 to build up a product like that? Do you have any opinions on when is it too early to issue a token?
Mason Nystrom: Yeah, I definitely think for certain types of protocols, there's more technical risk. There's more timing that it just takes to build the solution. And so Livepeer is a perfect example where there's so much that they wanted to do. Part of it was limited by...
They had to build out staking contracts and the token economic design for Livepeer that operated on Ethereum. But then they also had to garner this massive network supply of people who wanted to provide transcoding services. That just takes time. I think you've seen that across the board for most of the infrastructure type protocols. They're not as easy to use yet as they need to be.
For example, like making file storage protocols easier to use is a massive undertaking. And so you have companies like Pinata, for example, which are a more centralized storage version that uses IPFS, but then you also have protocols that are these Web2.5 protocols that are bridging the gap. So like something like Filebase, lets you come to their website and they let you plug to any variety of decentralized file storage solution and make that process really easy for you.
So much time has been focused building these protocols that the usage part is kind of next and just takes time. To answer your second question on is there like two... Is there a correct time to release a token? I definitely think that there is... It's my personal belief that a lot of protocols, companies shoot themselves in the foot by releasing a token too early rather than building out a product and making sure that product has product more fit from a certain point, because then once you find product market fit, the flywheel that you can implement using a token, using those economic incentives is much better than just launching a token and giving rewards for a liquidity pool.
Crypto Texan: Yeah. Another one that you and I have talked about is Ceramic, which I believe you recently angel into Ceramic. Do you just want to give us like a little shill-your-bags moment and tell us like what is Ceramic and why do you feel like that's important to the space?
Mason Nystrom: Yeah. Absolutely. So Ceramic is a permissionless data layer that enables for composable data. And so on Ceramic, you can think of it as a Layer 1 for data. It's not necessarily a blockchain in what you can consider a blockchain, but the core use case is enabling for data composability.
The reason that that is important is because it allows anyone in a network to take that existing data and adapt or build applications using that data. If you compare that with today's web which data is incredibly silo-ed, you have Google and Facebook and Amazon who are all just replicating the same data sets that they can, but just closed to themselves means that data isn't accessible to anyone, it's not portable and the biggest detriment to that is limit innovation. Think of what makes Ethereum so wonderful is that anyone can build on top of any other protocol and there's no limit to what you need in order to start a new protocol. That is incredibly powerful when you talk about just creating that flywheel of new companies, new economic activity.
Crypto Texan: Yeah. I also want to backtrack a little bit because you also talked about social tokens and if you could just... Can you define for our audience what is your definition of social tokens? What are the different types and how do social tokens compare to NFTs or can NFTs also be social tokens in a way?
Mason Nystrom: Yeah, I don't know if there's a perfect definition any more of social tokens. I've tried to map it out as a token that represents an individual or community. I've classified it into social tokens that are individual social tokens. That could be someone like Kerman who issued his own social token. Community social tokens, which represent a community, which could be something like Friends with Benefits.
Membership is often like a key component of it. The third that I look at is social token platforms and that might be something like Rally, which enables other people to launch their own social tokens on top of it. But has the Rally token act as collateral for all the other social tokens. When you look at them compared to NFTs, they offer very similar use cases.
They've had a very more recent like competition in terms of should a creator issue a social token or should a creator issue an NFT? I largely think that NFTs are easier at this current juncture.
When you think of an individual issuing a social token, one of the hardest aspects is ensuring that you're providing like consistent value. For example, I'm under the personal belief that as I'm sure there's a lot of other people that most tokens will eventually have cash flows, but that's not really possible right now with a lot of social tokens. I think a lot of individuals opt for an NFT that just has a simpler business model.
Crypto Texan: Could a social token be like a music artist issues a social token and the owners of that token could potentially get a portion of the revenue generated by that artist? Is that a way that you could tie revenues to a token?
Mason Nystrom: Yeah, absolutely. I think that would be a great way to do it. It's just a lot of people are worried about securities, laws and rightfully so. You don't want to issue a security that is one. So a lot of individuals, whether they be artists, whether they be creators, whoever else have chosen to issue an NFT, because then you can add a royalty to it, which is just an easier business model and looks less like a security than a social token.
Crypto Texan: Yeah. I think another trend that's been happening in the NFT space is that OpenSea has been getting a lot more competition lately with NFTX, Nifty Museum, LooksRare and then even the Coinbase NFT market, if that ever comes out.
And then I think that's also been accelerated by those NFT aggregators, which you mentioned like Jam! and Genie. So are you bearish on OpenSea? If you could, would you short OpenSea or do you feel like they've got such a strong hold on that marketplace?
Mason Nystrom: I think they have a pretty strong hold on their marketplace at this point in time. That doesn't mean that a competitor can't emerge. If a competitor does emerge, I think it'll look something more like Jam! than it will like LooksRare, just given the dynamics. If you think about OpenSea, it has some aspect of it that provide really powerful modes that you don't really think about.
And so like one quick example is that there's a listing cost to putting anything up for auction on OpenSea. And that's a big point of friction because if you are even using an aggregator, that's going to let you list across multiple marketplaces, paying a fee to list on every marketplace is cost prohibitive. Either we need to get to this point where gas-less minting is common across the board or just a point where transaction costs are a lot lower and most of that moves to an L2.
I think that Coinbase FTX, they'll probably be decent competitors given their current juncture. They have a lot of users and at the end of the day, like that's really important when you're talking about NFT sales.
One potential way that a competitor could compete against OpenSea is as we get to this world where more NFTs start to look like securities, kind of pulling the unit off, we're going to list an asset. It might be a security, it might not be. But people are going to be able to trade it versus OpenSea which is probably going to face more regulatory scrutiny, given that it's an actual company.
Crypto Texan: Yeah, absolutely. Yeah. I totally agree with you there. Are you involved with any DAOs currently or? I can see a world where Messari would encourage you to be involved in a DAO to get that experience and see what's going on in the space, but it's also kind of having two jobs at the same time. I guess what has your involvement been in DAOs or do you even have time to participate in DAOs?
Mason Nystrom: Yeah. I would say that I've loosely participated, but for the most part, I don't have time to go deep enough and be too active of a member on any given DAO. Messari does encourage us to participate in let's call it like the crypto ecosystem, whether that's a DAO, whether that's some other type of organization.
For example, one of our former analyst, Ryan Watkins, he was a big contributor to Yearn Finance and even proposed their buyback solution. As crypto grows and Messari analysts become more specialized and have pretty ingrained thoughts and opinions, there, I think, will be a world where we're more active in some of these protocols.
Crypto Texan: We're getting a little bit closer to the end here, but what other hot takes do you have? Do you have any takes that you feel like is contrarian or goes against the grain of the general ecosystem that we haven't quite touched on yet?
Mason Nystrom: That's a good question. I guess one hot take that I've recently outlined is the bull and bear case of digital land. And I find when we're talking about like digitally scarce land that is own-able, I'm less convinced that is going to capture value in the long term for several reasons.
Kind of like a core assumption of that is that if you try to compare the network effects that physical land has, there's a lot of reasons that physical land is valuable whether it comes from like food, water, shelter or even if you think of like Silicon Valley as like a city network effect. You had the semiconductor industry which spawned the venture capital industry, which spawned the startup industry. All of that is pretty powerful in terms of a network effect versus if you look at virtual real estate, that doesn't really hold true or at least the network effect is far more limited in terms of it's based on experiences and social status. And so that's potentially one hot take.
Crypto Texan: Yeah. And that's interesting because I had Dark Forest and AG on a few weeks ago and this was a topic that we talked about as well. I think I remember reading a thread that you posted on Twitter. One of the points you made is virtual land doesn't need access to plumbing or water or it doesn't necessarily need walk-ability or need to be close to down town to have value, but true real estate does. Do you feel like you're just a bigger fan of protocols or projects that go with the infinite land strategy?
Mason Nystrom: Yeah, I think if you look at the existing games that have been super successful, whether it's like Minecraft, they're these user content networks where one of the key value propositions is that anyone can create anything and eventually they create memes, they create new game types, they create viral of moments that Twitch streamers want to stream them just doing something.
That dynamic is a lot harder in a world where land is scarce because if you can't just build anything, if you can't just create content, then you're limiting call it what consumers can do. And the experiences could still be there in digitally scarce land and that can still be valuable and exciting, but you do have constraints from potentially like what can be created from your users or other developers.
Crypto Texan: I'm wondering if that translates too to just digitally scarce items in general and I'm not talking about like Bitcoin or Ethereum, but more of like the NFT PFP space or thinking about Decentral Games, for their ice poker, you need to purchase this NFT, I guess, wearable for avatar so you can gain access into that poker room or you can delegate that to someone and they can play for you and you get a portion of that revenues. Do you feel like that translates at all and where does it and where does it not?
Mason Nystrom: I don't think that does translate. Let's take an example of a PFP. So something like Meebits is like a really interesting example because the Meebit is this 3D object that you can import into another game.
I think a more compelling model potentially. If you contrast it with Fortnite where they license digital avatars, digital skins from Marvel or whoever and bring it into their game, I think there's potentially a world where Marvel creates an Iron Man skin and they just let someone license that into any type of game.
And so you get this rather than selling something different to all these companies, you create this one collection that can then be used across a variety of applications. I think that's just a more compelling model for how something might play out. And you could see that being different with let's call it like non-crypto native IP versus crypto native IP. So like Marvel might be super-hesitant to let anyone incorporate their content, but someone like Bored Ape might be very pro, "Hey, if you just bring our avatars into your game, we're cool with that. Feel free to integrate it as you see fit."
Crypto Texan: Yeah. What are your thoughts on the future of play to earn like with Axie Infinity and Decentral Games? Is that going to run its course at some time or is this just a new paradigm that we're seeing in the crypto space and I guess just in work in general?
Mason Nystrom: Yeah. It's an interesting model, but in its current form, I think it's gotten over its ski tips. By that, I mean the play to earn feels very reminiscent of when the iPhone first came out and you had the app store and what you could buy was look emitted. And so everyone was like, "Cool, this lighter on my phone that I can light or the skateboard can flip."
And the types of early games and applications that came out were pay once and then you get access to the game and that's a fine model, but I do think the free to play model, that freemium model is generally better. If you look at play to earn, it's really right now pay to play to earn, because you have to put in hundreds to thousands of dollars up front to partake in anything.
I think we can move to a free to play to earn where there's some base level of the game that is free, that you can interact with, you can earn. And then there can be other types of upgrades. I think games have to really balance how they incorporate payments, because the last thing that any gamer wants is for something to be pay to play. A lot of times that's why you've seen games like Fortnite choose to monetize on the cosmetics rather than actual call it like game play.
Crypto Texan: Yeah. Okay. That's interesting. Can you think of any protocols that are doing the free to play to earn right now or building that out?
Mason Nystrom: I cannot, no. I think that it's so much easier to monetize right now if you're just a play to earn game. I think there are a lot of games that are going to be, call it in development for the next 12 to 24 months. And so if we do see a slow down in this particular monetization model of gaming, I think you could see them pivoting to different models. But so far, I haven't really seen anyone do that or at least none come to mind immediately.
Crypto Texan: Yeah. This has been a really fun conversation for me, because I feel like I've just kind of said, "What do you think about this protocol and this protocol?" And you just kind of give me your opinion, which typically when we do these, I'm interviewing like a co-founder and we're talking about one specific protocol.
This is fun. But on that note-
Mason Nystrom: Yeah. Likewise.
Crypto Texan: Yeah. I'm curious about like what other projects out there and this could be Metaverse or DeFi or, or like another Layer 1 or an L2, but what other projects out there should people be keeping their eye on? What are some really good teams out there building stuff that maybe people are not paying attention to?
Mason Nystrom: That's a good question. Obviously, I've spoken very highly of Ceramic. I think that's going to be very compelling as well as some of the potential applications that are going to develop on top of them.
I've mentioned a lot of the things that I find interesting from file storage to other types of applications. I'll say that I'm really excited for resource networks. How can people monetize like the Airbnb style? So there's this abundant resource that people aren't using and how can it be monetized? And so like GPUs are like a perfect example. Livepeer uses GPUs, Render uses GPUs, Akash will eventually use GPUs.
And so I think that's like a really compelling business model. That really excites me as well as just other types of infrastructure. I think that we've only just started looking at the types of liquidity infrastructure on the NFT side of things. And there's going to be a lot of different experiments over the next 12 months. I'm pretty actively watching that market as well.
Crypto Texan: Yeah, because my thought's been lately is that there's so many people focusing on Layer 2 and ZK-Rollups and that is definitely going to be the next big thing in my opinion, but I'm also starting to take a look elsewhere and say, "Okay, but what's after that?" I feel like it does keep going to the Web3 infrastructure or the data economy infrastructure, which is why I'm a little bit bullish on our data economy index, not to shell our products, but I am.
So I wouldn't say that if I wasn't. You're just confirming a lot of the things that I have been thinking lately. Yeah, I guess that's pretty much all the questions I have and we're running up on time right now, but is there anything else that we didn't touch on that you want to talk about specifically or in general?
Mason Nystrom: I just have a question for you. What has it been like working for a DAO because Index Coop is definitely one of, I want to say, like the more established DAOs of several different working groups, several different product lines. I'd love just to know what that experience has been like.
Crypto Texan: Yeah. Thanks for asking. I've been doing this for almost a year with the Index Coop and I've been in the space since 2017 and I do have a full-time traditional finance job, which is why I'm Crypto Texan and my PFP is a Bastard Punk instead of being a real name and my real picture. But I think it's been really interesting and I think it's just important to keep in mind that we are early in the sense that we're just trying to figure this out as we go and we're looking to other DAOs and other organizations and see how they run things well.
I think inherently you've got to pull stuff from the traditional legacy world to try to build what we are trying to build. I feel like the term DAO, decentralized autonomous organization can sometimes be a misnomer because it feels more like we're a company that's built on top of the blockchain, but with no like true legal standing anywhere. I guess like technically we would be considered like a general partnership in the United States, but we're all over the world.
I would say that I have felt like... I just feel like the type of person, the type of worker and the type of personality that DAOs attract is a very unique individual in the sense that... I learned this early on when I first started getting involved in the Coop. Asking, "What should I do?" Is a good way to get started, but a better way is to just do things.
Like you really have to be a self starter in a DAO and just keep moving along and chugging along and pushing the DAO your own way instead of having someone tell you how to push the DAO forward. I think if you go to a job interview, I think something that the job interviewer wants to hear you say is that you self-starter and you do things on your own.
I think that's great and I think everybody says that in every interview, whether they mean it or not, but in a DAO, you have to be that. Because if you're not, the flow of the work force is so fluid that someone's going to come in and take your spot. I don't know. Is that a good thing or a bad thing? I think it's great for the DAO when the organization is whole.
Is it good for that person? Well, maybe not. But the type of people that I work with at the Index Coop are just so laser focused, self-driven and that is the most rewarding part to me. Right now, it's something I do on the side. Well, I say I don't really... I can't really call it a part-time job because I do this way more than part-time, but I would call it very fulfilling and it's a good addition to what I do in the traditional finance world an it's something different in innovative too.
Because the landscape is always changing from a legal standpoint and from just an innovation standpoint. Luckily, in the bear market now, the news headlines have slowed down a little bit so I can catch up on things. But in general, those are my thoughts. I feel like I rambled on there for a little bit. I'm not used to people asking me questions on this.
Mason Nystrom: No, I appreciate the response. I think that's like... So many people, I think, so often are so euphoric about DAOs when I think that they still have a really long way to go and there are definitely, I think still a lot of existing pain points.
DAOs are really great at capital fundraising, but I think that they can definitely get better from an Ops perspective. When you mention being a self starter is really important, I wholeheartedly agree. I think that you need that in a DAO right now and I think the question is how can we then get to the point where you can have a multi-thousand person organization where not everyone is self-starter and you can introduce some hierarchy that might resemble a more traditional company, but that's, I guess, like a boomer take for another day.
Crypto Texan: Yeah. I think another thing that's really been interesting for me is when the Index Coop does face like some adversity internally. And how is that resolved and how are people working together to... I think it's just very important to have like core value and a mission and just keep referring back to that. And make sure that everything that we're doing is adhering to those core values in that mission and that's the best way I think, to get people aligned from just like a cultural and organizational standpoint. But I think another thing is like, just because someone wants to work for a DAO doesn't mean you have to let them work for a DAO.
We have people that come in all the time that say, "Hey, I want to join." And they don't really follow up. It goes back to that self-starter mentality, I guess. You really have to prove your worth in the space. I'm still rambling. We've gone over time.
But I think one of my favorite things is that when you do see someone pop up and say, "Hey, I'm interested. I want to start joining. I want to start contributing." And then you really see them start contributing. They're like leading calls, they're tweeting about the Index Coop, they're hosting Twitter Spaces. And just watching someone come from nowhere and just rise to the top of the organization, it's the coolest thing, man. It really is. I've seen that so many times and that's another part that's really fulfilling to me.
Mason Nystrom: No, definitely. I appreciate the insights and I agree that there's a lot of rewarding potential that can come from working for a DAO.
Crypto Texan: Yeah. Well, Mason, like I said, we're up on time, but I appreciate you coming on to the podcast with us. Everyone who's listening live, thank you for listening live. This is being recorded and we're going to get this out in about a week. Mason, again, I appreciate it. Thanks for coming on.
Mason Nystrom: Thanks so much, Tex. This has been a blast.
Crypto Texan: All right. Talk to you later.
Host: @Crypto_Texan
Audio Engineer/Mixing: @LloveraFrank
Marketing Images: @crypto_diller_
Transcript: @0xMitzy / @Crypto_Texan
Conversations with the Coop - Mason Nystrom - Messari Crypto