🎙 Zeneca: "The Market is Fed Up With the Same Sorts of Projects and There's a Flight to Gaming NFTs"

Zeneca is an NFT investor and content creator who grew his collection of non-fungible tokens from 0 to about 3,000 pieces worth millions in less than a year. He comes on the podcast to talk about how he went from professional poker player to full-time NFT trader, and what lessons from poker he has brought over to crypto. We discuss the importance of teams and communities when investing in NFT projects, and the key signals he looks for when buying NFTs. Zeneca talks about the difficult balance of using incentives to bootstrap community, while also providing value beyond those incentives, otherwise projects become unsustainable.

Zeneca believes the NFT market has hit a downturn amid rising crypto prices because it has become saturated with the same types of projects. He believes avatars will take a back seat to projects where NFTs have utility beyond displaying the art itself and being part of a community. That’s why gaming is setting up to be the next big movement in NFTs, he says. Still, he doesn’t believe we’ve seen a true bull and bear market yet — that will come when NFTs better integrate with DeFi and leverage comes into play.

Next, Zeneca is looking forward to focusing more on content creation than trading, and he’ll be of course experimenting with NFTs as a way of monetizing that content, with his own NFT drop coming just around the time this podcast is published.

The podcast was led by Camila Russo, and edited by Alp Gasimov. Transcript was edited by Owen Fernau.

🎙Listen to the interview in this week’s podcast episode here:

🙏 Thanking our podcast sponsors:

• Matcha, which routes orders across DEXs on Ethereum, Polygon, BSC, fantom, and Avalanche to provide the best possible prices without taking any commissions.
• Tracer Perpetual Pool tokens, leveraged tokens that can be put into cold storage OR used as collateral throughout the DeFi economy without worrying about liquidation risk, or margin requirements
• Balancer, one of the leading DeFi automated market makers (AMM) for multiple tokens. Dive into their pools here!
• Kraken, consistently rated the best and most secure cryptocurrency exchange, which can get you from fiat to DeFi
• Integral is a new DeFi primitive and OTC trading protocol built for large crypto trades. Join the waitlist for a new version launching in Q4!

👀 Only paid subscribers have access to the full interview transcript below.

Zeneca: Sure. So I got into NFTs at the start of this year, and crypto mainly then as well. But before that, I was a professional poker player for about 15 years. So I came from a nontraditional background, nontraditional career, and that made the transition into NFTs relatively seamless, and easier than if, say, I was quitting a 9-5 traditional job to get involved.

“...I came from a nontraditional background, nontraditional career, and that made the transition into NFTs relatively seamless…”

So I played professional poker for 15 years, I went from high school to that. And then around 2016-2017, when the crypto bull market was happening, then I started getting a little bit into crypto. I was excited by it, into Ethereum and all the possibilities, but I couldn't really visualize what all these smart contracts would be used for in the future. I didn't quite get it the same way that I think that I do now.

So when the bear market hit in 2017, I left the crypto space, I was less interested. I wasn't one of the ones that stuck around, went back to real life, went back to poker. And then at the start of this year when everything started picking up again, prices were taking off, I was starting to get more interested in what was happening. And so NFTs were starting to pop off around the same time, say, January, February, March.

And I had some friends who hadn't really left the space, they'd been in the crypto space for a few years. And they were telling me a bit about Hashmasks and CryptoPunks, and how they're worth tens of thousands of dollars, and I couldn't believe it, obviously. Like, anytime someone first hears about NFTs they think it's a scam or something outrageous or ridiculous, and that was basically my first impression too.

“...anytime someone first hears about NFTs they think it's a scam or something outrageous or ridiculous, and that was basically my first impression too.”

But eventually, I realized, these friends of mine, they’re really smart. They wouldn't be spending so much time and money in the space if there wasn't something of substance there. So I started doing some research and doing some reading and digging and educating myself on NFTs and crypto again, in general, because I hadn't been in the space for a while and was trying to catch up.

And I just sort of fell in love and made a bit of a conscious decision to spend a lot of my time on the crypto space, and NFT space and not on poker. And so that was probably around February, March. And then just since then it's been eight months. And I'm still learning. I spent a lot of time learning and figuring out what's going on. Maybe four or five months was pretty heavily trading NFTs, buying, selling on an active daily basis.

And then somewhere along the way, I decided to create content. I decided to start a newsletter, largely because I've found that I learned about things best if I'm trying to write about them and explain it to other people. And so I thought it would be really helpful for me to talk about projects that were going on at the time. And it just sort of blew up and a lot of people started to really resonate with the words, I guess.

And then I do these daily stats on Twitter, which again, I started tracking the floor price of a handful of projects that I was personally invested in out of personal interest because it was helpful for my trading. And I tweeted it out once and like a lot of people were like, whoa this is really, really cool and interesting. And I was like alright, well maybe I'll just tweet this out every day. And five months later, here we are, it's really blown up.

And from there I have just kept creating content, I have a podcast and then I've got a Discord server and have my own NFT drop coming out. I'm going to start a YouTube channel. And I'm really focused now less on the day-to-day trading and buying and selling of NFTs and more on creating and trying to find ways that I can give value back to the community via content or via consulting and advising on projects, trying to help them launch the best version of their products. Less trading basically. And that's where we are.

“I'm really focused now less on the day-to-day trading and buying and selling of NFTs and more on creating and trying to find ways that I can give value back to the community via content or via consulting and advising on projects…”

CR: Very nice. That was a great summary and catch up to the present day. But I wanted to go back to a couple of points. One is what do you think made that click for you that you went from being a skeptic not so interested in crypto beyond just the trading aspect to realizing, oh, there's something here in NFTs so that I want to spend most of my time in this space?

Z: So it was probably a combination of things. One, was having some friends that were in the space and realizing that, if I trust them, and think they're smart people, there's probably something there and I should do more research. But the thing that actually made it click, I guess is that I read this article on a newsletter by Packy McCormick, he has a Substack called ‘Not Boring’. And he wrote a post called “Power to the Person.”

And it was basically about the creative economy, Web 3.0, and how NFTs will just create many of these opportunities for content creators, whether it's artists or game designers, or whoever to expand their reach and create content that people who appreciate and value it can buy from all around the world, and effectively have true digital ownership. That was the specific thing when I realized that we have a way for people to have true ownership over digital assets and realizing how much of our lives run on the digital world, that really made it click for me.

“I realized that we have a way for people to have true ownership over digital assets and realizing how much of our lives run on the digital world, that really made it click for me.”

All-In with Thousands of NFTs

CR: So from there, what was the next step? Did you just start buying NFTs that you liked? How was your research process that led you into what to buy? How did you first get started in the space?

Z: Yeah, it was quite a different scene back then compared to what it is now. So I don't know how applicable my journey will be. It was a bit of buying things that I liked and thought were interesting and cool. And for a long time, they would usually go down in value. It wasn't a case of quick flipping like it may have been a couple of months ago. It was sort of hey, this project looks cool, let me buy an NFT in it because I'm really into NFTs. But there wasn't really any sort of immediate profit seen or even medium-term profit seen, by medium-term I mean a few weeks. Time is crazy in the NFT space.

“...there wasn't really any sort of immediate profit seen or even medium-term profit seen, by medium-term I mean a few weeks. Time is crazy in the NFT space.”

So I wasn't really full on in the NFT space to begin with. I was still dabbling with other crypto coins, still playing a little bit of poker. I was trying to learn more about it, and be in the space, talk to other people, talk to friends, join Discords, find things that were cool and interesting, spend time in the Discords of projects that I really liked.

I remember I found Zed Run back in April, I think, and I spent a lot of time learning how that ecosystem worked. And from there, you talk to other people, you network, you hear about other projects that sound cool and interesting and I start buying into a few projects. And eventually, some of them will go up in value, and then you just get a better idea of what works, what doesn't. And that's just part of the learning process, I think.

“...eventually, some of them will go up in value, and then you just get a better idea of what works, what doesn't. And that's just part of the learning process, I think.”

CR: What was your first major NFT breakthrough, a piece that really made it so you were like oh wow?

Z: It probably was a Zed Run horse. So I participated in one of the drops, I think at the start of April, and I just got really lucky. I got a Genesis horse, which, their drop, it's difficult to even get one because a lot of people were trying and there's gas and all sorts of other issues. And I think I got two or three and one just happened to be just a big winner. And in those times, you could race your horse as many times a day as you could basically. And I was racing up to 100 times a day and the horse was generating income for me, generating profit. And so I was like, whoa, this is, you know…

“I was racing up to 100 times a day and the horse was generating income for me, generating profit. And so I was like, whoa…”

I remember someone offered me 4.5 ETH to buy it, and 4.5 ETH was maybe my entire bankroll at the time, it was an enormous sum of money and I was really strongly considering it. And I just started asking around. I reached out to other people in the Zed Run space because I didn't really know how to value the house. And I wasn't sure how long I could continue racing it for, how long it would be profitable for, and what breeding value there would be. And I eventually ended up not selling and then now the horse has probably earned 5-6 ETHs in profit, just racing, let alone the actual value or the profits generated from selling the offspring. So yeah, that was definitely my first big win in the NFT space.

CR: Interesting. And now how big is your NFT portfolio?

Z: In terms of number of NFTs, it's somewhere in the 2,500-4000 range. It's really hard to know exactly how many I have that are genuine NFTs because there's like an issue with spam at the moment where projects will just send tons of NFTs to people's wallets and mint them directly and they’re usually worthless garbage. So yeah, somewhere between let's say around 3,000 NFTs. And in terms of value, it fluctuates. I haven't really checked in a while, obviously, we're in a bear market, but somewhere in the say, mid-seven figure range is roughly what it's grown to.

“In terms of number of NFTs, it's somewhere in the 2,500-4000 range […] somewhere in the say, mid-seven figure range”

Poker Lessons for NFT Trading

CR: I'm curious how your poker skills apply to NFT trading, if at all?

Z: I've haven't really ever consciously thought about a situation in the NFT space and gone hey, you know, it's similar to this in poker, I can apply similar approaches. But I think just generally, the mindset is very helpful where in poker you have to learn to sort of have a healthy level of disassociation from money or detachment from money. When you're playing poker, you’re using chips, even though you bought it with real money, the money is sort of a tool, like you bet with chips, and you win and lose chips. And then at the end of the day, week, month, you do the bookkeeping, and you have to treat it a bit like a business.

“...just generally, the mindset is very helpful where in poker you have to learn to sort of have a healthy level of disassociation from money or detachment from money.”

It's similar to NFTs and Ethereum, like Ether, yes, it's real money, it’s currency, but it's also a bit of a tool that we use to invest, and buy and trade projects. And there are times when you're going to invest and lose a bunch of money, there are times when you're going to invest and make a ton of money. And if you get really upset when you lose, and too euphoric when you win, it messes with the head, and it makes it difficult to think rationally. So I think all of the experience in the poker space has really allowed me to separate the money from the logic.

CR: So viewing money and value being transacted in the NFT market more like poker chips than actual money is helpful?

Z: Yeah, it's definitely helpful, I think, on a short term basis. Obviously, if you take it too extreme in either direction, if you just believe it's not real money, then you end up making poor decisions. And you need to have some level of attachment to say, hey, it's 6 ETH, that's 25,000 US dollars, that's a lot of money. But if you're just always thinking about oh, crap, the floor price went down 0.05 ETH or 0.5 ETH, and then that's this many dollars, that's how much rent, that could have been a car or a holiday or a new computer, if you’re always thinking about that, then you’re too in your head. I think it's easy to make poor decisions because your emotions are running the show and not your logic.

ETH is Money

CR: Makes sense. I'm interested in how your view of ETH has changed by being involved in the NFT market. Because you mentioned before that ETH is currency, and to some people, maybe outside of DeFi or outside of the NFT space, that might not be so obvious. But I think for people who are constantly transacting in NFTs and NFTs are priced in ETH by default, that starts to become second nature. So I'm wondering, if you go back to when you were looking at crypto in 2017, or the first time you ever learned about Ethereum and ETH versus how you view ETH now, how has that changed?

Z: It definitely feels a lot more like a currency now than it did in 2017, or even in May of this year, June even. Certainly after having transacted with it a lot and using it on a daily basis. Does my brain start to think in ETH? And it's like when you're buying and selling things, I think of things in ETH price. And in the past, it would always be doing the math and converting it to US dollars, Australian dollars when I was there. And now it's a secondary thing where I think of it in ETH first and foremost, like, how much does it cost, that much ETH? Okay.

And then, lately, I have to remind myself, hang on, ETH has doubled in price, it's now 4,300 or whatever. You know, 0.1 ETH is not $250, it's now $450. And there's some sort of real world ramifications that has on the market. But generally, back in 2016, 2017, ETH was an investment, it was an asset or just a thing that I bought and hoped that the number went up. Whereas now, it's something that I use on a daily basis to trade, buy and sell things. But I have a couple of employees now, and I pay them their wages in ETH. It's a currency. And they're happy to accept it, I'm happy to give it and it works well. So it's definitely a situation now where I think in ETH more.

“...back in 2016, 2017, ETH was an investment, it was an asset or just a thing that I bought and hoped that the number went up. Whereas now, it's something that I use on a daily basis to trade, buy and sell things.”

CR: Even in general life, like the groceries?

Z: Less so in general life. Although, occasionally, I'll be looking to buy a fairly large purchase, whether it's a new laptop, or a new phone, and it'll be $1,000 or $1,500, and I'm thinking that's kind of a lot of money because in real life, that is kind of a lot of money. And then sometimes I'll do the math and be like, hang on, that’s “only,” 0.2 or 0.3 ETH. And it's like, I just spent that on some random profile picture project that launched out of nowhere. And it really is a reality check when you do the math sometimes. But in real life, I don't think in ETH, but when I'm in the NFT space, yeah, it is all ETH.

CR: I guess these prices really have a way of distorting reality. It's like when you're dealing with NFTs and with DeFi, and you spend like 0.1 ETH, even in gas.

Z: Exactly. Sometimes the gas fees are so much, and MetaMask tells you what it is in US dollars, and I just tend to generally block that out and am like, okay, it's just gas, it’s what it is. But especially for people newer to the space when they see it's going to cost you $125 to process this transaction, it really is jarring. And even when I was several months ago getting used to the space, it really made me think twice, and I was reluctant to transact, as you should be if it's a lot of money, but yeah, now I think of it in ETH.

“...especially for people newer to the space when they see it's going to cost you $125 to process this transaction, it really is jarring.”

Picking Projects

CR: Yeah, it makes it easier to swallow. Okay. So you've grown this huge NFT portfolio in just a few months, really quite impressive. How do you go about picking what projects to invest in? What do you look for?

Z: The number one thing I always look for is the team behind the project, the creator, the artists, the managers, the marketers, everyone, I want to know who is working on the project. Like that's the number 1, 2, 3, 4, and 5 reasons for me. There are projects that have mediocre art, mediocre roadmaps, mediocre everything. But if it's an A-plus team who has a proven track record of releasing successful projects, then I'm usually very willing to at least hear them out and take a chance on them.

“The number one thing I always look for is the team behind the project, the creator, the artists, the managers, the marketers, everyone, I want to know who is working on the project. Like that's the number 1, 2, 3, 4, and 5 reasons for me.”

So that's just by far the number one thing. Beyond that, I like projects that are doing something new, something innovative, something creative, not just copying all the other projects that have come before. Obviously, you can have some success buying into projects that are copying previous projects, and obviously, every new project takes some inspiration from everything that's been done before. Because if a project does something, it works, community likes it, take it, use it, build on it, great. But if a project is doing something completely new, and can execute well, and it's a great thing, then that is what really appeals to me.

“...if a project is doing something completely new, and can execute well, and it's a great thing, then that is what really appeals to me.”

CR: Okay. So, the main things are who is behind the project? And how much innovation there is?

Z: Yeah, I would say those are the two biggest things. Sort of in conjunction with the first point about the team, I also want to know the community, like who are the other people that are investing into this project. It can be hard to find that out before a project launches, but you can get a bit of a feel for it by hanging out in the Discord seeing who else is excited, why they’re excited for it. Are they just there for the money? Do they think it’s just going to be a quick flip? Or are they also as interested in the innovation or the creativity or the team as I am?

Sustainable Community

CR: It seems like community is such an important part of NFTs at this moment, at least. Because beyond just like investing in the art itself, or the token itself, what you're really buying into is the community. So it is just such a key piece of the investment. So how do you tell whether a community is good and is sustainable and here for the long run? And also, from all the different projects you've seen, what have you seen is an effective way of building these communities?

Z: So, I mean, what makes a good community or what appeals to me, everyone is different. There are a bunch of different communities now and they will have different personalities, and different humans will be attracted to different ones for different reasons. So I'd say just find a community where, if you're in the Discord and chatting to other people in that community, you just get along well with them; you like the things they're saying, the way they’re saying them, just the people that they are. If you have fun, and you make friends, that's great, like that's the number one thing, and different communities will have different people again.

So in terms of a strong community and finding people that are there for the long run, again, that's just chat with them, have conversations and see are people really concerned about the floor price and their investment in financial terms going up and down? Or are they there because they like the project, they like the team, and they like where things are going to be in a year, and are just having fun engaging with one another in the community?

It's getting more difficult to find these communities, I think, especially as a percentage, of every project that drops, very few of them are going to be able to create sustainable long term excellent communities, just because there are so many people trying to make money in the NFT space right now that each community is going to get flooded with people who are just there for the money. And then when the bear market hits, which we're kind of in one now, most of these people will go away, and then who was left in the project are the true believers, true supporters.

“...especially as a percentage, of every project that drops, very few of them are going to be able to create sustainable long term excellent communities…”

So I actually think that a good way to find really good communities and investments is to look for projects that may have launched a few weeks, couple months ago, the floor price may have tanked a lot and just go and check out their Discord, spend time there, see if the team is still active, if they're still updating and working on building and creating things, and if there's still a core community of strong supporters, then those can be some of the best investments I find because those are the projects that can really take off. And you can get in at a really low price point after all the flippers and the people that were just there for a quick buck have left.

CR: Do you have examples of recent projects like that that you've joined?

Z: I know, one I really like is Top Dog Beach Club, I've spoken about it a bit lately. It launched two or three months ago, somewhere around then, and it never really took off to like amazing commercial success. It's been trading decently, a little bit above mid-price, even now still, and has reached a bit higher, maybe 0.5 at one point, it minted at 0.08.

But it doesn't have the hype. It doesn't have a ton of people in there right now. But the team is excellent, they're one of the first fully non-anonymous teams, they came out and said who they were, what their backgrounds were, and we're dedicated to providing value for the community. And it has a really strong group of core believers, and the team is still building. There's still people. They're having fun and talking about real life events, and online games and all sorts of ways to connect and have fun. And it hasn't taken off yet. It may never take off. You can't predict these things. But I am a big fan of that one. And that's probably the most recent one that fits the criteria.

“...the team is excellent, they're one of the first fully non-anonymous teams, they came out and said who they were, what their backgrounds were, and we're dedicated to providing value for the community.”

CR: Cool. So it looks like you put a premium on non-anonymous founders?

Z: I do.It is definitely possible to be anonymous and launch successful projects, except in the current landscape with hundreds of projects launching a week or a month. If a team is anonymous, it is more difficult to get people to be convinced to invest in that project. Because it's all too easy for the core group of developers and creators to launch multiple projects, and just dump one community and move on to the next one, release a new project and then leave the community behind and move on.

“If a team is anonymous, it is more difficult to get people to be convinced to invest in that project.”

And if there's no accountability, if there's no real people attached or personalities attached, then I find it difficult to want to invest in the long-term. It doesn't necessarily have to be fully non-anonymous, like pseudo-anonymous is perfectly fine. If they have a Twitter profile, and they're known in the community and they've been around for six months or years even, I don't need to know their real name, I didn't know their face, I don't need to know any of that. But there's obviously a personality and a person and the human and just entity behind this and it's not fully anonymous.

Whereas if a project is launching, and on their website, they have a team page, and it's just like full pictures of whatever their profile picture avatar is, there's no links to Twitter, there's no links to anything, or if there is a link to Twitter it was created like two weeks ago, or anything like that, that's a red flag and doesn't appeal to me.

Whitelists as a Double-Edged Sword

CR: Makes sense. About building community, there's been different tactics that NFT drops are using to create buzz. I know you mentioned whitelists on one of your recent newsletters. What are the most recent trends that you're seeing both in community building or in NFT drops recently?

Z: So, whitelists have been a popular thing for maybe the last two months, six to eight weeks. They were sort of around a little bit before that, but nowhere near as prevalent as they are now. And they were sort of an answer to gas wars because people were getting fed up with gas wars, projects were like, alright, we can just whitelist the people and then they can mint when they want without gas.

And it was and is a decent solution through that. But where people are getting fed up now is that projects are using access to the whitelist as a way to inorganically build that community. So what they'll do is they'll say, we have a Discord, if you invite five friends, we'll give you a whitelist spot. And so they really inflate the Discord numbers. And originally, this idea worked, it worked decently well. Projects were able to grow their communities. But now I think we're at the point where people are savvy enough, they know that all projects are going to do this. They'll set up bots. They'll set up fake accounts on their other computers or on their phone to join these Discords and they basically pad their numbers.

“...where people are getting fed up now is that projects are using access to the whitelist as a way to inorganically build that community.”

And even if they do get five genuine friends, humans, whoever to join the channel, it doesn't necessarily mean that those who joined are going to be interested in your project. So that's one approach for community building that projects are taking, and it works in getting people through the door and padding your numbers. But I don't think it necessarily works in growing a strong and healthy community.

So one thing is, if you do these types of things, and you do get several hundred or several thousand real people through the doors to your Discord, it's now your responsibility to make them want to stay, to make them want to get invested in your project, to find it appealing. And you really have to do that quickly and effectively. Because most of us in the space, we're in dozens, if not hundreds of Discord servers. If we're joining one just for a whitelist spot, we're not going to spend much time there. So maybe we spend 30 seconds, we read announcements, read a whitelist post, and then if something catches our eye, we may spend a little longer, otherwise we're off to the next thing. And so if a project really wants to succeed with this approach, they need to find a way to capture people's attention really quickly.

“...if you do these types of things, and you do get several hundred or several thousand real people through the doors to your Discord, it's now your responsibility to make them want to stay...”

I think it's a double-edged sword, this approach does work and there is a time and place for it. But I'm a fan of finding other ways to really build your community. And unfortunately or fortunately, the best and most effective way to build a community is to spend time. It takes time to organically grow. If you want to launch next week, and you don't have a community, you're not going to be able to launch with a strong community, pushing your launch date a month, two months, three months, back, really is a better idea, I think, to push launch, build a strong community, have people excited for your project, and then launch it than to rush to launch, not have it sell out, have a lot of people unhappy because they bought or minted and now it's trading below mint, and then you’re sort of playing catch up and hoping that people will for some reason decide to invest.

Saturated NFT Market

CR: What do you mean when you encourage NFT projects to be better? You have this big post admonishing people, be better. So what do you mean by that?

Z: I mean, it's all of that. If the whitelisting thing is working for a while and other projects are using it to get people in the Discord and these invite contests, you know, yes, copy it, maybe use it as a tool, but don't rely on it as a way to build your community. Just find new ways, find innovative ways, be creative. Find a way to make people want to stay, to want to be part of your community. Don't rely on what's worked before because sentiment changes very quickly in this space. You can't rely on it going forward.

“Don't rely on what's worked before because sentiment changes very quickly in this space. You can't rely on it going forward.”

If you pave your own path, it's just better. And the whole post was a response to the hundreds of new projects launching every week. And the fact that so many of them are low effort, and even the ones that aren't low effort, that people have been working on for a couple of months, they aren't necessarily groundbreaking, innovative, fantastic, amazing things that make everyone want to rush in and be a part of that just another decently well executed profile picture project. And I don't think that's good enough anymore.

I think the market is getting fed up with all these same sorts of projects, and we want to find cool, new, interesting things to invest in. And I think that's where we will head going forward. I see that already starting to happen with a flight to gaming NFTS. And people are starting to see that yeah, collectibles, and art and profile pictures and stuff were good and there's a place for them in the space. But really who needs 10 profile picture projects? You buy one, you find the community, maybe you buy a couple others because you really like them. But very few people are going to be able to engage in even half a dozen communities, let alone however many projects are dropping now.

“...the market is getting fed up with all these same sorts of projects, and we want to find cool, new, interesting things to invest in. And I think that's where we will head going forward. I see that already starting to happen with a flight to gaming NFTS.”

Whereas with gaming, the gaming industry is enormous, and I think that more people will resonate with games, at least maybe avatar and profilepictures will come back, I'm sure they will because when we get millions and billions of people in the space, there's going to be a need for many more projects. But right here, and now we're just oversaturated with them and people want something else.

CR: Interesting. So do you think this NFT bear market that we're in, you’ve said that you think that's where we're at, do you think that's been driven because there was this flood of Avatar projects? If you can go into where we're at in the market right now...

Z: Yeah, I think that's a big part of it, the oversaturation of projects. But a lot of us in the community have said that the market was oversaturated in June, and then we said that in July, and then in August, and then September. Eventually, it was going to be right. Eventually, the supply was going to completely dwarf demand. I think that's where we are now.

I don't think it was just that. I think the fact that ETH prices took a massive run up had people a little bit scared to invest more ETH into the NFT space, in case ETH kept running up. And gas prices have also been really high, which makes it difficult for people to buy and sell, especially the lower priced NFTs. If an NFT is 0.05, and gas is going to be another 0.05, it doesn't make a lot of sense for people to want to buy that. So I think these three things have all contributed, but certainly the massive oversupply is a big factor.

“...a lot of us in the community have said that the market was oversaturated in June, and then we said that in July, and then in August, and then September.”

CR: Do you think there will be an inverse correlation between ETH and NFTs going forward because of what you mentioned?

Z: It's really hard to say. Like we've seen over the last year, obviously, the NFT market has matured a lot, but it's still relatively immature. We've seen ETH go to 4k and then tanked to 1,700 and then go to 2.5k and then again run up to 4k. And there hasn't really necessarily been a strong correlation. Because last time ETH pumped, NFTs were also pumping, like when it went from 1,700 to 2.5k or 3k, or whatever. But this time when ETH pumped, NFTs tanked.

I think as the market matures, the level of correlation will become less evident. It is hard to say. I think that as ETH prices go up, NFT prices in ETH will come down a little bit, but probably not to the same ratio that ETH is going up. Like if we have a 10k ETH, it's just like a 0.1 ETH project is now $1,000 USD, compared to a few months ago where it was $200 USD. And that's just naturally going to make it much more difficult to sell out. New people to the space, you have to convert whatever currency they're coming from to ETH, and are just going to get less bang for their buck. And so yes, I think naturally, there will be some sort of correlation, but it probably won't be close to perfect correlation.

“I think that as ETH prices go up, NFT prices in ETH will come down a little bit, but probably not to the same ratio that ETH is going up.”

CR: Alright. So maybe NFTs will drop in ETH terms as ETH price goes up, but maybe not in dollar terms?

Z: Yeah, I think so. And I think that for the foreseeable future, they'll still go up in dollar terms. But over let’s say, the next couple years, not necessarily the next month or two, but probably not as much as just pure ETH.

Push Towards Gaming

CR: So, I want to get to what you were getting at before with your transition into looking more closely at gaming NFTs. Because as you were talking about investing in NFT projects and in community, in the end, to me, there has to be something else there for a project to be valuable, right? Sometimes it’s hard for me to wrap my head around okay, there's this NFT project, and yeah, like maybe it looks really cool and maybe people love showing it off on their Twitter avatar, and maybe it has this really hopping Discord chat that everyone's there. But is that worth millions of dollars?

So at what point do you need something more substantial there? Do NFTs need to represent some actual utility, some actual platforms, providing some value of some sort of service to people? Like, for example, a game, some yield, some financial product or something else, besides saying, oh, I'm part of this cool club? Is that going to be enough in the future? Do you think there is always going to be a place for that? Or do you think that will evolve past that where people will just demand more utility from these things?

Z: I think there's definitely a place for it, and there always will be just as NFT avatars or NFTs themselves as status symbols in effect. CryptoPunks don't have much in the way of utility, but their valuation is enormous because they were the first large generative project, they were so early, they've become a brand and culture in and of themselves. And having one now is really a flex.

And in real life, people buy Ferraris, and Rolex watches, and Louie Vuitton bags, and all sorts of luxury goods where the utility of those is not really much better than a $20,000 car, or any bag or any watch that works. It's just to show off to other people to say, hey, I have money, I can afford this slightly more luxury good for whatever reasons. And maybe they're a little higher quality, but not to the extent that they’re demanding those prices.

“...in real life, people buy Ferraris, and Rolex watches, and Louie Vuitton bags, and all sorts of luxury goods where the utility of those is not really much better than a $20,000 car, or any bag or any watch that works.”

I think some NFT projects have a lot of that going on with them where it's sort of a status symbol that people are willing to pay for to be part of this club, to be part of this community. And I think the community aspect does have some utility to it. Like the networking effects of a really strong community are powerful.

Take the Board Apes, for example, they really started off this whole wave of community driven projects. And there's now almost 6,000 unique original Ape owners. I don't know how many Mutants and stuff there are. But we formed this community on Twitter, on Discord, where just by nature of someone having this profile picture, being part of the club, we're just willing to help each other out and network.

“...we formed this community on Twitter, on Discord, where just by nature of someone having this profile picture, being part of the club, we're just willing to help each other out and network.”

And in real life, there's value to networking, and people pay tens to hundreds of thousands of dollars a year to be part of a country club or a golf club, where a lot of the value is derived from being part of the club. You can go play golf for $100, or whatever it is. You don't need to pay six-figures a year to be part of a golf club if it wasn't for the networking effects and the community aspect. And I think we're seeing a bit of that in the NFT space.

I think going forward, it's going to get harder and harder for projects for that to be their only thing. We've already got a bunch of these types of projects, these exclusive, these higher price, “blue chip projects”, that if someone wants to be part of one of those clubs, they can go get a Punk, they can go get an Ape, a Cool Cat. And there's a couple dozen projects in the 1-3 ETH range that will probably end up being more exclusive higher tier priced clubs.

But there's definitely not room for hundreds of these types of projects, I think, at least at the moment. And that's where we're seeing people who are coming to invest in projects now, if they can't afford that, then they do want utility, they do want something more. And that's where the gaming comes into the effect or the yield. Like the craze ran a couple of weeks ago, maybe a month ago, where every project was saying hey, we’re going to release a token, it’s passive income, it’s yield and they hadn't really realized what the legal ramifications were and a lot of backpedaling happened after that.

“...there's definitely not room for hundreds of these types of projects, I think, at least at the moment.”

But the market really loved that idea. They were obsessed with it. That's why all the projects kept doing it because if you released a project with that everyone would buy in because they wanted that DeFi element to their NFTs and that utility which most other projects aren't offering. So I think we're going to keep seeing innovation and evolution forward about ways that projects can add utility beyond just the community and beyond some sort of basic token. And gaming is an excellent use case of that. And I hope we see other cool use cases too.

“...we're going to keep seeing innovation and evolution forward about ways that projects can add utility beyond just the community and beyond some sort of basic token. And gaming is an excellent use case of that.”

Building Utility into NFTs

CR: What other types of utility are you seeing, if any? I don't know if there's anything else besides NFTs and gaming out there? What are some of the new use cases?

Z: So there's some projects that are in real life events, that way, if you have the token, you get access to. Just general membership access tokens, like we saw the first real big one with Gary V's VeeFriends where if you had one, you got access to his Discord, and then some benefits for being a holder and then access to his in real life conferences for the next three years, I think.

And we've seen a bunch of other membership tokens or passes like Metakey, House of Kibaa, and then there's a bunch of private Discords and stuff, where the utility of the NFT is entry to a membership or a club. But instead of just being a profile picture club, the token itself is sort of irrelevant, like either it's an ERC-1155, so every NFT is the same, essentially making them fungible, or it's like Gary V, where he just doodled and like the art isn't the selling point, it's like this is a membership to the club.

And in those cases, the project's offering something in return, whether it's collabs with other projects, whether it's courses and information on how to improve your level of education, access to conferences, access to a private Discord, things like that. So that's tangible value. And it's sort of the Web 3.0 of content creators getting paid. Previously, it would be ads on a YouTube channel, monthly, $10 fee to subscribe to your newsletter, whatever it is. And now people are saying, hey, buy my NFT, that gives you either lifetime access or in some cases for 12 months, this will give you access. And I think that's a really innovative way that people are using NFTs to add utility. We've seen a bit of that and I think we're going to see more of that.

“...it's sort of the Web 3.0 of content creators getting paid. Previously, it would be ads on a YouTube channel...”

Intersection Between NFTs and DeFi

CR: Totally. That's super interesting. I'm definitely looking into that as well. So going further into this NFT utility space, what are you seeing in NFTs and the DeFi intersection?

Z: So obviously, we had that phase a month ago with yield tokens, and you could stake your NFT and generate tokens. And it's tricky because it makes it so that your NFTs are securities and not assets, or rather, non-securities, so the Securities Exchange Commission in America will come after you and there's all sorts of issues like that and regulate it.

And I think the real issue with that is that if the token that's been generated is ltraded for financial gain, if it's just a governance or utility token, then they can probably get away with it, but it's a gray area. And I think it's really cool that projects are exploring this and experimenting with it because I'm fascinated with the idea of NFTs crossed with DeFi. In some cases, just holding the NFT allows you to passively accrue tokens. Or in the case we had that Bodo airdrop, which Bodo is like an artificial intelligence that users who own the token can vote and essentially train the artificial intelligence to create art.

And what they did is they retroactively airdropped or made able to be claimed tokens by anyone who owns a CryptoPunk, a Bored Ape, Art Blocks, SuperRare piece and stuff like that. So instead of it being like an ongoing yielding thing, it was like you own this NFT now you get this token. And I think we're going to see more of that sort of stuff going forward.

But what I'm truly excited for, which I think we're probably still a few months away from, is a seamless way for people to borrow against their NFTs. So, at the moment, NFTs are illiquid, and if you have 10 ETH in NFT, it's basically all locked in that NFT. You either have to sell it to get the money back, or do the peer-to-peer loans, so that’s one-on-one say, hey, I'll lend you my NFT, lock it up in a smart contract or a trusted third party, and pay them some interest. And it's very clunky and difficult at the moment.

“...what I'm truly excited for, which I think we're probably still a few months away from, is a seamless way for people to borrow against their NFTs.”

But we're going to see these centralized automatic market makers where you can go and say loan against 40% of the value of your NFT. You know, they'll evaluate what every NFT collection is worth or the whitelisted ones that they decide to put on their platform. And you can say, alright, I'll borrow 4 ETH against my 10 ETH NFT. I won't need it for this time. It's 2% interest or something nice and low, and we'll pay you back.

And when I want it, I can just unlock that money. And then people can use that money to even just buy other NFTs or just go yield farm on whatever, regular DeFi and usually get more than 2%, or whatever low interest rate this platform is offering, maybe they're going to charge 3% or 4%. But I don't think it'll be too exorbitant. And you should be able to get better yields elsewhere. And it's going to be this great unlocking of liquidity. I think that's really going to kickstart the next huge bull run in the NFT space, whether we get that in three months or a year, it's hard to tell.

But it's also going to come with a ton of risks. Like as soon as people can do that, that's when people can over-collateralize, they can leverage themselves, and that's when a market downturn can really get people liquidated and crashing. I don't think we've seen a true bear market yet, but I also don't think we've seen a true bull market and they’re both going to come with more interoperability with DeFi and NFTs, I think.

“...I don't think we've seen a true bear market yet, but I also don't think we've seen a true bull market and they’re both going to come with more interoperability with DeFi and NFTs...”

CR: Total. Well, yeah, that's what leverage does it supercharges the market on both sides. But I know there's already some projects trying to do this like NFTfi and others. Do you think those still fall short, or what's missing for you there?

Z: Yeah, they definitely fall short. Like NFTfi I use it because it's the best we have or one of the best options we have in terms of borrowing against your NFT. The issue is that it's peer-to-peer, so you need another person to make an offer on your NFT. The terms are usually quite unfavorable for the person lending their NFT. Most of the time the interest rates people will offer or receive are like 10-50%, sometimes more.

And the infrastructure is not set up in an optimized way, in the sense that if you want to lend your NFT, you have to pay a gas transaction cost to unlock it on the platform, and then to receive offers. So, before you even agree to lend anything, you have to pay gas, and the gas to use the platform is considerably high because their contracts are very sophisticated. And so it's just not very gas efficient. And if someone wants to borrow against a 1 ETH NFT, it doesn't make much sense to pay 0.2 ETH in gas to approve the token, accept the loan, and then repay the loan. So it's an okay solution, but it's not enough to unlock a ton of liquidity.

Zeneca’s NFT Project

CR: Got it. Makes sense. To start wrapping up, I really want to hear about your own NFT project?

Z: Yes. So I was just talking about membership tokens, my project is basically going to be that. When this video goes live, I think it will have launched or be launching in the next few days or week. So I have a Discord server, which has about 11,000 people now. And I originally planned for it to always be public and free and open. But I also wanted to release an NFT and create it as a membership token. And I was going to say, alright, I'll give a couple of private channels within the Discord and give access to those and maybe early access to my newsletter, and find other ways to provide value.

“I have a Discord server, which has about 11,000 people now. And I originally planned for it to always be public and free and open. But I also wanted to release an NFT and create it as a membership token.”

But I ended up locking the Discord to new people, largely because we had some scammers coming in and pretending to basically be community members and post malicious links and scam others. And I wanted to find a way to sort of gate the community and safeguard it a little bit. We've seen all the Discord hacks happening lately. And I just think having a small financial barrier to entry, or even just a logistical barrier to entry will help keep the quality of the community high.

So yes, I'm dropping my NFT project. There'll be two price tiers. And 99% of people will be interested, if they're interested, in the lower price tier, which is 0.033 ETH, and it's basically a lifetime membership to what I'm calling Zen Academy. So my Discord server is currently all it is. I have plans and visions to build on this whole platform in the future, but I don't really know what it's going to be like because the space moves so quickly.

So yeah, 0.033 ETH for lifetime access, I think is quite reasonable for what it is. There will be other benefits aside from just Discord server access. But again, I'm still figuring out what they're going to be. If people are buying your membership token, a lot of it is just trusting in me and belief in me. And if they think that I'm going to build something good, cool, interesting, and valuable, and all that, then great. If they don't, then it's probably not the right NFT for them.

“...if they think that I'm going to build something good, cool, interesting, and valuable, and all that, then great. If they don't, then it's probably not the right NFT for them.”

And I'm also doing it in an interesting way where instead of limiting it to 1,000 or 10,000 or whatever, it's going to be unlimited mints, open for a two week period. So basically, anyone that wants to get one within this two week period will be able to decide when gas is low. They'll have the time, they won’t set an alarm in the middle of the night or miss work or whatever like a lot of people do before hype drops. So that's cool. That's the lower tier.

And then I have this, it's almost an experiment. But it's a crazy higher price tier exclusive club, where I'm dropping 333 NFTs priced at 3.33 ETH each. And what this is basically an answer tois that, so in the last month or so I've started doing consulting and advising for other projects.

And basically, I created a Google form and I tweeted out saying, you know, if you're interested in bringing me on as an advisor for your project, fill out the form, my rate is 6% of initial sale revenue. If you're okay with that, great, I'll look at your form, and we can maybe work together. And then I got like 80 responses in 36 hours, and then maybe another 50 people reaching out to me after I closed it off asking if we could work together. And I basically realized there's just no way, there aren't enough hours in the day. I can work with maybe two to four projects at any given time.

But perhaps I could offer something at a lower price point than 6% of initial sale revenue would be, but still a decent amount where I wouldn't be able to give you a full-on advisory experience. But you can get access to a private Discord access to private chats with me, a phone call, if you want to. I can look at your project and advice and you have that level of access. And it's an experiment where I'm selling my time.

And that's one portion of people that are interested. And the other portion is people that just want to be part of an exclusive Discord community and think that it would be a good networking opportunity. And again, there's a lot of potential for me to build and create connections and collaborations with other projects and reward holders going forward. But I'm figuring it all out as I go along. And I don't have a roadmap. I don't have too much to promise because the space moves so quickly, I'll just adjust and adapt and do what I think is best. I'm excited.

“...I'm figuring it all out as I go along. And I don't have a roadmap. I don't have too much to promise because the space moves so quickly, I'll just adjust and adapt and do what I think is best.”

CR: Awesome. So, for your NFT project, it really looks like you're leveraging NFTs as a content creator. So you're going down this utility direction that we talked about earlier. So it's not really about the art or an avatar or anything like that, it's more access to your community? And does it also include access to your newsletter, your content specifically?

Z: So, it's largely my Discord and community. I want to keep as much of my content free as possible. What I will do is give early access to my newsletter, so I'll post it in my Discord, a link to it maybe 24 hours before it goes public, as a little token benefit. And there'll probably be some content that's just specific to Discord. So maybe it's a market update, maybe it's an analysis for a project that doesn't really fit in my newsletter, doesn't fit in a YouTube video or whatever. I'll definitely be putting some content that's Discord specific. But as far as stuff that I'm currently doing like my Twitter daily stats and my newsletter and stuff, I want to keep all that free still.

Daily Twitter Stats

CR: And your Twitter daily stats, they're super helpful. They really are amazing. How did you start compiling them? And is it all manual? Is it manually that you were going through all these prices on NFT floors and all of that?

Z: It was manual up until maybe two weeks ago. So I just started, I had a Google spreadsheet. And I had like five projects that I was tracking that I was invested in May or June. And just for a few days it was just me doing it myself. And then I think I had a friend saying, it'd be really cool if I could go to a website and track floor prices. And I was like, well, I'm kind of doing it for a handful of projects, let me just tweet it out. And people liked it.

“...I had a friend saying, it'd be really cool if I could go to a website and track floor prices. And I was like, well, I'm kind of doing it for a handful of projects, let me just tweet it out. And people liked it.”

And then I added CryptoPunks, which I don't have, but obviously, it's a massive project that people were going to be interested in. And then I added a couple of other projects that I didn't have. And then I would buy into new projects and add them. And it was largely just me tracking projects that I was interested in, but then also what was hot and what the community seemed to be interested in and was tracking and people would request things and I just add them.

It was all manual. I just created the spreadsheet. This is the floor price. This is what it was yesterday, what it is today. This is the change. This is how many it listed for sale. And I actually used to track unique owners for a very long time, but I stopped that because it just got too crazy. And also, a little less accurate project are starting to manipulate that but anyway, that's another topic.

So it was all manual up until maybe two weeks ago. And I was okay with it being manual and I was happy to do it because it would take maybe half an hour to go through 50 projects, update the price. And I felt really much more connected and in tune with the market if I was checking on every single floor every single day. And I had tried automated systems in the past, and it was like, well, if you just look at the numbers, it doesn't quite give you the same feeling of finger on the pulse as if you're just actually looking for them. And often, when I was updating them, I'd find good deals, let's say, hey, this is an outlier, this is way below floor, I'm going to buy it. And then I picked up a few good projects there.

“I felt really much more connected and in tune with the market if I was checking on every single floor every single day.”

But as the list grew, and as more projects get launched, we might have 200 on there now, it just became more and more time consuming. And I was spending less and less time actively trading myself, so I felt less of a need to have a super close connection to the market. And so I had someone reach out on Twitter, he's a programmer, he created a Python script to automate effectively all of it. And now once a day it gets updated. Soon I'll be able to update it whenever I want. And, so now I just look at it and then tweet out the interesting things.

From Trading to Content Creation

CR: Nice. So going forward, where do you see yourself going? Creating more content, doing more trading? It looks like you're doing less and less trading and more and more content, is that what the plan is?

Z: Yeah, that's accurate. That's what I've been doing. And I think that's what I want to keep doing. As I was doing more trading, I felt a couple of things. First was that it was just more stressful. In order to do well and successfully, it's sort of based on how much time you put into it. There's so many opportunities that are just the fact of being at the right place at the right time in the right Discord, seeing the right tweet, being at your computer, being able to mint something a second notice. And if you were away, then you'd miss things and you lose out. And if trading is all you're doing, then you always want to be on.

“There's so many opportunities that are just the fact of being at the right place at the right time in the right Discord, seeing the right tweet, being at your computer, being able to mint something a second notice.”

And it was also not really scalable. Flipping and trading is great when your bankroll is relatively small to medium, and you're buying say 1, 2, 3, 5, 10 NFTs in a collection. But as your bankroll size grows, in order for it to be a sizable investment in a project, you might need to mint 100, 200, 500 NFTs, and just logistically going through, listing each of those for sale, deciding what to sell them for. The effect that that has on the market, if you’re going to sell 500 NFTs, you can do it at once because that's going to tank the floor price. It's just a lot more time and a lot more effort and approach to do it in an efficient way.

And it just isn't scalable. And it also wasn't really that fulfilling. It's sort of similar to poker, where when you're playing poker, effectively, you're trying to win money from other people. When you're trading, you’re effectively trying to trade better than other people. If you're selling something, you think it's worth less than the person that's buying it. If they buy it, they think it's going to be worth more. If you're selling it, you think it's going to go down in price.

And it just didn't feel like I was really adding to the community or doing anything in a meaningful way. Whereas with content, I feel less stressed even though I may be working longer now, but it just feels better. It's more fulfilling and rewarding. And I think, going forward, I'm going to definitely spend more time. I mean, now I have my own project coming out. I'm going to be creating content, but also finding a way to work with other content creators, whether it's written content or videos, but also if it’s project creators and developers and designers and artists in a way to use my platform and community now to sort of elevate them and have a win-win situation where they can elevate us and we can reward each other.

“...with content, I feel less stressed even though I may be working longer now, but it just feels better. It's more fulfilling and rewarding.”

And I just want to share some of the stuff I've learned over the last few months if people find it interesting and useful, and dedicate more time to that than trading. And buying NFTs is still very exciting. And it's still a thing that I'm always going to do. But I think it'll be more collecting for the long-term, collecting because I love it, rather than collecting to sell next week.

NFTs in 10 Years

CR: Awesome. Sounds good. I agree. I, of course, believe content creation is extremely fulfilling. And then final question, your long term view on NFTs. Where do you think the space will be 10 years from now?

Z: 10 years from now, I think we will probably have full-on mainstream adoption by then. I think that we'll have found ways to make it amazingly scalable in a way that you can transact without spending much on gas, transactions happen quickly, it's seamless to get involved. So your grandmother will be able to get involved and then your five-year-old will be able to get involved.

“So your grandmother will be able to get involved and then your five-year-old will be able to get involved.”

And the way that smartphones are now and apps, when they first came out, it wasn't that easy to navigate tech. But as time has gone on, it's just gotten easier for everyone to get involved. And I think that more of our lives are going to be in the digital realm. Or even if not purely in the digital realm, we'll have augmented reality, where you'll use NFTs in day-to-day life. Maybe you have an NFT that is your loyalty card for your coffee shop, and you scan that every time you go, or something like that.

And obviously, with gaming, it's going to be everywhere. The metaverse is going to be huge and real and people will be spending more time. Instead of having a Zoom call like this, we're going to be sitting around the metaverse table with VR headsets or something like that. And it will just sort of be the norm. And yeah, it's very exciting. I think billions of people will be interacting with NFTs in 10 years.

“I think billions of people will be interacting with NFTs in 10 years”

CR: It'll just be part of our lives. Maybe we won't even really think about it as much, sort of like how we use our phone or credit card. It's just part of how things work.

Z: Yeah. And most people probably won't understand the tech or how it works in a way that most people don't really understand how their computer actually works or how their phone works or how the algorithms behind Facebook works. It's just using the interface, which is going to be very easy for anyone to use. And then under all that we'll have Ethereum running and multiple blockchains and sidechains and rollups and layers and gas transactions there, but they'll be baked in and hidden. I think it'll just be very seamless. Obviously, we're a long way from that, but maybe 10 years is about right though.

CR: And that's where the opportunity is, right. It's really early right now.

Z: For sure. We are very early.

Share The Defiant

The Defiant is an information platform focusing on decentralized finance, a new financial system that’s being built on top of open blockchains. The space is evolving at breakneck speed and revolutionizing tech and money. Spread the word and share!