EXCLUSIVE: Dan Olson On The Downside Of The NFT Hype Machine – Yahoo Finance

exclusive dan olson on the downside of the nft hype machine yahoo finance

EXCLUSIVE: Dan Olson On The Downside Of The NFT Hype Machine – Yahoo Finance


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An NFT Winter of Our Discontent? An interview with Dan Olson on the downside of the NFT hype machine.

Gary Vaynerchuk is one of the leading voices in the NFT space — he is both artist and lead promoter for his Veefriends NFT series. He recently launched VaynerNFTs as a way to handle his future plans for growth in NFTs. Recently, Vaynerchuk also launched a fine art NFT marketplace and Christie’s auctioned five works created by Vaynerchuk for VeeFriends for $1.2 million.

This week, Vaynerchuk appeared on “Crypto Goes Mainstream”, an event produced by Yahoo Finance and Decrypt and Gary Vee tempered his usual enthusiasm with direct warnings of an impending NFT winter.

“The conversation is about to get very interesting when we hit an NFT winter because there is way too much short-term greed and supply and demand issues and when the whole market crashes… there is going to be a real one I think based on what I’m seeing…,” Vaynerchuk said.

When distinguishing what a “real NFT winter” would be, Gary Vee is separating this predicted market dip from the two small dips that have punctuated an incredible run in the NFT market, which increased 700% in transaction volume between Q2 and Q3 of 2021 to $10.67 billion according to Dappradar.

Vaynerchuk ultimately believes that NFTs will be an important part of the future — but his predictions for current NFT projects are less sunny.

“I believe that 98% of NFT projects will be less when it’s all said and done. But the problem is the 2% is going to be so extraordinarily high that one is required to do the homework to see the opportunity,” Vaynerchuk said.

Of course, Vaynerchukq is enthusiastic about an NFT Winter as a buying opportunity. That seems reasonable, as he is in an excellent position to ride out any rough waters in the market and come out on top, relying on his existing capital and public profile. Gary Vee loves NFTs — but his body of work goes far beyond NFTs. Even VeeFriends are staked in the value of his already successful seminar series.

But are NFTs really the boon for all creators that they have been and almost certainly will be for already rich and famous creators like Vaynerchuk? Will an NFT Winter be a good thing for investors in the 98% that Vaynerchuk posits will take a beating?

Can NFTs be bad for creators and investors?

Generally, you don’t see dissenting points of view about NFTs — and if you do, they usually appear on publications that don’t otherwise write about blockchain. No community is strong if it cannot bear criticism. Yet, too often the criticism comes from people who have not taken the time to understand what NFTs are and how the projects develop their audience.

That’s what made Dan Olson a rare find for me — a content creator who has taken the time to understand NFTs as a phenomenon but who is not foaming at the mouth with uncontrollable zeal over the potential.

After following months of Twitter exchanges with @FoldableHuman who vocally believes NFTs are a net negative for creators and buyers, we reached out to Dan Olson to learn his perspective. Olson is a popular YouTube creator whose channel focuses primarily on films and film production. He began his journey to understand NFTs as a phenomenon in September and in addition to Twitter, Olson took to Discord channels to get first-hand views of projects. His observations, though not the popular view for most NFT supporters, are drawn from months of interacting with multiple projects and serving as a hands-on field reporter observing the phenomenon.

Dan Olson

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You do great content about films — what led you to the topic of NFTs?

“A lot of my work revolves specifically around talking about film, but ultimately my job is to make stuff online. NFTs have become pretty difficult for online creators to ignore because they’ve been pretty aggressively marketed to us as a revolutionary new revenue stream,” Olson said.

What was the moment that made you decide to make a public statement about NFTs?

“Honestly the tipping point for me… was the night I got invites to NFTits, MagicMarbles, and DIMEZ all in the span of an hour, all via bots lurking the Cool Cats Discord. I’d already been joking about the transparent bubble economics of the procedural PFP projects, but procedural renders of a marble that anyone new to Blender could build from a tutorial in less than an hour broke me,” Olson said.

When did you start investigating NFT projects on Discord?

“My investigation into the activity on Discord specifically started sometime in September 2021 after evangelists insisted that I just wasn’t seeing the bright side — I wasn’t seeing the community and the innovation.

I joined several higher-profile servers and wasn’t persuaded by what I saw. A lot of the culture was still extremely focused on the projects as financial vehicles.

Even in the most established projects… These aren’t fandoms in the way you would experience them around a game or a TV show or a book. The product is pretty insubstantial if not functionally non-existent. Of course, just joining any of these servers immediately led to a deluge of spam for other projects, both in the servers’ authorized shill channels and via cold call bots reaching out to everyone on a server list. It’s tempting to say that this was a flawed way to delve deeper, that obviously this would mainly lead me into less stable projects, but I got just as much spam for successful projects like Humanoids and NFT Worlds as I did for rug-pulls like Crypto Astronauts and Hood Punks.

On the whole, if you just look at the pitch package and the sample product, there’s very little material difference between a project that’s going to sell out 10,000 tokens in six hours and one that’s going to become a trash fire as the project leader has a nervous breakdown and burns the mint three days post-launch after only selling 800 tokens,” Olson said.

Do you need to be on the invite-only Discord channels to get the full picture?

“If you only looked at Twitter and YouTube you could get a reasonable intuitive picture of what’s going on, to the point that nothing would really surprise you, but you wouldn’t be getting a comprehensive picture. Things don’t hit YouTube or Twitter until they’ve passed through some kind of general social filtering mechanisms. Discord chats, on the other hand, are a lot closer to ground level. Chat rooms are a lot snappier as a means of communication. I wouldn’t say it’s a definitive look at the broader NFT community’s values and norms, but it’s a pretty significant one,” Olson said.

Can you explain the toxic positivity you see on the Discord channels?

“There’s an extremely pervasive resistance to any form of skepticism that ultimately manifests as a sort of toxic positivity. This is all part of a complex feedback loop. The projects, broadly speaking, lack any kind of substantial product, existing almost entirely as promises backed by nothing more than a screenshot of a roadmap and some sample PFPs.

I think it’s really important to keep in mind that goes for successful projects just as much as for rug-pulls. There isn’t any meaningful difference between a Party Ape Billionaire Club and a Betting Kongs. BK was never going to make a casino, even if they hadn’t tanked, and despite the fact that they’re running billboards in Times Square PABC is never making an MMORPG.

Both claims are equally ridiculous, but one of the two made a huge pile of money. The primary product is ultimately hype, which is both insubstantial and fickle.

Negativity, both internal and external, can have a meaningful impact on the willingness of people to buy into a project, and if buyers are tepid then you won’t get a runaway sale, and if you don’t get a runaway sale then that’s going to turn off buyers even more.

This creates toxic positivity where doubt is aggressively policed by both project leaders, who have an obvious financial interest in the hype since their big payday is the minting rush, and community members themselves, who have a speculative financial interest in the hype. While all of that is logical in the pure sense that there’s an effect that can be explained by an incentive, the output is effectively a self-organizing cult.

Doubters are ostracized so aggressively that it chills all conversation about a project’s actual viability. I’ve been chided and banned from spaces purely for asking questions like has the team ever shipped a video game before? Which one?

KwyptoKados banned me very quickly for mentioning that it was troubling that they’d ask for $2.5 million to make a video game, a budget that puts you on par with a serious mid-budget indie game, but only list the developer as “Sam”.

Questions that would be utterly banal in any other investment forum — what has the team done, what assets do they have, why should anyone believe they can deliver on their promises — are treated as hostile. And the frank reality is because there aren’t answers.

Party Ape Billionaire Club is just as vaporous, and yet they succeeded, so there’s an incentive to enforce the collective delusion. The end product is a community trained to ignore warning signs and dismiss criticism. And the results of that are obvious: there are still people convinced that somehow someone is going to pick up the ashes of Evolved Apes and manifest the rest of the project, a belief based on no observable evidence,” Olson said.

What are the worst examples you have seen on Discord?

“The worst atmosphere I’ve seen is the most pervasive, which is the whole culture around paper hands as an insult for anyone who cuts their losses and bails out of a project. It comes up constantly even in successful projects, so it’s particularly depressing to see it applied so aggressively in projects that are visibly floundering.

On the dramatic side, the project lead for Time Travelers had a nervous breakdown and almost rugged the project by accident, the DIMEZ Discord is getting kinda toxic as the devs push out Gen 2 with Gen 1 being barely sold and still available for minting, and despite being rugged weeks ago the Crypto Astronauts general chat is still semi-active with people trying to brainstorm a way to recoup any of their money.

That third one (Crypto Astronauts) is particularly heart breaking, since the $300 minting cost meant a lot of buyers dug pretty deep just to mint one, and then panic-bought the floor in a sunk-cost frenzy as they watched the project fail. Honestly, though, enough have failed that there’s basically a script at this point for how to avoid being branded a rug pull, and that’s to create a slow death.

The basic formula is this: the project launches their minting but after 48 hours has sold less than 20% of their stock, new mintings have slowed to a crawl or stopped entirely, and the secondary market floor price has fallen below mint cost. The project leads burn the remaining hashes and say they’re going to take a few days to “reconsider the direction of the project.” They come back with a dramatically scaled-back proposal, frequently with a name change, and insist that this will now be considered Phase 1 of the grand plan, and everyone who bought in is a founding member of an elite circle, and they just need to HODL until Phase 2.

There’s some intermittent communication on how phase 2 is shaping up, with attached unrealistic promises about Phase 3, some sneak peeks, and maybe even an airdrop of something largely irrelevant and worthless or a purchase of another NFT of dubious quality for “the community chest”. Gradually updates transition to just being promotions of other projects and general communication slows with leads disappearing for longer and longer spans until it becomes sort of obvious that they haven’t logged in for a couple of weeks and are never coming back. At this point if the website disappears it’s officially branded a rug pull, but if not then forum members mill around in confusion with some declaring it a rug pull while others insist that they’re just too busy on the next phase. Around this point, since moderation has laxed or ceased, chat sees a steady spike in (messages like): sorry this didn’t work out, but [link to other project] is really legit, DM me for details,” Olson said.

Despite valid criticisms of generative NFT art and collectible projects today, do you see NFTs as a vanguard of digital ownership?

“Not particularly. I frankly see it as the vanguard of a future version of the web that is less accessible, less free, less interesting, and substantially more expensive. I see it as the vanguard of a million paywalls and oppressive code-enforced DRM schemes.

I see tremendous blind spots in a community that has spent so long focusing on the hype of an untenable fantasy Metaverse where they’re the ones cowing corporations with immutable ownership guaranteeing their ability to resell video game horses that they’ve failed to consider that the enforcement of ownership can and will be used against them if and when corporations decide to leverage their power in the space. (I see) A lot of focus on decentralization as a panacea, very little consideration of power as an actual dynamic,” Olson said.

What drives the intense desire among investors to believe in these projects?

“The driving force is economic disparity. The wealthy and tenuously wealthy are looking for a space that they can dominate, where they can be trendsetters and tastemakers and can seemingly invent value through sheer force of will. This is, in my opinion, the blindspot of many casual critics.

The fact that tokens representing ape PFPs are useless, yet somehow still expensive, isn’t an overlooked glitch in the system, it’s half the point. It’s a digital extension of inconvenient fashion. It’s a flex and a form of mythmaking. And that’s how it draws in the bottom: people who feel their opportunities shrinking, who see the system closing around them, the casualization of work as jobs are dissolved into the gig economy and want to believe that escape is just that easy. All you gotta do is bet on the right Discord and you might be air-dropped the next new hotness. It could be you plucked out of the crowd on Rarible and bestowed a six figure price by an elusive Saudi music producer.

Get a BAYC in your wallet, HODL like a good diamond hands, and enjoy that yield. All you need is $5000 in seed money and you can buy a Farmer’s World milk cow, and if you milk that cow every four hours, day and night, for two weeks, why there’s all your money back right there and now it’s pure profit — minus the overhead of all the WAX you needed to stake, the barn you needed to buy and build, the barley you needed to purchase and grow, the food you needed to buy to refill the energy you needed to milk the cow, build the barn, and grow the barley. Plus you actually need to cash out which isn’t getting paid, it’s quitting.

The whole ecosystem, from OpenSea fantasies for starving artists to the buy-in for Play to Earn games, it’s the same hollow pitch as MLMs. It’s LuLaRoe (MLM), but everywhere you look people are wearing ugly-ass ape cartoons,” Olson said.

Do you have advice for creators considering dropping NFTs?

“I’m not going to say don’t do it because even if that’s the essence of my advice it’s too trite and dismissive on its own. So, try to cut through the hype and get a good look at the nuts and bolts.

What are your minting costs going to be, where are you getting your smart contract from, what utility are you going to promise, what parallel infrastructure are you going to need to set up and maintain, what are you going to do if something breaks? If you’re selling the most bare-bones NFTs possible with no strings attached, what are the odds anyone outside your circle buys it? Will it provide a meaningful shift in your business model, or are you just buying into someone else’s plan to monetize your audience? Are you going to end up on Twitter tearfully trying to explain Kraken to your followers hoping someone has the heart to jump through the hoops because you’ve sold nothing and have paid hundreds of dollars in Gas? Does this actually solve a problem that you couldn’t solve with your existing tools?

Succeeding in NFTs is just as hard as it is everywhere else on the web, it’s not magic, it’s not inherently more profitable, and the overhead and maintenance costs, in both cash, energy, and attention, can be staggering. You risk burning your audience on the raw PR of attaching yourself to a toxic hyper-capitalist subculture. You risk accidentally rugging your own project when you realize that trying to fulfill open-ended promises such as making a DAO or setting up a community fund are making demands on your day-to- day work that consume your time and interfere with your actual product. You are potentially exposing yourself to a whole new plane of liability with regards to rapidly changing tax law and financial regulations.

There are enough purely pragmatic considerations that for most creators the answer is “no, don’t bother, it’s not worth the effort,” Olson said.

Conclusion

Blockchain technology has an absolute value and utility — but all the things built on blockchain are up for consideration. Even Bitcoin, the OG of the crypto world, is just 13 years old and like a lot of adolescents has a long road ahead of it before it can really deserve a tested and proven place in the world. It may be “digital gold” but real gold has been used by humans as a transfer of value for over 10,000 years.

Critical thinking is an essential part of “doing your own research” and a more nuanced examination of NFTs as a phenomenon may be distressing to those with crossed-fingers wishing for immediate gain (and the projects selling to them) but ultimately is a good thing for the future of a stronger blockchain community.

Image from Pixabay by PublicDomainPictures

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