Technical & operational challenges of NFTs for mass adoption on the non-crypto community

Transcript

the most obvious thing the world has ever seen is the ux needs improvement if we're going to get mass adoption so there's lots of brilliant people working on these really important challenges i'm i'm going to be speaking more on the operational and technical piece so for me the core thesis of palm nft studio is nfts as an enabling technology we need to partner with real world brands and real world ip in order to drive mass adoption we've seen this a bit with nba top shot and so rare right they partnered with real world assets distributed them in a novel way using nfts and we're able to get hundreds of thousands

even millions of people into the space that's been by far the biggest onboarding experience and so my thesis our thesis is that we can do the same thing for entertainment companies and we've started by working with dc comics and batman and we've got other major projects of that like but working with that sort of company comes with a ton a ton of complexity so these these media companies these ip companies just aren't used to living in the space that we're in and they aren't used to a lot of the idiosyncrasies the our way of doing business is very different from the traditional way of doing business and if we're going to get these major ips in we need to at least meet them in the middle right we're

never going to get them to come all the way to our side so so what are we talking about here compliance somebody working at a major film studio is never going to stick their neck out on the line and do things in the gray area of compliance it's just not worth it to them why would they lose their job over over this work right there's also a whole number of legal gray areas and then for me the most important is actually around community i'm going to spend a bunch of time talking about that nobody in our space that's not true a lot of people in our space don't like talking about compliance and legal stuff but i think it's actually going to be one of the most important drivers of the next wave of adoption if we get standards and best practices around how large ip can play

in our ecosystem so when i say compliance like what what do we mean by the challenges so the first the first issue is for the last 18 months the number one use case around nfts truthfully has been speculation right like if you ask people why they're buying nfts for the most part it's been to try and make money it hasn't been for anything else and so that inherently makes them tradable assets and when you have tradable assets you need to be very careful on how you interact with them and none of these large companies are going to enter the space unless there's very clear guidance on how you do tradable assets in a way that makes them securities versus

tradable assets in a way that actually makes them collectibles or consumables or games or experiences and a lot of us play in sort of this gray area but there are clear guidelines and so we go to companies now with a clear set of best practices and we're going to start publishing those on like the do's and don'ts but the primary one is very clear don't sell price increases do sell utility don't sell value of a drop do sell reasons you'll enjoy this or keep it or collect it right just to use the comic book example companies have been selling comic books as collectibles for decades nobody thinks of them as securities or tradable assets that's because they don't talk

about the price appreciation it's because they talk about the story and they talk about the characters and they talk about the novelty it's it's really basic but also really important oh i have a clicker stand standards and legal frameworks so this one is a bit vague but for me this is also really about what i was saying marketing guidelines one of the biggest issues with all of this work is like one wrong statement from a community moderator is could be enough to get a case against a large company and so you really need to do a whole top to bottom set of frameworks to make sure everyone's on the same page and then of course everyone here is probably familiar with

the need for kyc and the need for other requirements especially if you're going to introduce secondary markets or enable people to sell these assets or take these assets to intermediate marketplaces you're going to want to make sure that these large public companies don't have any exposure to any anti-money laundering risk or money money movement provider risk and things like that our space has historically been really anti-kyc and other requirements i personally am on the complete other side of that fence like i want everybody kyc'd so that we can work in a sandbox that's really compliant and actually [Music] actually drives adoption in a safe and predictable way

so that's all compliance stuff and not actually legal stuff there's legal stuff that is also really intense right like these large companies are used to certain guarantees in their contracts that no one in this space is probably able to make like every large company is going to come and ask you as a service provider to say and to guarantee that nothing you do will break any law in the world and like in crypto that's nearly impossible because there's contradictory laws everywhere in the world right so it's almost impossible for you to say in every jurisdiction globally i'm compliant with everything and so then the question is how do you educate or convince legal departments that are used to doing business in a certain way for the last 150 years that they need to make an exception for you

but it's important because if you don't do that your contract with them is technically null and void and not worth paper it's on there's also a particular legal and assertion angle around compliance and then my favorite challenge probably in the space that i'm i'm talking to a few companies here because there's a lot of people building on it is the accounting processes like the accounting processes today in crypto just don't work with traditional big business accounting so openc you have a secondary sale on openc there's a royalty collected openc pays you at some point over the next uh 10 days unless you sometimes it's more unless you have clear like monitoring

accounting reporting systems in place you won't know how much has been collected you won't know how much to report to your ip partner that sales have been you'll be in violation of your reporting requirements and so forth like analytics in this space is absolutely crucial and i'm glad to see so many people building on that but those are the boring pieces for me from an operational perspective i think the much more interesting one is the community piece i think it's not an exaggeration to say that potentially the killer use case of nfts is community formation and creating these affinity groups around assets that are really powerful but big companies are used to like the sale of something kind of being

the finish line so you know you make a big movie it goes to box office and you sell your tickets and that's it right or you launch a big video game your goal is to sell a video game and that's kind of it right whereas in the nft space the primary sale is the starting line of community formation it's the very beginning of that process and so it's rethinking how these large ips take products to market think about their assets think about their sales and think about the relationships of their customers that's the exciting part like that's the power of this asset is to reimagine that relationship but it takes a lot of work when you're working with large ip because they're just not used to it they're not familiar and so making sure that you front load commitments on content commitments on engagement

commitments on community moderation commitments on like the way people will engage with the community treat the community and value the community the good news is if you're able to form a community these these partners are incredibly excited because they've never had their customers as engaged as they can be with an nft space and i'll share some data on that later the other like the flip side of this community piece is the fact that there's a just a ton excuse me i don't know if i'm allowed to curse in these things there's like an absolute load of negative sentiment out there like when any nft project is announced by a big company and you scroll through the twitter comments the majority of them

are pretty brutal right because people don't know what they are people think they're a scam it's what i said so that community building isn't just working with the fans it's training them to objection handle and making sure that they know how to educate and train communicate with people who've just heard that nfts are killing the planet or nfts or ripping people off or nfts or a ponzi scheme or people that have these sound bites and need to move on and then the other piece that's sort of like more of a personal uh vendetta or pet peeve of mine is like discord adoption is still pretty small in the general population it's everywhere obviously in our space and

really powerful but it's a very confusing new tool for the average person and so when you expect people to learn crypto and maybe learn wallets and maybe learn all these things like a lot of them aren't even making it through the discord channel like forget all these more complicated factors and so we need to figure out our community building tools that actually go to where the fans are so where are the fans uh sometimes they're just reached by email it's pretty boring but it's a pretty good channel sometimes they're on twitter sometimes they're on instagram sometimes they're on facebook sometimes they're in various channels it depends on the community you're building but i promise you very few of them are on discord and so you either need to make the commitment to like do the education or bring them to discord or be away and

and be aware that you'll lose a lot of them in that process or go to where the fans are okay that's the operational stuff i think that's that's the bulk of like the chat like the domain specific challenge for mass adoption with large ip but there's of course technical challenges most of these probably won't surprise you uh wallet and key management has to be number one that's probably as much a user experience issue as a real technical challenge but most people don't want to know what wallets are most people are very happy to have while it's obfuscated that comes with its own security problems that comes with its own account management issues or internal

upset vulnerabilities external issues there's like lots of issues with managing wallets on behalf of users and lots of issues in having to train users to manage their own wallets so some very smart people are solving this we take an entirely custodial approach on most of our projects because most of the fans and that we're engaging with are not crypto natives and we think that we can bring them in with the custodial experience and then progressively decentralize as our thesis some people will take different approaches but this this is number one the the other big one is like there if you go up and down this conference there's like a million tools right now

for nfts there's token gating tools there's burning tools there's tokenization and fractionalization tools there's like a cambrian explosion of tooling for nfts which is super super exciting and super necessary this experimentation process is absolutely crucial but most of the tooling doesn't actually play nice together most of the tooling isn't interoperable so if you're launching an nft project you need to figure out what are the most important features and the tools that relate to that because sometimes making one choice on wallet a custodial wallet means certain token gating solutions are off the picture just because of the way they connect with wallets or choosing a specific token gating solution means a specific

community forum based community forum is off the picture and that's that's the thing and that's hard in a ecosystem of rapid innovation right because it's really hard to see around corners and know which projects will be most successful uh and then for me the single biggest technical challenge is getting accurate analytics and so there's a lot of people working on analytics but why is that such a hard technical challenge because most of the activity around nfts is off chain right most people when they buy an nfd they won't sell that nft for a while but they'll engage with that community in

dozens and dozens of ways beforehand they'll engage on twitter they'll engage through token gating systems they'll engage on discord discourse in real life events and actually trying to aggregate that data into some sort of usable framework to understand who your users are what they're doing and be data driven at this moment is uh is building a full company tech stack in and of itself so if anyone's working on that data aggregation problem i would love to speak to you because it's a real challenge you know we go to our partners we work with dc comics and they ask us what what are users doing and we have to piece together data from 10 different dashboards and 10 different sites it's a real issue i think what's most interesting

other than my inability to get powerpoint working properly is is that scale actually isn't the hardest part today like everyone always talks about the technical challenges of nfts as like oh how do we scale to a billion users it's like okay if we were actually at a billion users scale would be the problem but we're able to scale to a million users on a various set of networks sidechain approaches l2 approaches some some l1 but most of the time most projects that go after that level of scale don't come anywhere close because they run into other technical and operational and user behavior issues first so we kind of have this obsession with scale in our space probably driven by defy which does hit real scaling

issues but in the nft space it's much earlier in the adoption cycle and scale isn't the driving technical challenge so i see a lot of people making choices because they want to optimize for future like insane scalability numbers and that's wonderful i love that ambition and i think we need to get there and we're making some choices for that too but don't forget about like the technical choices that are here and now today as as you're launching a project so you know i said at the top that i think the bridge to mass nft adoption in in my view is partnerships with large ip and i don't think that's a particularly unique or innovative thesis we've seen this with sports ip and driving mass adoption and we're starting to do this primarily in the entertainment space so

this is our last project with batman dc comics under the radar last fall we gave away about 900 000 nfts to batman fans they didn't even really know their nfts they were just sort of collector items at batman conferences and then we sold them pfps generative art batman masks and now we're putting through these engagement mechanisms so if you have one of the free ones or one of the paid ones you can do different things participate in story lines and actually play a role in gotham city uh through different narratives and we're starting to see uh where's the this is the one like from an engagement perspective we're starting to see like really really impressive stats that are starting you know that for our ip

partners are really meaningful in terms of turning fans into ambassadors in terms of really driving exciting outcomes but this is just the tip of the iceberg like it's exciting but when you look at you know 11 million impressions and in this in the context of all the batman fans of the world we are we're just getting started right that's obviously nothing so i'm being told i'm running a little bit low on time so i'm not going to go through all this in too much detail but i think this is this is our view on the path and it's exciting there's lots of people trying similar things so there's a company that just did projects with uh you know nickelodeon and there's other projects out there with like star trek and other brands and obviously formula one and some of the aaa gaming coming

into space that's how we bring users in build the great adoption funnels and the great experiences but under the radar we need to get the operational piece correct because if we don't do the operational and technical pieces it's just not going to scale at the end of the day so there's a five minutes i think for q a and thank you for coming to my talk [Applause] thanks hi um two short questions so when the users when they buy the paid nfts i guess they pay with fiat right because second question do you mean the nft when they buy it or you just keep it not minted and maybe you will meet it later

for them in case they want to transfer it we min when when they buy yeah all these are minted so we you know i think there's some shortcuts that uh are really valuable but maybe i don't want to say sacrifice but they make trade-offs on the verifiability of the assets like for us having the verifiability and go back to the actual point in time of creation on chain is really important when we think about where these assets will be in three years or five years or seven years everyone knows everything now good okay thank you very much boys

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