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Web3, Creator Economy, NFTs… A chat with Eytan Messika
673,000— the number of searches on Google last January for the term Web3, an increase of +2,383 per cent in one year. Presented as the third generation of the internet, one that is more equitable, transparent and decentralized, Web3 is based on blockchain and cryptocurrency technologies aiming to shift the power from platforms (Web2) to creators and their communities (Web3).
The idea of decentralisation is an attractive one, no doubt, but how decentralized can it really be? Jack Dorsey for instance, recently stated that power will go to the VCs and their LPs who invest strongly, and that a limited number of people of this new web will own the new dominant toolkits. A similar PoV, expressed by Moxie Marlinspike, the founder of encrypted-messaging app Signal and more recently by tech-guru Scott Galloway, who underlines the fact that “the top 9% of accounts hold 80% of the $41B market value of NFTs on the Ethereum blockchain.” He extends his reasoning to Bitcoin: “the top 2% of accounts own 95% of the $800 billion supply of Bitcoin, and 0.1% of Bitcoin miners are responsible for half of all mining output.” In other words: “If it were a country, Bitcoin would have the greatest inequality in the world. The advertised decentralization of power out of the hands of a few has, in fact, been a re-centralization of power into the hands of fewer.”
It’s a complex subject more so because of it’s protean aspect, which encompasses an entire ecosystem of emerging technologies such as DAOs, DeFI and digital assets like NFTs. In other words, the learning curve constitutes a barrier to entry for the mass-market, there is an abyss to cross between the early-adopters and the early-majority.
And yet, these challenges don’t undermine its potential in any way, and startups are racing to secure a sweet spot in this promising ecosystem. I reached out to Eytan Messika, the co-founder of the company Nilos, a financial stack that allows anyone to build a business in Web3 so he could offer an insider point of view. From the basics to the best practices while looking into the future, Eytan shares his vision on Web3.
Hello Eytan, this is not the first time I’ve interviewed you for my Substack, but a lot has happened since the last time! Can you tell us a bit more about what you have been up to?
Haha, yes it's true!
When we met, I was focused on the development of my curation newsletter, Overload, and my copywriting agency.
But a little less than a year ago, a very good friend told me about a project involving NFTs. At the time, I was passionate about crypto as an investor, but I didn't yet know how to get this technology embraced massively.
The applications spoke to few people because they were still too complex to understand. And then, I dived back into NFTs after our discussion, the idea of being able to anchor scarcity digitally, the idea of ownership, of belonging to a community, and of digital social status.
In short, I had just discovered the missing piece of the "mass adoption" puzzle. For the simple reason that nothing speaks to the general public like culture, NFTs were the way to bring crypto and culture together.
We started to iterate on the market, with a thesis around NFTs: it will completely reinvent the relationship between intellectual properties (brands, artists, creators) and their fans by attaching all sorts of utilities to this asset.
So we had to accompany this transition.
We started by developing one of the first NFTs studios with a suite of tools that allowed brands to enter this market (a sort of Shopify for NFTs) and then something interesting happened: brands started asking us legal and financial questions like:
1. Who manages our wallet?
2. How do we get the income in crypto into our bank account?
3. How do we protect ourselves from volatility?
4. How do we declare it? VAT or not? Which fiscal regime?
And we realized at that moment, that the biggest brake on this market was absolutely not the creation but the financial management and the risk of a project.
We decided to pivot, going from Shopify to ...Stripe and thus built Nilos.
What is Nilos?
It's the financial infrastructure that allows any non-crypto-native brand or creator to develop a Web3 project without having to worry about compliance, legal and financial issues.
The infrastructure takes the form of a custodial wallet, on which you can automate the management of your revenue (for example, take out a part of your revenues in $/€ from your bank account automatically every week), integrate these flows to your accounting and stay AML compliant with your bank by analyzing the origin of your revenues...
In short, a complete financial stack to relieve creators.
NFTs. This is a term that has been the subject of much discussion in 2021. If for some, NFTs are the holy grail, others think they are a huge scam and speak of a speculative bubble. What is your opinion?
In the end, my opinion matters little. What is important is what is observed objectively and what the market dictates. Some examples:
BAYC became a $5b brand in 8 months.
Opensea is worth 13b$.
The Adidas Into the Metaverse collection was the brand's most historic marketing campaign (they made +$23m in the primary market).
Sorare makes 1.7m$ per day in sales.
An unprecedented migration of talent, entrepreneurs and investors to the topic.
A hoax? No, the technology is real.
Speculation? Totally, but it's the logical consequence of a revolution.
For me, a technological revolution without speculation is denying the human dimension of an adoption process. You only have to look at previous technological revolutions.
And finally, I'd like to quote GaryVee who broke the internet a few weeks ago with his CNBC interview.
"I think NFTs are grossly misunderstood," he said. "People thought that Andy Warhols and Jackson Pollocks should not have value. People thought that sports cards should not have value. People thought that sneakers should not have value.
"People trying to assess value on something based on their opinions ‘has made me laugh my entire life and has been historically incorrect.
"We are living more and more increasingly in a digital landscape, and NFTs become assets to communicate who you are
"And that's something human beings have done forever — bought things to communicate. And NFTs will be the scaled version of that."
WEB3 + NFT : an “Internet of Value” ? Inspired? Can you elaborate?
If I had to summarize my vision, it is that we are migrating from a state where the internet plays the role of a support to our identity to a state where it becomes a part of our identity.
But the internet no longer filters information and we find ourselves submerged by too much news, which only accentuates these two universal needs:
The search for meaning
The will to be free
This leads to many trends for GenZ:
Financial education on YouTube and TikTok -> More freedom
Access to investment through RobinHood and Revolut -> More freedom
Culture (identity vector) becomes an asset class like StockX, Otis -> More freedom and more meaning.
Passion/creator economy -> More freedom and more meaning
The desire for disintermediation and to regain control over GAFA (data, distribution channels…) -> More freedom
Web3 is the convergence of all these trends.
How can today's brands deal with the promises of Web3? Will they have to completely reinvent themselves?
Understanding Web3 is simply understanding that we are migrating from a state where the brand was defined by a product and values to a state where a brand is defined by a community and values.
These are new codes and new distribution channels. The focus should not be on a distribution chain and logistics but on managing a community. This is a very important change. That said, the transition will be gradual.
Today, there are 4 main themes favoured by brands/creators:
Crowdfunding 2.0 : The NFT is used to finance a project (film, music..) and gives the right to future earnings/privileges generated by the project
Presence in the metaverse & digital fashion : The NFT is a virtual item to be projected in a virtual universe
Redeemable NFTs: The NFT is associated with a physical object
Membership cards: the NFT is access to a community and many privileges
One can start by building a villa in The Sandbox and be accompanied by a number of NFT studios to create utilities associated with the NFT.
You can also simply buy an NFT to show that you are associated with a cause.
For example, the case of The Sandbox, which bought World of Women to promote diversity.
For the majority of Web3 use cases quoted by brands, we can observe a combination of these four use cases on a single project: Adidas is by far the best example to date.
As a matter of fact, I listed the different use cases to start with here.
Some advice? Best practices / pitfalls ?
I wrote a guide here on questions to ask before embarking on an NFT project.
But if I were to add some:
FOMO is never a good reason to go fast on a project that will follow you, so take the time to develop the utility in depth.
Technically, you need to be accompanied. There are many NFT agencies specializing in this field, such as Rarecubes or BEM builders in France, NFTstudios in Portugal or Rehab in the UK.
Depending on the audience, it may be interesting to integrate "on ramp" tools that allow your end users to pay by credit card for your NFTs (Moonpay or Ramp).
The choice of the blockchain should not be made lightly because it affects everything: prices, developers, end-users' wallets, currency, etc.
Start creating a presence on Twitter and Discord.
Do not underestimate the legal part.
Fast-forward to 2030: Web3, Creator Economy, NFTs... Where do we stand?
20% of the population has an NFT as their PFP.
80% of GenZ has a Genie avatar.
NFT drops have become a standard for cultural financing.
The event and ticketing market is disrupted by a huge NFT player.
All brands have a regular presence in a Metaverse.
The passion economy expands completely to Web3: virtual architects, virtual consultants, virtual sports coaches.
A wallet = a bank account, a social network and an instant messenger.
The closing word: a punchline, a quote, something that inspires you?
This video about Rafa's journey after his victory in the US open.