Alt Asset Allocation ep 54 - A Crypto Landscape Update with Cooper Turley
DAOs, NFTs, Social Tokens
Primer: In this episode of Alt Asset Allocation, Ben Lakoff interviews Cooper Turley for an update on what is happening in the crypto space. Cooper talks about all the different sectors of crypto, like DAOs, social tokens, NFTs and DeFi. He also shares how a newbie can invest in the crypto space for the different sectors.
Who is Cooper Turley?
Background
Been in crypto for 5 years
Passionate about the idea of community and the creator economy
Went to school doing music business
How he got into crypto
Fell into the crypto rabbit hole because of the idea of smart contracts as it can expedite royalty payments and change the way that artists get paid
Did not know what he was doing out of college but took a leap of faith to work on a few projects and going to conferences around the world
Cooper the yield farmer
During DeFi summer, he went into yield farming and started a few DeFi blogs
Realised that finance is not for him because it is not motivating to add another zero to his portfolio
"Actively did the whole DeFi summer yield farming type thing. And then woke up one day and realized that finance wasn’t getting it done for me. You know, like adding another zero to the portfolio, wasn’t really driving or motivating me."
- Cooper Turley
Fell into the creator economy rabbit hole with things like NFTs, social tokens and most recently DAOs
To summarise, he loves helping creatives to learn how to use technology
Spent most of his time contributing to projects to keep the ball rolling and to advance the industry as a whole.
Most interesting space in crypto now (dated July 21 2021)
Figuring out what mainstream adoption of crypto looks like
Starts by stepping back from tech and asking basic questions like:
How does someone get involved with buying their very first token?
What does it mean to join a community online?
What does it mean to be a member of that community through ownership?
Things that seem easy to crypto natives are actually quite foreign to most people e.g. joining a Discord server or downloading Metamask
A lot of his time is spent around innovation and bringing new people into the space to help advance it
Also working on empowering people in an active community to get work done in a distributed manner
Decentralized Autonomous Organizations (DAOs)
What is a DAO?
"DAOs are internet communities with a shared cap table and a bank account."
- Cooper Turley
It is the relationship between social and financial capital
Currently in our day to day jobs, we are accumulating as much income as we can to build up our bank account
Outside of that, we have social circles where we spend most of our time
"The creator economy is not one sector of crypto - it’s everything combined together to offer, you know, the best of both worlds."
- Cooper Turley
DAO is the evolution where our social world and the working world are tied together, so we are working with friends on the things that we love, to make an impact on the world and get paid for doing so
Which stage of the DAO evolution are we at?
A dozen new DAOs popping up every week, with a hundred over DAOs managing billions of dollars in assets
People are brainstorming cool ideas and going from the ideation phase to the execution phase
The DAOs are transiting from just existing to actually creating meaningful value to the community
Cooper is involved in
Friends with Benefits - a community to hang out with friends and they are now building an actual product around IRL experiences
PleasrDAO - has an NFT collection to democratize ownership to iconic NFTs
Seed Club - he is actively involved in this social token incubator
A lot of DAOs are raising capital into a community-owned bank account and using the capital to pay people just like how a company would, except it is done on-chain using crypto tooling
The design space is interesting from a distributed work perspective but it also opens up a dialogue regarding the valuation of a DAO's underlying token
A DAO is not a DeFi protocol with billions of dollars in TVL, but you do have 50+ people contributing to it every day, spending all their free time coming to community calls
Interesting to see how the market will place a value on this, relative to all the other assets that exist right now
Why is crypto such an important part of DAO?
It is the ownership element
Tokens can be owned by anyone, so anyone can be anywhere in the world and still contribute to the DAO to add value to the token
The ownership element is the core premise that transforms a chat group into a more sophisticated vehicle that has financial upside from the work contributed
The legal steps to start a DAO
Different schools of thought on this subject and there is no concrete right answer
Setting up the DAO as a limited liability company (LLC) in the US
This is the registered legal entity behind the DAO
The DAO will limit participation to 99 accredited investors in total
This is the most formal way and it covers a lot of bases especially if the DAO is making for-profit decisions
"And I think the unfortunate reality is if you’re trying to do things buttoned up by the legal way, it’s not going to have the same feeling at all. And you'll have to pass accreditation and limiting the number of members - it’s a very different structure than like the utopian DAOs that we see, where everybody is collaborating and working together."
- Ben Lakoff
Having a legal entity like an LLC will have a very different feeling from an informal DAO where everyone just collaborates
The DAO as an informal web 3 entity that is on-chain
Starts with an address that holds all of the DAO's assets with signers on a multisig wallet
Allocation of capital is very fluid
No idea of the legal ramifications of this arrangement, but it assumes that the members of the DAO are acting honestly and that the capital is used in a productive manner
Still figuring out how to take this structure to a point where the government recognises it as a legal entity, like in Wyoming
How to make DAO more mainstream?
Clarity on the legal status
For DAOs to go more mainstream, there needs to be clarity in the legal status
Those DAOs that are worth billions of dollars need to have their legal structure clarified by regulations
Accessibility and ease of usage
The tools needed for a DAO to function, like voting, token gated chats, treasury management etc, are scattered all over
There is a need for a good web 3 native chat platform where it has all the core tools needed to form a DAO without having to log in to different sites
Would a DAO starter pack help?
Interesting that when the DAO space just started, everyone was trying to build a DAO starter pack
Projects like Aragon was trying to build an operating system that had all these tools inside
But the DAO industry as a whole stepped away from wanting to use an out of the box starter park because they wanted more customised options to suit what they need
So now there is a lot of focus on these off-chain tools like Snapshot where no gas fees are needed to do the things a DAO does, like using tokens for voting
Over time, there should be a push towards the less decentralised version of things that are less crypto native but still give a core set of tools to coordinate and operate effectively without the steep learning curves associated with V1 of the DAO world
Creator / Social tokens
What are creator tokens?
Creator tokens are tokens that represent a brand, an individual or a community that a token holder can claim ownership over
E.g. Youtube influencers, Instagrammers, athletes, musicians etc
Creator tokens are important because it goes beyond having a deeply technical crypto platform and instead apply the same basic primitives to a group or a community that we all know and love in our daily lives
Which social tokens have more traction currently?
Crypto native communities
Friends with Benefits
Have a token gated Discord server
Building products around what it means to be a member of that community
Bankless DAO
Launched a token a few weeks back
Reinvents what it means to be a media company in a web3 world
Non-crypto native communities
Rally
Been onboarding a lot of streamers, influencers, musicians etc and have about 150 creators
Provides people with an easy on-ramp platform to buy tokens with a credit card
Starts to see a lot of fun experiments where someone buys their first token and use that to join VIP chat with their friends
Rally token is on a side chain, not ERC-20 tokens, but having a siloed ecosystem means that there are more mainstream use cases too
This is also why Nifty Gateway is so popular in the NFT space as it simplifies a lot of complexities with on-chain interactions for retail users
In the NFT world
What is happening in the NFT world?
Generative art is very popular right now
There is a script that generates different traits, so there is a race to mint these unique characters and collect the rarest and highest quality
E.g. Bored Apes Yacht Club, Crypto punks
Strong communities are forming around different projects
Validates the creator tokens and community thesis that Cooper talked about all the time
Less focus on drops from individual artists and more on developing communities around a theme of assets rather than individual assets themselves
Specific NFT artists are going deep on building out communities and minting out their own custom smart contracts
Excited about fractionalization
Making ERC-20 tokens that represent a claim on an underlying asset
From the mainstream perspective, the number of people buying NFTs is not as high as before, but the social capital being invested in the sector is still very high
Investment ideas
What are the investment ideas for the different sectors in the crypto space?
DAOs
Most DAOs have fungible tokens that one can participate in
Currently on the lower side of market cap, around $10 to $20 million market cap
At least 80 to 90% of the DAOs in the map that Cooper made had a token associated with them
The best way to invest is to first understand what a project does, then get into the community like their Discord server and see if it is a good fit
Tokens can be earned from participation or to DEXs like Uniswap to buy it
Currently, there is no overall index to buy social tokens yet
Perhaps in the next 6 months, there will be more index plays on social tokens as a whole
The best way to get exposure is still to work on a community early on and get to know these groups
Many of them have non-transferable tokens and their value is undefined, which means they are often at generous valuations
Hence participating in a group and helping them out gives a good chance to earn an allocation for the tokens and they will be worth far more than speculating and picking them up from the secondary markets
NFTs
Will see more platform tokens coming into the markets over the next 6 months
NFT marketplaces that do not have tokens now will start to have them soon
Do not hop into the latest NFT minting train, and take the time to see what people have as their Twitter avatars and try to accumulate those NFTs
"I would be less inclined to tell someone to just hop on whatever the latest NFT minting train is and look over time to see what people have as their Twitter avatars, and then work really hard to try and accumulate those assets."
- Cooper Turley
If you see many people associating their identity with a particular asset, it has a higher chance to have long term value
DeFi
Cooper is always looking for places to stake to earn a yield
Not actively buying right now, but looking for places to deploy stablecoins to earn native yield and also tokens
Interested in Ribbon finance
A protocol where tokens are deposited into a vault and earn a yield for selling options against it
Have non-transferrable tokens right now so early users can have airdrops
Interesting that the community voted not to have the tokens transferable yet, so users are fumbling to get it so by putting more tokens into the vault
Follows a capped approach
Starts off with non-transferable tokens that are scarce, so it incentivizes users to use the platform more often to accumulate as many as possible
This approach will reward the most active participants instead of the one who farms with the most capital
What needs to be done before mainstream adoption can happen?
Wrong perception of readiness
It is not true that we are ready for mainstream adoption
A lot of work needs to be done to ready the entire industry to an average user
The ease of usage of crypto is severely overestimating so there is a need to focus on the very base level kind of interaction
Self custodian of crypto assets
Self custody is not important for mainstream adoption
"But I think for your average user that is poking around with a hundred dollars worth of crypto, them being able to self custody doesn’t really matter. And I think it’s actually more important that they can put that to work rather than making sure that they have true ownership."
- Cooper Turley
It is more important to put those tokens to work than to make sure that people have true ownership
Advice to newbies
Resources
Important resources to learn from:
Forefront - for all things related to the social token ecosystem
Bankless and The Defiant - generally DeFi and crypto stuff
nft now - a news media for NFTs
For newbies, it is less about where to look for resources but more about how much time you put into looking
After 5-ish hours of researching, it will be easy to find a few key players that can help to expedite the learning curve in this space
Advice to newbies regarding DAO
Join a DAO instead of starting one
Go around Twitter and spend some time following all the accounts that talk about DAOs
Will be easy to see which DAOs are interesting
There are many exciting projects out there so it's more beneficial to get involved with the existing community than starting on your own
If after getting involved with one, you realised that it does not fit in with what you want to do, then start one
All information presented above is for educational purposes only and should not be taken as investment advice. Summaries are prepared by The Reading Ape. While reasonable efforts are made to provide accurate content, any errors in interpreting and summarizing the source material are ours alone. We disclaim any liability associated with the use of our content.