Zima Red ep 129: Foobar - Web3 Polymath: Investing, Building, Learning, Teaching
Primer: Investing? Checked. Building? Checked. Learning? Checked. Teaching? Checked. In this episode of the Zima Red podcast, Web3 Polymath Foobar shares about his involvement in all 4 spheres with host Andrew Steinwold.
Background
Has been programming for a long time
Did machine learning at big tech for a few years
Did a lot of math explorations, which pulled him into crypto
Interest In Programming
His original goal was to create fun games
Was into games as a child. Played against his siblings
When his siblings no longer wanted to play anymore, he designed small games that he could play against himself
What Is Machine Learning
The big idea is that you take gigantic amounts of data and you create algorithms that are self-learning
Machine learning has a number of subfields:
Computer Vision — Applied in self-driving cars
Natural Language Processing — Applied in home assistants like Alexa
Recommendation Systems
Discovering Crypto
Had a soft introduction to it, but never took the interest to dive deeper
Became interested in finance a few years ago
His stock account got shut down for trading too much
Started getting more interested in crypto after that
Dove into NFTs during the Moon Cat claiming frenzy of March 2021
“I remember setting up scripts on three separate computers to compute the proof-of-work hash and got a decent bag of Moon Cats. And that was pretty exciting.”
- Foobar
His First Foray Into NFTs
Late 2020, he understood what NFTs were, but thought they were the dumbest thing in the world
A lot of smart people were talking about it, so he got curious
Bought a CryptoPunk for 2-3 ETH
Thoughts On NFTs Today
NFTs as status goods are here to stay, making it difficult to invest in
The lines between fungible and non-fungible tokens are growing thinner everyday
Room to grow in the gaming industry
However, interoperability is very difficult. This will be further away than we think
You can’t double the rate of completion by doubling the money that’s invested into the industry. Sometimes, there’s a complex dependency chain
Thoughts On The Yield-Generating Aspects Of NFTs
There is a natural rate of yield (e.g. if someone wants to short your punk, they pay you 5% a year to borrow your punk and sell it)
Vast majority is companies raising large amounts of money from their primary sale and distributing some of it back to their community (e.g. airdrops, new coins for stakers, etc.)
For NFTs, there is a chasm to be crossed — from speculative assets to a store of value
NFTs As An Asset Class
Every new asset class has to bootstrap itself by standing alone
Bitcoin started out as a way for people to transact on the internet
Now, people are waiting for central banks to buy their Bitcoin bags
PFPs have an emotional product-market fit
“People want something that represents them, and they want that for an internet world.”
- Foobar
Thoughts On The User Experience
The user experience is terrible
Has to be a safe, healthy, and usable ecosystem for the average non-technical user
Thoughts On The Current Landscape And Market For Both Crypto And NFTs
NFTs live in a world of their own
Crypto has grown large enough that there are now persistent subcultures
We can have successful projects that grow in bad macro conditions
Crypto is the last free market. They are the first to crash and the first to recover
Crypto is a fundamentally sound asset class that has a real chance of capturing value from the TradFi system
In 2030, crypto will be dominant
There will always be volatility, so prioritize survival
Thoughts On Proof-Of-Work And Environmental Concerns
Flaws with the Bitcoin security model assuming that an ever-increasing market cap can secure it
Proof-of-work is a pure cryptographic primitive that can’t be easily faked and has a long history of success
Newer L1s that launched with Proof-of-Authority or Delegated Proof-of-Stake has issues with centralization
“Ethereum wouldn't be Ethereum if it was proof-of-stake from the start. Ethereum had its several years of proof-of-work bootstrapping for initial token distribution that helped it gain credible security and decentralization.”
- Foobar
Thoughts On The Terra/LUNA Situation
Tragedy for people who have lost their funds
There were some bad actors
People assumed the safety was similar to a bank account
“I do think that crypto has a problem with loving arrogant founders a bit too much, where people will succumb to hero worship. And then the hero fails them and they all lose money. And then they go find the new hero and repeat the same thing next month.”
- Foobar
The UST peg would be defended by Jump Crypto, Luna Foundation Guard, and other deep-pocketed backers
It grew too big for its own good and the sell pressure was too large
The mechanism was fundamentally flawed from the beginning
Was The LUNA Collapse Due To Bad Actors Or A Faulty Mechanism?
Probably due to both
People should be more concerned about about the mechanism rather than who exactly are the bad actors
What Is He Focusing On Today?
Focused on building currently
Involved heavily in DeFi. Is leading Alchemix’s multi-chain and governance strategy
Have launched NFT projects in the past. Advising NFT projects
”By far the most rewarding is building. There are plenty of zero sum games to be had. But it's much more satisfying to create something new and put it out into the world that people love.”
- Foobar
Most exciting news is Jenkins the Valet:
Bored Ape that launched a decentralized storytelling brand
Enlisted a New York Times bestselling author to write the book
His role is to help shape and drive the technical strategy
His Investment Process
First have to define what’s important to you:
People with high earning potential can take on more short-term risks
People with lower earning potential have to set a bar of acceptable losses before proceeding
Important to have a solid base of less volatile assets (e.g. cash, BTC, ETH)
When moving out on the risk curve, it’s money that you are willing to lose but also has a potential upside
His approach is certain themes/sectors that have high growth potential
For a while, that was NFTs. NFTs have grown so much that it’s not as easily an investable sector
Within DeFi, there are high executing teams that aren’t appreciated by the market yet
Looks for products with moats that can last for 10 years
Thoughts On On-Chain Analytics
Promising area but it demands all your attention and time
Nansen has a wallet tracker feature that notifies you whenever a wallet makes a transaction
This goes back to the hero complex he mentioned earlier. Copy trading can become overwhelming with the sheer amount of degeneracy that people engage in
Tough to find the balance between signal and noise
Value Drivers To NFTs
Decentralized identity — your PFP becomes who you are
Illiquid order books resulting in sharp percentage increases for NFT prices
Value Drivers In Token Economies
Useful products that people are willing to pay for
The product accrues value
Coordination mechanisms drive value (e.g. email drives immense value to the economy)
Bitcoin and Ethereum are coordination mechanisms that drive value which people are willing to pay for
Key financial primitives (e.g. Uniswap) and marketplace primitives (e.g. OpenSea) that people want
Lot of speculation on future growth/multiples
Thoughts On Web3 Gaming
Tokenized in-game assets are a step up from traditional in-game assets
Needs to have a shift to make it accessible for everybody
His Newsletter
Twitter does not work for long-term preservation/accessibility of content
Started on a newsletter explaining key concepts that are underexplored
Single Favourite NFT
His Female Albino CryptoPunk he used as his profile picture
Was very mathematically-minded at the time of purchase. Observed that female and albino were undervalued
People thought he was a girl
Most Controversial Thought
Has a strong belief in self-sovereignty and self-responsibility
There are outsized rewards for people who take ownership of their own actions
Plenty of people in the NFT space blame others when things go south
What Is He Bullish And Bearish On?
Bullish on fundamental tech advancement
Bearish on zero-sum thinking
If He Could Improve One Thing In The Space
Bullish on DAOs but their current implementations are not quite there yet
NFT Ecosystem In 3 Years
NFTs will continue growing
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