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What are NFTs and why pay millions for them? 'Certainly a bubble' says Ian Rogers

Episode Summary

Non-fungible tokens, or NFTs, are minting new millionaires overnight, and this brand new asset class is not only here to stay, but on the way to revolutionizing commerce as we know it, said Ian Rogers, chief experience officer of Ledger.

Episode Transcription

What are non fungible tokens. And why are people paying $69 million for digital art? Well, that is the focus of our discussion with Ian Rogers. He is the chief experience officer at ledger. Ian, welcome to Kinko. It's your first time, tell us a bit about yourself. What do you do and your backgrounds? Sure.

 

Uh, my name is Ian Rogers. I'm the chief experience officer at ledger, which means I look after the consumer side of our business. So we sell, um, hardware wallets to, to store digital assets such as cryptocurrencies or digital art. As, as you mentioned, um, before that I spent 20 years in the digital music business.

 

My last two. Posts, there were a CEO of beats music. And then when we sold beats to Apple, I looked after the streaming music business at Apple. Um, after the launch of Apple music, I came here to Paris to be the chief digital officer at LVMH. So that's what I did for the five years previous to joining ledger.

 

Awesome. And, uh, we're going to be talking about all things, NFTs, non fungible tokens. First of all, what is. A nonrefundable token. And have you ever seen anything similar to this concept in your career before? No. It really is a very new thing. I think that, you know, I, I spent my career in the internet business and, you know, you could say the web one dot O the web two dot O business.

 

And this really is about web three dot Oh. Which is about, um, you know, giving more ownership back. To, uh, to consumers that I think, you know, there've been a lot of great things about the web, but we haven't had really digital ownership with, uh, with kind of web 1.0 or 2.0, I mean, I'm at least partially responsible for the fact that, that you don't own compact discs.

 

Um, you might have a Spotify or an Apple music subscription. And so in many ways, that kind of lack of ownership is. Is a great thing or at least a convenient thing. Um, you know, but, but as human beings, we like to collect things. We, we like ownership. We like sovereignty. And also, you know, of course in the financial space, you know, digital store of value, digital transmission of value is, is extremely valuable.

 

And, and I would say a real. A real innovation. So I think, you know, what we're experiencing now is this, um, is the creation of digital assets. Um, you know, we, we have now, um, critical digital assets, which can be lost or stolen the same way that you could, you know, have your cell phone be lost or, or stolen.

 

And they hold value. So a non fungible token is something that is unique. So, you know, if, you know, you could say that, uh, uh, an Ethereum or a Bitcoin is fungible because. If you're getting one Bitcoin, you don't really care which Bitcoin you get. You're getting a Bitcoin. But if you're, you know, if you're getting a piece of art, you might care if that's number one or number five in the series, just like you would, if it was a piece of fine art or a photograph.

 

So that's, what's meant by non fungible tokens, they are actually unique digital objects. So I think the word fungibility means that it can't be easily traded or replaced by another similar. Good. What makes the blockchain technology. Useful as a platform for creating non fungible assets. That's a great question.

 

I think that, you know, but that is really what the innovation of the blockchain is all about is giving us a way to, to have digital ownership that is, is trust free and distributed. All right. So, um, you know, w what you have is you have this public ledger of who owns what, um, and, and then you, as the individual hold your private key, which shows you as the owner of, of, you know, those items on the ledger.

 

So in that way, you know, you have kind of proof of ownership, um, but without necessarily having kind of a, a closed. Um, you know, single source of that knowledge, the, the source of that knowledge is, is open and available to the public. Okay. So let's talk about some use cases for NFTs. And then what, what have you seen in the media that, that have struck your attention for, uh, where this technology is headed?

 

Well, I mean, there've been some big ones. I keep telling people, you know, the world that we live in. This week is different than the world we live in lived in last week, because last week we did not yet live in a world where someone had spent almost $70 million on a piece of digital art. But before that, I was saying that, you know, this, this month is different than the world that we lived in last month when you had not yet, we didn't yet live in a world where someone spent more than $200,000.

 

On a, on a, you know, a LeBron James moment from NBA top shots. So there've been, you know, a number of these, um, you know, there there's, you know, there was a Grimes release. We had our first album release in the space with Kings of Leon a couple of weeks ago. So, you know, there, there are a lot of, um, a lot of use cases there, and there are use cases that are broad ranging.

 

So you've got art, music, um, sports, um, you know, and. Uh, you know, gaming, there, there, there are many, many uses for this technology. Is this a fad? Ian? Is this, is this something that's going to come and go away? Where do you see this being the beginning of a brand new asset class for investors as well? I don't think it's a fad at all.

 

I think, you know, you, you probably seeing, um, a bit of a bubble in terms of the pricing, but I think that's simply because, you know, As, as one future is famously said, you know, the future is here. It's just not evenly distributed yet. And, and so I think that, you know, the value of these assets will get distributed across more artists over time.

 

But I think the market cap on these things will only increase, um, from this point forward. And I think that's because, you know, human beings love to collect things that there's there's, um, Yeah. You know, and, and, you know, we collect things, you'd see behind me, I collect vinyl, um, you know, but who sees my vinyl collection, people who come to my apartment, um, I think that the notion of kind of, you know, collecting things and using those collectibles, uh, as part of your identity, Is is very, um, you know, uniquely, I mean, I don't think humans do that.

 

There's nothing, there's nothing that, that, um, you know, it's impossible to deny that. So I think, I think we'll see that also, you know, if you think about it, everything is collectible and we have digital lives. So, you know, like I said, I spent the last five years of my career at LVMH, and I think that, you know, the, the future where you can buy a, uh, a luxury handbag and then take the digital representation of that.

 

Good with you. Into a game or a virtual environment. I don't think that's, that's too far away from us for us. So I think that, you know, there's certainly a bubble in terms of, you know, um, NFT everything, um, at, at the moment. But I do think that, you know, that will be more the norm than not, you know, when w if you buy something to immediately get a digital certificate of authenticity will probably be more the norm than the exception.

 

So you're, you're an expert on consumer trends, especially in the luxury goods and digital assets spaces. Uh, tell us about the demographics of the type of people who may the interested in NFTs, who like going by your example, for example, even Tom bag, a digital version of that who would buy that, who would buy a Nan cat GIF worth $600,000 of ether, for example, Well, I think those are very different markets, but I think the thing that, that, that makes this, makes it easy to see that this isn't a fad is the fact that there are so many different markets for this, you know, um, you know, I'm thankful for NBA top shots because I think for a lot of people that shows, um, Oh, wow.

 

I, you know, for people to kind of get their heads around, Oh, this is like baseball card collecting. I think that they can, that they can understand that, you know, I mean, anyone who's who grew up collecting stamps, Can understand, um, what's going on here, but you know, if you look at, let's say, you know, let's use Louis Vuitton as, as an example, you know, a hundred percent of the Louis Vuitton customer base has Instagram.

 

Right? So, you know, the, the customer base for, you know, I mean, you know, you, you could say either Instagram or we-chat pick, you know, but they certainly have one of the two and, um, you know, so. Point being is that Louis Vuitton customers have digital lives. So, you know, for them to take a digital representation of that product into their digital life, I think it's going to be incredibly natural for them.

 

I think there's another thing to consider here though. Think about, you know, we've all seen the rise of, of, you know, sneaker culture over the past five or so years. And you know, there are a lot of kids on the planet today, um, for whom sneakers are currency. Right. There's social concurrency. And they're actually real currency, whether they're, they're selling them on stock X or Grailed or, um, you know, et cetera.

 

So I think that, you know, if you think about that demographic and what this might mean for them, where they have collectibles, which are completely liquid, it gets pretty exciting. I mean, think about the excitement that there's been around cryptocurrency over the last few years, and now ask yourself, which is more fun.

 

Um, you know, money or Pokemon, you know, now imagine that you can pay for things with Pokemon that's, you know, kind of what we're talking about here. So I don't, I don't think it's hard to imagine that there's, you know, that there's a pretty. Um, you know, uh, you know, ready market for, for these assets. Uh, Ian, uh, tell us more about this consumer trend.

 

I'm curious to learn more. So are you, are you saying it's more or less the same crowd as the people who already invested in crypto? The, the, the people who may be already interested in the digital asset spaces? Well, you know, there's, I think I could ask this, this question two ways, because I think if you look at the people who are spending huge amounts of money on these assets, now they probably are people who are already invested in crypto.

 

I mean, look, if you, if you bought that eith um, you know, at a, an extraordinary low price, and now, you know, your, your asset has grown considerably to kind of, you know, move that Eve. From from one liquid asset, which is a theorem into another liquid asset, which is an NFT is not a large jump. But I actually think the more interesting answer to the question is that I think it's exciting that these things are attracting a lot of people to the digital asset space who weren't here yesterday.

 

So I think if you look at the people who are buying, you know, um, cards on NBA, top shots, they may not be people who have been in the crypto space for a long time. If you look at the people who, you know, who ended up purchasing the Kings of Leon, um, digital album, uh, that they, they may be just music fans, who this may have been their first one.

 

Uh, purchase. And there are also, you know, if you look at, at some of the other places where people are buying, you know, digital shoes with a physical twin or a digital jacket with a physical twin, you know, those, those people that might be their very first digital asset purchase and it will actually become the thing that, that gets them into cryptocurrencies instead of the other way around.

 

Okay. All right. So, so let's suppose, well, we're going to talk about ledger and how that ties back into crypto. But let's suppose you were still, uh, you know, at, uh, Apple or Spotify or any of the streaming service you work for the Weaver, Tara, for example, any of these high-end consumer luxury goods, uh, products that, uh, that you've worked for, how would you integrate this into your product line?

 

What'd you have consider this at all. Yeah, I would, and I would recommend that the brands do that today. Um, it's actually, you know, relatively straightforward to, um, you know, when, when a customer is checking out, you ask for their wallet address, um, and you keep it on file even, and then you send them the digital representation of, of what they have.

 

Or w when you say digital representation, what does that mean? What, what is a digital representation? That's a good question. It could be, I mean, it could really be whatever the brand was. I'd like it to be, you know, it could be, um, a, you know, just a certificate of authenticity. Um, but imagine now that, that I have, you know, kind of the simplest version of that, which is certificate of authenticity.

 

Um, and then I also connect that wallet to my favorite video game and that wallet can see that I am a, um, an authentic owner of that. Good. And now there could be an appropriate representation of that product in the game with me. Okay. Um, so, you know, there's, there's, there's, it's really kind of wide open in terms of what you can do with it, because it's, it's quite straightforward.

 

What you have is you have proof of ownership. Um, and you know that then with that proof of ownership, I could, I could get some kind of a perk. If you look at the Kings of Leon example, you know, that the, the owner of those is going to get backstage passes basically to the, to the next tour. So there's a lot of, a lot, a lot of different things that you could do with that.

 

But I think there's another interesting consumer trend here. Which ties into that. Um, you know, if you look at what happened, you know, in 2020 we saw, you know, brands, I'll, I'll speak for my brands at LVMH, um, you know, really move, um, you know, very, uh, um, uh, you know, authoritatively into the world of direct to consumer.

 

So we've already been on the direct to consumer journey for a long time. Of course. I mean, a Louis Vuitton is fundamentally a direct to consumer brand or Brown. No, With no wholesale, but if you are a brand with, who has wholesale distribution, as well as direct to consumer distribution, but you know, you can only get the NFT representation of that product in the direct consumer channel.

 

That's a great incentive for, for customers to buy directly from the brand as well. So when you have news from a brand like Adidas last week, where they came out and said, you know, they want to grow from 30% direct to consumer to 50% direct to consumer, um, you know, in, in the coming months. Well, if I were them.

 

I would offer if you buy direct, if you buy from adidas.com, you get an NFT. Um, so I think you'll definitely see things, you know, moving this direction, which will be exciting for brands and consumers and push us even further into the direct to consumer reality. You were an exec for the music industry as well.

 

Do you think NFTs could change the entertainment business and how artists could think about in the future, how to market themselves, how to market their, their, their songs and products and, and, and shows and whatnot. Absolutely. I think it will completely change the way that, um, that, that an artist can own their own.

 

Art and deliver that art to their fans and potentially even collaborate, you know, imagine, imagine that, you know, um, a song, a song is, is a, is a collection of, of, um, parts anyway, right? So if you open the, you know, the liner notes to your, to your favorite album, you'll see, you know, the effectively the credits, which is another way of saying who gets paid.

 

Um, you know, when, when this, when this particular song gets sold. Okay. Well now imagine that you could track those rights. If it was remixed, if there were derivative recordings, that's something that's never been pulled off in the music business, you know, that, that where, where you get kind of an actual marketplace for collaboration and those sorts of things.

 

And I think that, that this type of technology ultimately will lead to that. Well, did you see any potential copyright or illegal issues with an FTC? Somebody wants to create an  based on an existing piece of art. Um, and if somebody else wants to do the same thing, well, who gets there first, who claims that?

 

Right? Yeah, absolutely. I mean, I think that that, that will be something that you're going to see a lot, in fact, where, um, people are creating things that don't actually belong to them. So in other, it needs to be a huge problem. The problem of counterfeit in this space is going, is going to be huge. Um, and we will need ways that customers can, can, can validate that this is actually who.

 

Um, they said it is. And then you'll just have also kind of, you know, the kind of existing, underlying rights problems that you have with anything. I can't just take your song and use it in my TV show. Um, and so I can't just take your song and use it in my NFT either. So, you know, th th this doesn't, this doesn't solve those types of problems, but it actually could present a solution to them, you know, and there are very few people who have figured out some of these difficult rights issues, you know, YouTube being one of them, you know, I can put a piece of music under a video, upload it to YouTube, and, you know, YouTube will take care of the payment.

 

Uh, of that, of that, um, of that recorded music piece. That's not a solution that exists broadly on the internet. Um, but you could engineer a solution like that. If you had kind of an underlying rights management system and. And NFTs could lead us in that direction. Okay. And finally, let's talk about storage, which I believe is where ledger comes in.

 

Say I spend $69 $69 million buying an artwork from, uh, from people. Well, I, I wouldn't, but say it, say I did, um, what do I do with this? Like what, what, what do I, what do I store it? How do I secure it? Yeah, well, and let's, let's face it. I mean, even something that is, you know, $10 or, or a hundred dollars might be, you know, a lot of value to, um, you know, to the, to the purchaser.

 

So this is what we do at ledger. We have a piece of hardware to. Store the private keys. So you can own, um, your digital assets. You can, you can effectively, you know, hold them in your hand. You can hold that ownership in your hand. Um, and, but you also have the security. The fact of the matter is, is that the devices that we all work from today were built for web 2.0, so, you know, your laptop, your web browser, your, um, you know, your, your phone and the apps that run on your phone, you know, they, they aren't.

 

They aren't secure in the way that ledger is secure. So ledger has a secure chip, secure memory, secure screen. You know, you can't get in there with malware the same way that you could on your phone or, or, um, or, or on your computer. You're not susceptible with ledger to SIM swap attacks and those sorts of things.

 

So I think if you have enough value that matters to you, you know, whether it's $10, a hundred dollars, a thousand dollars or $69 million, um, then you want to store that somewhere safe. You want to store that on, on a ledger. Oh ID. And that was very educational. Thank you so much for giving us, giving us your insights.

 

I appreciate it. Yeah. Thanks for having me on. It's a super fun topic. Absolutely. We'll love to speak with you again soon and thank you for watching cable news. I'm David Lynn. . .