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Background
Mint Season 2 episode 8 welcomes Maria Shen who’s a partner at Electric Capital. Prior to Electric, Maria was CTO and co-founder of a startup that helped SMBs easily create their supply chains with manufacturers around the world. Prior to that, she worked on search technology at Microsoft, with her features shipped to more than 1 billion devices.
In this episode, we talk about:
- Her NFT collection strategy
- Undercollateralized social lending in NFT communities
- Favorite NFT use cases
- The intersection of DeFi and NFTs
- How creators should be thinking about the metaverse
- The frenzy behind Bored Ape Yacht Club
- Lessons learned working in this space
…and so much more.
Thank you to Season 2’s NFT sponsors!
1. Coinvise – https://coinvise.co/
2. POAP – https://poap.xyz/
3. Socialstack – https://socialstack.co/
4. Celo – https://celo.org/
5. PrimeDAO – https://www.prime.xyz/
Interested in becoming an NFT sponsor? Get in touch here!
You’re making a lot of noise on crypto Twitter with your love for bored apes and your love for NFTs. So I’m excited to dive in. Let’s just get right into it. Give me a quick brief about yourself. Who are you? What were you doing before crypto? And like, where are you now?
Yeah, sure. So right now I am an investment partner-focused VC firm called electric capital. Where I, as you see from my Twitter, I’m super focused on NFTs and we can totally talk about how I got into NFTs in the first place. But prior to electric, I was co-founder and CTO of a supply chain startup. Before that I was getting my masters in computer science. I spent some time at Microsoft on search tech as a PM. Graduated from Harvard, studied political science and computer science. So yeah, I mean, my background mainly is in product and engineering being an entrepreneur and now investing.
How did you go from the supply chain to crypto? Cause that’s like that’s night and day. I know there’s a lot of overlap with blockchain technology and supply chain, but NFTs and supply chain?
I didn’t jump from supply to hang to NFTs, but I did jump from supply chains to crypto. So you know, kind of the backstory here. I started my company back in like 2015, 2016 . So if you take yourself back to that time that was when direct to consumer products really rose to prominence, right? This is your Casper. This is your Warby Parker. This is people realizing all of a sudden, oh, you know, I don’t need to go work for Nike or Lulu lemon. Like I can actually market my products directly to people through Instagram. And be able to actually reach a very wide audience. And so a lot of these small businesses were great at creating products, thinking through who their users were, but not so great at their supply chain at kind of actually creating the products and mass where we’re in many cases, even prototyping the products. And so my company at the time was effectively a supply chain backend for these small businesses. And so I worked with you know, I would say maybe about 300 manufacturers across Asia, South America, Eastern Europe and then thousands of small businesses use this system. And one of the really interesting problems that I kept seeing over and over again, payments. So specifically a lot of my small business customers were in the U S you can Canada. And so in order to pay a manufacturer overseas, like, you know, obviously you have the problems that you can imagine, like foreign exchange is difficult. Wiring is difficult. But actually the really painful problem is a lack of trust. These are small businesses that have never interacted with these manufacturers before, and these manufacturers have never interacted with these small businesses. It’s not like H & M coming in and saying, you know, Hey, give me credit. I’m H & M like, you know, I’m good for it. For these manufacturers I’m not so sure, and then small businesses are also unsure. So the kind of industry standard that was established is 30% upfront or something like that, about 30% upfront and about 75, 70% when you receive the goods. This made zero people happy. Right? So small business was like, what, like I’m paying 30%, who knows what I’m getting. And then the manufacturer is like, okay, I’m getting 30%, but I’m making a hundred percent of the goods. So like, how does that make any sense? And so there’s just like always this tension around payments. And so I thought back to when I was getting my masters in computer science, there was this one guy in my program who was very into Ethereum, like to the point where he was doing sessions for the rest of the class.
Just like on his own about smart contracts. So he’s like, listen to me guys, like smart contracts are the future. And at the time I was really focused on things like big data and machine learning and I was like, oh yeah, you know, smart contracts. Cool. You can put rules on top of money, but like, you know, not what I’m interested in AI is the future. And then, you know, once I kind of saw this problem with my customers in the manufacturers, I kind of thought back to smart contracts and it was like, oh, well, you know, actually if you can write rules on top of value, you just be able to do a really lightweight business escrow. And that would solve problems for both of these parties. It could be a really cheap and programmatic way to introduce escrow into the payment flow. And you would solve a lot of the like foreign transaction friction in terms of just moving money over, across borders. So I was like, cool. Okay, I’m going to integrate with an API. Someone’s got this. And I looked into it and it was like, no, the infrastructure was not ready. Fiat on-ramps and off-ramps were all over the place. KYC and AML, if you’re trying to form some sort of cohesive experience, especially across borders, like that’s just not going to happen. Manufacturers are like, you know, we’re barely using email. And so trying to get them to understand like, custody of the token, like, you know, there’s no chance. Zero chance. So I was like, okay, well this was a cool thought experiment, but like infrastructure isn’t ready. But that is what got me down the crypto rabbit hole. Cause I was like, well, you know, I mean, infrastructure can be built, right. But if the technology is there, then you know that’s real. And so, after I stopped working on my company, that’s really what I focused on was crypto. And I knew I really wanted to get into the industry. And so kind of here I am.
That’s awesome. You know, I got started in crypto also like your friend, just teaching classes on the weekends or my free time, like I used to write in Facebook groups, I read the Bitcoin white paper. If anybody wants to learn about how peer-to-peer transactions work, I rented this room on the university campus on Saturday at this time. Hit me up. And like, there’s something really like it about me, but there’s something really about something special about your friend. Cause imagine the amount of inspiration that he kind of shared from his passionate expressing and explaining something that he believed in so much and how that kind of trickled down to the rest of the people in that room.
No. I mean, absolutely. I think in retrospect, that’s when everyone should have seen that crypto is going to be big. Right. It’s like when you, when you kind of inspire that kind of fervor and people go out of their way to educate other people yeah. You know, it’s like this kind of religious fervor, right and anything that kind of inspires that is actually. Incredible and worth studying and worth looking into.
When did you make your transition into VC?
So once I decided I wanted to get into crypto. I really was not considering VC at all. I was really looking at, you know, Hey, should I join a crypto startups? Should I do something out of proxy? Should I start my own company in the crypto space? And so this was 2018 at this point and I met a Avichal Garg and Curtis Spencer, who are the founders of electric capital. And what I realized about being in crypto VC, that maybe a lot of people don’t realize is that there’s actually a lot of building that you have to do inside. I mean, as a, you know, just a very kind of elementary example. If you’re a traditional VC, you don’t have to worry about custody, right? Your custody is your bank. You just put the money in the bank. Period like that, you know, that’s it. As a crypto VC, it’s as you know, not so simple, right? Like what are you going to do? Hold millions of dollars on a USB stick? Like probably not. And so just things that you really take for granted that third party providers exist for at least in 2018, either didn’t exist or was very under supported. And I mean today, right. Still very under supported.
So you’re telling me you wouldn’t wear your fund around your neck as you wouldn’t wear 25 million around your neck? Pimp it out like you would with a gold chain?
You know, that actually might be the play is like, instead of like a Rolex, like watch, it should be a diamond studded USB or something. I think that’s awesome. Yeah. I mean, there’s just so much infrastructure to build. Right. And that’s just like internally, but then externally. I mean, the industry is moving in real time. Like things are being discovered in real time. And so any contribution you make in the space is almost just like putting something down in a history book. Right. And that kind of excitement, especially on the VC side, I have this privilege of being able to look across the board at what’s happening in crypto at large. And there’s always so many interesting things happening that honestly, I had trouble really focusing on like, you know, working on one specific idea was going to be very difficult for me. And so kind of this, this marriage between being able to look at a bunch of things and also being able to build so a lot of us at electric actually write a lot of code as well. And so like being able to actually exercise that muscle it was just the, you know, the right combination for me personally.
You know, you talk about as you ship something, it becomes a part of history. Right? Show me another industry that’s like that, that it’s so fresh. So early, there’s a lack of like talent, real, genuine talent. And we’re seeing this happen live. The best example that comes to mind is obviously party bid, right? And, and the, the beautiful social interactions that they created from like a multi-player bidding platform. Right. Another great example is fractional. Right. And really solving, tangible use cases and seeing the sheer market validation that comes with that is inspiring. And a lot of the reason why I entered crypto is even if I could just contribute with a grain of salt, I know that grain of salt would be tasty because in the grand scheme of things, like it’s so early, so fresh and just get in there and just build something. I love your story so far. That’s fascinating.
No, I think you’re absolutely right. I mean, Really any topic and crypto can be an area of study. Right. And I think it will be like, I think they’re like in colleges, in the future, people will be studying crypto-economics as like, as its own field. You know, there’ll be countless Ph.D. theses, written on this topic. And that’s just one of, I don’t know, hundreds if not thousands of different topics, right? The game theory of creating incentive mechanisms even just like the depth of the tech that exists, like really any direction you look in Is something new being created. And I mean, to your point earlier, I really don’t know another industry where this is.
Let’s pivot into the topic of NFTs. Okay. I know you love NFTs and I want to hear why, like, what is it about these, whether there’ll be 721s 1159s future standards to come. Why are you so attached to these cool collectibles? What is it about it for you?
You know, it’s funny, you should ask that because I’ve never been a collectibles person, but I think that’s actually, what’s really cool about NFTs is: just because you’re in NFTs doesn’t mean you’re a collectibles person. So I mean, I was first exposed to NFTs with like CryptoKitties, right. CryptoKitties came and I was like, oh, this is cool. Played around with it. I bought a few crypto kitties bred, a few crypto kitties and I was like, okay, cool. But how I kind of really really fell in was back in 2018. Crypto voxels was around and I’m a huge kind of Sci-Fi reader as is a lot of people in crypto, I think. And I’m a huge fan of snow crash. And so this idea of the metaverse is just like insanely cool to me. And crypto voxels is a metaverse right, is, is kind of this digital world where your avatar gets dropped inside and you can just walk around and the land itself, these parcels are NFTs and you can own parcels. And if you own a parcel, you can build on top of that and build all sorts of creative buildings. People create all sorts of amazing architecture on top of their own parcels. And so that’s really what I first did was like, I just walked around and I was like, oh, this is cool. Like, this is the metaverse. And what was funny is that crypto voxels were really early in integrating with NFT marketplaces and platforms so people could embed their own NFTs within their crypto voxel architecture, effectively turning the entire crypto voxel metaverse into one gigantic gallery or like one gigantic museum. And so I would literally spend all of this time walking around, looking at art, like clicking through the walls and being like, oh, what’s this and that’s how, you know, that’s kind of how I first kind of fell into it. Through the metaverse angle more than anything.
Were you buying plots of land yourself and like building on top of them? Do you remember how much the first plot of land you bought was for?
I think I spent something like $200 and this was after like, so what happened is I kept watching this land. I’m sure. I was like, I should buy one. And I’m like, that’s nonsense. Why would I buy digital land? It’s worthless. And then I was like, I just like, couldn’t help myself. Which again, I think when you have that kind of feeling like there’s something kind of interesting happening there. And I was just watching the prices go up and I was like, no, I have to $200 is like an insane amount of money to be spending on digital land, but I’m just, I’m just going to go for it. It’s going to be a total loss, whatever I’m willing to take it. And so, yeah, so that was, I think, around the prices and when I first started buying some parcels you know, I think they’re like over a thousand. I actually don’t check the prices that often, but yeah.
Can we talk about the addiction of spending ETH for a minute? I would rather pay a thousand dollars in gas fees than pay $300 for a flight. Like, I don’t know why what’s up with the psychology behind that, but it’s so much easier spending my ETH than it is spending my US dollars.
Absolutely. I mean, this is very embarrassing to admit, but like when I go to Chipotle I don’t get the guac cause I’m like, I’m not going to spend, this is a scam. I’m not spending $2. I remember one time, was like during the height of the NFT craze, right? Like I did something and this was when gas fees were atrocious like hundreds of dollars. I did something and the gas fee was like 60 bucks. I’m like, oh my gosh, what a steal! I think it’s very, well-documented like, not officially, but so many people have talked about this feeling where it’s like, you know, like I would never spend 20 bucks on this, like very normal, reasonable thing. But $2,000 on a JPEG, like yeah. Yeah, that’s right. That’s it. So that’s like practically free.
It’s the behavior that makes it absolutely insane. I mean, and you brought up part of it, right? Like all the behaviors from the outside looking in, it is nuts. Like party bid with like the zombie punk auction, right? Like party of the living dead brought in 400 plus complete internet strangers to lock $3 million into like more than $3 million to bid collectively on a picture. Like it’s the whole thing. Like if you try to tell that story to someone who’s not in crypto, It’s just mind-blowing.
I think there’s something culturally really interesting about NFTs that people didn’t foresee which is originally like, you know, the promise of blockchain and the promise of crypto is like, oh you do everything on the blockchain. You’re basically doing everything in public. And that brings transparency. Right. And transparency brings trust. But I think what people forget is like, we’re all like still very primitive monkeys. Like we actually, when we actually do things in public, like we do it for the status. Like, you know, we’re like doing with a flex and we’re doing it to actually signal publicly, like who we’re aligned with what we’re aligned with, like what our ideology is when we purchase something. And that something is effectively broadcast across the entire internet. Like, you know, back to this point about collectibles and NFTs, not really being collectibles, like if I were to purchase a beanie baby, you know, I would have to, it’s kind of like a push model of like, I have to tell people otherwise, who knows, you know, I just bought it in private. But, NFTs are public by default. Like it’s broadcast by default. Right. And so like, you’re really living like and broadcasting your digital life all the time. And that sort of social interaction is something kind of beyond which we’ve seen before.
What’s the current state of the NFT market?
I mean OpenSea is saying I think it’s made more than a billion dollars in transactions in the last 30 days. 100k registered users, which if you do the math, it’s like the average JPEG is like $10,000, which is insane in USD terms. So I would say there’s a couple different categories of NFT art that’s going on. Right. There’s kind of the profile picture lead where it’s not really about profile pictures. It’s really, you’re buying club memberships, right? You’re spending like thousands of dollars to be part of the club. You know, and that’s why you have people out here being like Hey, I joined bored apes like follow me, right. This is a community. Not to mention, it’s also a distribution channel. Like if you look at the hundreds, which is doing just like street wear. So they’re going to be dropping apparel for I mean just bored ape apparel, right? You don’t have to be in this bored ape yacht club to actually access it, but that’s actually a distribution channel. Like there’s actually, you know, real monetary value in this community. So, I would say the first bucket is a kind of community based NFTs where everyone coalesces around some kind of common identity.
I think there’s also a lot of stuff happening in the kind of generative art space, like art blocks and you know, kind of creating almost like accidental art, but still, I think there’s this kind of like community aspect with generative art, which is interesting. And then there’s kind of like the one-on-ones there’s the art community there. I feel like this broadly is, you know, one is like community-based and one is like artists based or like creator based. And I think that there’s another thing that’s kind of coming along, which is how do NFTs really get plugged into DeFi. Like NFTs at the end of the day, you know, they may be art, they may be collectibles. They may be whatever. They may be pieces of writing on a mirror. But they’re assets, right. They’re financial products. And so there’s kind of this category of things that are looking at NFTs as assets, kind of like fractional which you talked about before. And how can we actually introduce liquidity? How can we introduce better pricing models for rare or kind of tail NFT assets and how can these things be then plugged back into the DeFi ecosystem? I think that’s probably what I would say is like this really interesting unlock that’s going to be happening where, I mean, for the longest time you’ve had kind of two parallel tracks. You’ve had the DeFi community and you’ve had the NFT community and there’s been, there’s definitely been like cross-collaboration. Like I think that’s maybe what made Axie infinity very interesting is I remember. You know, back when Uniswap, did the retroactive draw of their uni tokens. Some Axie players actually ended up getting uni tokens because they inadvertently interacted with Uniswap through playing Axie infinity through, you know, kind of just like earning SLP swapping SLP. Like that’s that super cool right there. There’s that kind of thing that’s going on. I think like, you know, yield Guild for example, is looking at how can we actually loan out the NFT assets that we own and then these NFT assets actually have like a cashflow attached to them through these play, to earn games. And then how do we kind of capture some of that cash flow? So there’s, there’s been kind of stuff. Interactions, but I think the true unlocking kind of this like real marriage between DeFi and NFTs hasn’t really happened yet. And I think fractional and like you know, kind of that category of things is really leading the way. But we really haven’t seen that true unlocking.
Yeah, I want to touch upon the first point that you brought up of Bored Ape yacht club, doing a collab with the hundreds, doing a merch drop specifically for their community. And I know you mentioned for whatever reason I saw online that you have to be a member. BAYC to get t-shirts.
I’m not sure. So there was like a Bored Ape merch drop that was separate where it’s like, you know literally token gated. Where you have to prove, and then you can purchase. I thought the hundreds was open to everyone, but I actually could be wrong on that.
Do you see creator passes in the form of NFTs coming into fruition down the line?
Oh, yeah, absolutely. I mean, it, I think it’s absolutely going to happen. I’m very opinionated on actually how these communities form and I think what you mentioned is almost like a social token, right? Where it’s like highly sort of social token. It could be a ERC 20, or maybe she launches on another chain. But I actually think the reason why NFT communities are so passionate and so special is because it’s not a token. Like I mean, it is a token obviously, but it’s a unique asset with like an image that you can kind of emotionally resonate with, which you can’t do with an ERC 20 token. So I actually feel like the way that creators are going to be able to leverage their communities is through like, Some sort of badges or some sort of NFT based thing. And I think there’s kind of two aspects. There’s like, how do you enrich your community and your fans? And then kind of like, how do you really engage with them? I think on the enriching part, you know, I feel like what’s going to happen is you’re going to have musicians, for example, creating their music, masters as NFTs. Fractionalizing that right? And then people who own fractionalized shards of this music master may be able to generate streaming revenue or, you know, it doesn’t have to be music, right? Maybe it’s the commercial rights to a specific ape or to you know, maybe a Kylie Jenner, cartoon character that might be option for a movie. Right. And what if that were fractionalized and you actually get revenue based on how this IP is used? Yeah, I think that would be super, super interesting. And then I think there’s kind of this community aspect or engagement aspect where right now most NFTs are pretty static. And this is where I think async art has done a really amazing job and not getting a ton of recognition. They definitely get some recognition, but they invented this concept. I mean, correct me if I’m wrong. My understanding is they invented this concept of layering for NFTs, where a certain NFT can have multiple layers. So you can imagine for an album cover, for example. Let’s say Drake is going to create a new album, his album cover has like a background and a foreground. You know, maybe the background is like you know, like this beautiful nature scenery. And then the foreground is like some cartoon characters. What if every single aspect of that was actually an NFT and so like layered together, it creates a cohesive whole. And if you owned the background, you can change it from night to day. You can change it from New York to Tokyo, you can change it, you know, like you have the power to actually lose this album cover in some way. So I feel like this, like there’s still a lot of play and experimentation we can do.
That’s like, that’s the only token standard, right? Stacking collectibles, and basically non fungible tokens on top of one another, whether they be eyeglasses, right. Or whether they be rings or whether they. That are interchangeable, but okay continue.
I think that can be applied to the community as a whole, as well. Right. Where it’s like, let’s say you’re the oldest followers of a certain celebrity. Like maybe that means you get accessorized in a special way that the NFT that you have actually grows and develops as kind of the community grows. And I think those are all sorts of really interesting things where fans can get recognized for the contribution that they make. And that can happen, you know, that can happen through NFTs and I think there’s no real way for that to happen at scale today for creators and their fan bases.
That’s actually a very practical use case of applying what these cartoon drops are doing to a real life example. Being able to interchange different components of an album cover, issuing those as NFTs and having unique components, unique traits to the album cover. And even if you would take it one step further and do like extended versions of songs, you know, on some ensemble drops versus non. Like which one’s explicit, which one’s not explicit. Now we’re going down a rabbit hole that the possibilities are endless, but here’s the issue. Like creators they’re not thinking like that just yet. You’re seeing founders innovate. And I recall talking to like four projects that are working on the element of tokenizing musicians and tokenizing their albums, basically. And figuring out the whole fractionalization of royalties, bringing that off-chain payment on-chain. But again, creators don’t get this. Creators typically want to focus on the creative they want to focus on drawing and they have their managerial team that kind of handles the rest. So how do we kind of get more managers, and more artists related with what’s happening in the space to be more ballsy, right? To be more risk-taking. What do you think is the right solution for that? And part two is what do you think is stifling that?
That’s such an interesting question. And I agree. Because right now, like in order to really design well some of these mechanisms that we talked about, it’s almost a piece of performance art in itself, right? It’s kind of a full-time thing to be able to design that. And if your full-time thing is actually photography or your full-time thing is actually music, like. Designing the community interactions, designing the incentive layer, designing the reward, you know, the reward mechanisms. That is a very, very heavy lift. . I wonder if, what will actually happen is some creators will experiment and achieve kind of like the playbook for how this is done. You know, I know Justin Blau, for example, has done a lot for his music NFTs . He tweeted out kind of enigmatically that his NFT holders can kind of get rights to it in some way. So, you know, I think some artists are going to end up pushing the boundary and proving out certain models. And I think those models will become the playbook. And then once the playbook is established everyone else probably will just be able to adopt it right in that here’s five playbooks. And so whoever ends up writing one of these playbooks early, will win asymmetrically, but everyone else who follows that playbook would obviously also benefit. But yeah, I do think it is a big lift and it means veering off the creative path a little bit, or whatever, kind of, you know, art or creation that you’re doing to think in a very specialized and deep way about game theory and incentives which is a big ask.
If porn stars started issuing their own social tokens, how does that intertwine into DeFi. Are they going to start issuing like lending and borrowing pools on Aave, you know, for whatever?
Every single kind of technological advancement we’ve had like video streaming, like, you know, kind of like the internet, like a lot of this is pushed by honestly, the porn industry, like they’ve always been on the cutting edge of technology. Like, ads are delivered through videos.
I’m curious to see what happens with that use case. I want to talk about what are some of your favorite NFT use cases that extend beyond land, like digital land music and art? Like what are some of the more experimentative things that you’ve seen, either creators communities dabble with and make a lot of noise behind?
I think there’s going to be a lot of power in collective storytelling. So I think Aku is a really good example of this, where the Aku character is a ten-year-old boy he dreams of being an astronaut. And there, the idea is that there can be a community DAO behind deciding storylines for what Aku ends up doing. And I think that’s going to be, you know, incredibly interesting for storytelling and for media going forward, there was another idea that was tweeted. Earlier I want to cite him correctly. Maybe we can tag it afterwards or something, cause I want to make sure it’s actually attributed to the right person. He had this idea of what if we had this, you know, manga series where every single character is an NFT and and, and fans can kind of coalesce around these characters and then you can kind of create narratives around them. I think it’s, you know, I actually feel like this sort of community created content is going to change the way that media works in the future. Like it’s going to change the way you know, Netflix and Hulu and Amazon and all of these, these platforms work and the way that we consume. Like think of the fervor around game of Thrones, right? Like if you actually had like, maybe through staking, like game of Thrones, tokens against certain characters in battles , right? Like, you know, there was this battle of the night or, you know, there’s like all these epic battles in game of Thrones. And what if you could stake tokens against who would be the winner or like stake tokens to give them special weapons to use during the show like that would be really interesting.
Imagine you could do that live with the WWE. Like that, that just came to mind. Imagine basically stake tokens, and then men fight. You will determine whether or not the dude hits the other dude or girl with a chair.
I think actually, like you want to do item drops, right? Where it’s like, if you take enough tokens, like this guy gets a banana. I think this sort of participation is just going to change the way like content is created.
I love that. That’s a good point of view. I want to dive into something you’re really excited about. You kind of talked about it briefly scattered throughout, but I want to bring it up. So you talked about the intersection of DeFi and NFTs. So I want to pull up the tweet that you wrote. So this is from August 8th , 3:40 PM. I’ll shoot it alike, like as well, boost it a little, give it some love. The next thing in NFTs, plus in DeFi will be under collateralized social lending in NFT communities. Social lending works in emerging markets without robust credit scoring systems but didn’t work in crypto because of the lack of on-chain communities. And then below that, you put dead, which is the dead punk that was through party bid. And then you tag Bored Ape yacht club and then you mention communities like that. Can you talk a little bit about what you’re kind of referring to more in-depth from that tweet?
Yeah. I have never had anyone pull up a tweet during a conversation. This is actually really cool. So. Let’s think about what credit is, right? Like credit is basically trusted. Credit is saying, I trust you to give me this money back plus something else. Give me my original money back, plus some. And the way that trust is established today, like in, you know, for example, in the United States, is through credit systems and credit scores and you do that through repeated purchasing history and kind of repeated activity, whether you’re renting an apartment or whatever. And all of that gets logged on chain or logged in a database somewhere. And the reason why you can even accumulate this score is that you have one identity, right? Like you can only ever have like one social security number. So you’re tied to that identity and that identity can be tied to a scoring system that effectively, you know, it’s flawed in many ways, but the aim of such a system is to tell people how trustworthy you are in this credit and lending system. And in emerging economies where you may not have such a robust you know, in the United States, our entire industry is dedicated to the credit score, you know, and in other emerging economies, you may not have entire industries dedicated to credit. And so you actually have small-scale communities doing community-based lending and saying that like, Hey, I’m a member of this community. You’re a member of this community. We live in the same village. I know you’re not going to up and move. I’m going to lend you some money cause I know you’re good for it. Because we’re attached in some way. And in crypto lending just has a really hard time taking off because there is no identity. I can make as many wallets as I want. And each wallet can have a different set of actions that I’ve taken on-chain and I can abandon any wallet anytime that I want. And so they can’t tie it down to one identity. That makes credit scoring incredibly difficult. So barring that, I think the flip side is like, okay, so then can you do community-based lending. And there’s been some really early I’m struggling to think of the name, but there was definitely like a really early example of this, I think back in 2018 where it was literally a network where, you know, I would pull someone in and I would say, I’m going to underwrite him. Like, I know he’s good for it. And if he doesn’t pay it back, then I also get slashed. Like there was, there’s like basically some incentive system, but it didn’t really take off for whatever reason. And I think the problem is that, like, I would still have to know that person in real life in some way. And like, I still need to like have some sort of relationship. So is there actually some sort of decentralized trustless way of establishing a community to say to someone, Hey, like you’re good for it without even knowing identity. Like it’s actually a really, really tough problem. And so that’s, you know, that’s why it’s been really hard to have under collateralized lending or credit in crypto. But I think the emergent property of these communities like Bored Apes, as silly as it is. The Bored Ape community is very cohesive. Your identity is determined by the ape that you own in your wallet. And I wonder if there’s some way to say like, Hey, if you’ve held your ape for a year or you haven’t touched this wallet can, you know can actually receive some sort of loan from someone else in the Bored Ape community. Or like if you hold debt tokens for a certain amount of time and you can kind of mix and match conditions, right. You can say, okay, what if you, you own a Bored Ape and you’re a big liquidity provider on, you know, Uniswap or something. And you’re an active governance participant in this DAO then like you are able to receive a loan in some way. So I think there’s something interesting about now that you’ve formed identities actually around cartoon characters that there actually might be a way to do lending within these communities.
Do you think people are starting to realize the potential behind DeFi and NFTs? I know there are a few startups already exploring it, but do you think more of the more inner circle crypto community has started realizing what this could become? Or do you think people have yet to experience that aha moment?
I think we’re somewhere in the middle. I think there’s a really healthy contingent of people who are like, oh yeah, this is big. Like once DeFi and NFTs merge, we’re looking at like the most viral financial product we’ve ever seen in the history of humanity. But I think there are also a lot of people in crypto who have been in crypto for years, who are like the OGs, were actually quite skeptical of NFTs. So I think that that’s obviously contingent. So even within the crypto community, I don’t think people, all people agree that NFTs are interesting or worth their consideration. And then outside of NFTs, obviously there are a lot of skeptics. I think we’re still early, but what will happen is I think there’s enough of a contingent of people who are true believers in this merging of NFTs and DeFi to start pushing the envelope on experiments, like party DAO, right? Again, a great example, party bid, like a great example of that happening, where you merged NFTs with DeFi to create some things super interesting that no one’s ever seen before. And I think as more and more of those experiments come to be, I think people will learn through example.
What’s going to eat web 3?
Yeah. I think this is such an interesting question. I think what web three fundamentally solves is how can we create a functioning incentive layer at scale in a potentially adversarial environment, right? So whether all sorts of adversaries it can weather distrust. Like it doesn’t really matter. This incentive system will hold. I think that’s what web three is all about. And once you have this incentive system, you can do revenue sharing, right. And that’s how you can kind of unbundle YouTube and you can kind of topple Facebook and you can kind of topple all of these kinds of more extractive platforms that really profited off of creators, while the creators didn’t really profit off of it. I think web four might be, you know, everyone’s kind of living in some sort of multi-verse and everyone is living their lives digitally. And I think, I really, I think the reason why this question is a good one is because, it’s really hard to imagine what the problems might look like when that is the case, right? When we live our entire lives digitally, when we transact digitally and the relationships we form are kind of at scale and we can have multiple identities as well, and multiple different kind of personas that we live out really full and enriching lives online. This kind of makes me think that, I think it was like in ancient Greece or something where someone was writing you know, kind of like the ancient Greek version of like scifi, right. Where it’s like, okay, what if some sort of being we’ve never met before, like how can we travel to their land? And we’ll travel to their lands through like ships.
Because that was like the longest mode of transportation that they could have foreseen. Like they obviously couldn’t have foreseen planes. Right. It wouldn’t be like flying. It would just definitely be like, we would travel to other worlds for ships. And I think it’s a little bit hard to see into the future and even anticipate what sort of problems we would have once that happens. I do think though, that pendulum kind of swings back and forth between centralization and decentralization and the trade-off is that centralization is efficient, but decentralization allows for trustless transactions to happen. And we’re effectively trading off efficiency for you know, for the ability to interact with strangers. For 400 strangers, to be able to lock up $3 million. Like we did that probably in kind of an inefficient way, but it made it possible. And so right now the pendulum has kind of swinging into the decentralization camp because a lot of the institutions that we’ve trusted for a really long time, turn out to be extractive or turn out to be like, if you look at like the way government functions today, like, you know, it feels like it’s a little slower. It feels like it’s not meeting certain needs. Or colleges where people feel like, wow, I’m paying all these heavy tuitions, but like, what am I getting out of it? So I think there’s just been this like a little bit of a crumbling of trust in centralization. So now, we’re kind of swinging into decentralization. And I wonder when once we’re completely decentralized, I wonder if people are going to be like, wait, this is very inefficient. Wouldn’t it be more efficient if we centralize things? And so I wonder if we’re going to swing back the other way and just swing back, you know, it’s like that’s why history rhymes, right? Like it’s because we’re living in cycles effectively.
Maria, before I let you go, thank you so much for being on what an awesome conversation quickly plug yourself and where we can find you in the projects you ‘re working on.
So I invest in crypto projects, especially NFT projects, especially things looking at creators and looking at these new social communities and looking at the intersection of NFTs and DeFi . So I’m very actively investing in that in a firm called electric capital. You can DM me on Twitter. My DMS are open I’m at @MariaShen. Or my email is maria@electriccapital.com.
