Dark Star

Gaby Goldberg

Jacob Smilovitz

Jarrod Dicker

Jonathan Moore

Gaby Goldberg, Jarrod Dicker, Jonathan Moore, Sophie Fujiwara

News

Perspectives

MTV, Napster and Embracing Destruction

Crypto faces a unique challenge for consumers. Naturally, any consumer of a crypto product is focused on two things at once: the product and the asset value. This can be equated to needing to own Facebook stock to use Instagram or needing to own a part of the NYT while also being a reader. The value shifts from “is this product good?” to “is the business of the product good?”
While it seems like a hard hill to climb, there is opportunity in re-imagining the consumer and commercial relationship of crypto-native protocols and companies by leaning into this exact sentiment. If a protocol or product’s success is anchored on getting the right individuals to take action and remain engaged, the method of on-chain data can be a benefit. One area in this field that’s exciting to us is how data targeting, acquisition and advertising can develop in a decentralized landscape.
In this world, on-chain data is public and can be leveraged by anyone, anywhere. we like to think of on-chain advertising today as akin to the 1980s advertising era– billboards and magazine inserts are prominent, you can reach scale through distribution but don’t really have a firm grasp on who you’re reaching, if they’re the right customer and if it drives the right results. However, with more products and incentives emerging to put actions on-chain, this begins to evolve. Through crypto-native actions, we’re seeing users mint, claim, collect, buy, and sell – all unique behaviors that each tell a unique story about the individual customer. Similar to how Facebook and Google leveraged cookies as a means to build better ways to get in front of the right users and convert, we anticipate the creation of tools that make on-chain data more comprehensive and actionable based on the type of customer you want to target. But in this case, that data isn’t limited to those platforms alone, it’s available to everyone.
Third party cookies drove advertising on the web over the past three decades. The resulting business was reactionary. People traded data for access — now, their personal data is far and wide across the internet, managed by third-party vendors and platforms. We like to believe that users can and should manage this data to their preferences, but there is no putting this genie back in the bottle. On-chain actions pair user identity and transactional actions, which is a powerful way to more deeply understand consumer behavior and preference. While the data itself can be considered additive to existing user data, the behavior of preference and selection is more native to the user flow than what we see today with CCPA and GDPR. Applications can be built to encourage the access of data in exchange for better, net new experiences. Products need to be more unique, as data is public and the differentiation is now in the experience. This is early innings but a complete change of behavior and turn of hand.
One example of this new frontier can be seen through RabbitHole, which recently launched their <a href="https://rabbithole.mirror.xyz/dLdjm64QBoHY78LiJGd_wUzWMy5QQKNfA1La8w9um-E" target="_blank" rel="noopener noreferrer">Quest Terminal</a>. Through the Quest Terminal, protocols can see how others are structuring their acquisition campaigns, what designs work per specific actions, and create user segments to build more effective campaigns through the use of public, on-chain data. Like how early cookie-based ad networks focused on segmented audiences, clicks and conversions a new set of behaviors are presented to crypto-based actions such as minting, collecting, swapping, staking, and lending. With the right amount of on-chain data, targeting and acquisition could become more sophisticated in knowing how best to allocate dollars, to which audience, to perform specified actions at scale.
<div></div>
Every day, more data is being put on-chain. Companies like Dune, Arkham and OnceUpon have taken an initial step in providing context to on-chain data, but we’re still very early in making this data actionable. For example, with the right commercial engineering, there is a model for Dune where protocols incentivize Wizards through tokens to drive more context and awareness around their offering. Sort of like a crypto native influencer and/or affiliate marketing network. We believe as more media is being created off on-chain behaviors, there starts to become an increasingly growing commercial stack that identifies and drives value off of this newly scaled network.
While Quest protocols and other acquisition tools have been “successful” in sending traffic to a protocol or product, it leaves a void in re-engagement, without really knowing who these users are, what they care about, and how best to segment those that truly value the purpose of the product.  The Quest Terminal builds a new platform for creating and reacting to on-chain data where protocols can deploy Quests in real-time, monitor results and see how others’ are managing and deploying based on KPIs. This is a major component in the RabbitHole stack, where now campaigns can be easily distributed, aggregated and acted upon in real time. Soon, RabbitHole will release their SDK which makes it easy to integrate Quests from the protocol into any interface.
As decentralized networks move some of our social behaviors to socio-economic, the foundation to support this nascent economy is being constructed in real time. What’s clear is this action-based data is unique and critical for the expansion of all blockchain-based company’s, and we believe will soon go beyond for those looking to reach a user group prone to engaging, spending and supporting brands and platforms aimed towards their passions and preferences.
*To explore the Quest Terminal, visit <a href="https://terminal.rabbithole.gg/" target="_blank" rel="noopener noreferrer">Terminal.Rabbithole.gg</a>. Read more from the RabbitHole team <a href="https://rabbithole.mirror.xyz/dLdjm64QBoHY78LiJGd_wUzWMy5QQKNfA1La8w9um-E" target="_blank" rel="noopener noreferrer">here</a>. *
<hr />
TCG Crypto is an investor in RabbitHole. None of the information discussed herein is intended to be, or should be construed as financial advice, or an offer to sell or a solicitation of an offer to buy an interest in any security. The information set forth herein has been obtained or derived from sources believed by the author to be reliable and has been provided solely for informational purposes. Nevertheless, the author does not make any representation or warranty, express or implied, as to the information’s accuracy or completeness. Certain companies referenced herein are included by way of example and not companies in which TCG has invested to date nor companies in which TCG intends to invest.

In Crypto, Acquisition is Easy– Retention is Hard

As <a href="/journal/tcg-crypto-year-in-review/" target="_blank" rel="noopener noreferrer">we wrote</a> last year, we believe the most sustainable consumer businesses will continue to be built around passion. What we’ve observed is that blockchain has the ability to turn passionate audiences into passionate owners, unlocking experiences that previously felt either personally or professionally prohibitive (e.g., curating a museum, managing a record label, directing a TV show, etc.). Ownership in these instances isn’t strictly financial. In fact, we find that more often than not, these emerging behaviors unlock without the need of money changing hands. Instead, ownership inherently incentivizes a customer to participate deeper in these existing and newfound experiences. This is where we believe a unique opportunity lies for consumer.
<img loading="lazy" class="alignnone size-full wp-image-917" src="https://tcgcrypto.pdmdev.co/wp-content/uploads/2023/05/xQD_QNWUXaFONIcNMI5wH.png" alt="" width="2134" height="832" srcset="https://tcgcrypto.pdmdev.co/wp-content/uploads/2023/05/xQD_QNWUXaFONIcNMI5wH.png 2134w, https://tcgcrypto.pdmdev.co/wp-content/uploads/2023/05/xQD_QNWUXaFONIcNMI5wH-128x50.png 128w, https://tcgcrypto.pdmdev.co/wp-content/uploads/2023/05/xQD_QNWUXaFONIcNMI5wH-160x62.png 160w, https://tcgcrypto.pdmdev.co/wp-content/uploads/2023/05/xQD_QNWUXaFONIcNMI5wH-320x125.png 320w, https://tcgcrypto.pdmdev.co/wp-content/uploads/2023/05/xQD_QNWUXaFONIcNMI5wH-640x250.png 640w, https://tcgcrypto.pdmdev.co/wp-content/uploads/2023/05/xQD_QNWUXaFONIcNMI5wH-960x374.png 960w, https://tcgcrypto.pdmdev.co/wp-content/uploads/2023/05/xQD_QNWUXaFONIcNMI5wH-1440x561.png 1440w, https://tcgcrypto.pdmdev.co/wp-content/uploads/2023/05/xQD_QNWUXaFONIcNMI5wH-2048x798.png 2048w" sizes="(max-width: 2134px) 100vw, 2134px" />
A key focus since initially articulating this thesis has been around the expansion of passion-based businesses with blockchain, using crypto to create net-new environments for incumbent businesses. This can come in the form of new audiences (i.e., “the active consumer”), new products (i.e., ownership, active participation) and new business models (i.e., digital assets). Instead of looking at expansion as horizontal (driving net new users into an existing interest zone), we believe the path to value is vertical, achieved by going deeper within existing passion arenas. Our position is that when crypto works for consumer, it doesn’t need to interfere with the existing business but rather adds net new benefits on top. As a result, when we evaluate companies, we first look for evidence of passion in the existing customer base. Why do consumers care? — regardless of when or how crypto is eventually integrated.
A good example of this is showcased by our portfolio company <a href="https://www.medallion.fm/" target="_blank" rel="noopener noreferrer">Medallion</a>, which enables artists to launch on-chain fan communities, tightening their relationships with fans and introducing actionable insights that drive both new experiences and economic opportunities. Since launching the platform 6 months ago, <a href="https://medium.com/medallion-fm/house-of-medallion-community-digest-03-23-b802d24bb427" target="_blank" rel="noopener noreferrer">Medallion artists’ natively owned and operated communities</a> have on average 8% more fans than in Facebook Groups, 38% more fans than on Reddit, and nearly 3x (182%) more fans than in Discord. Medallion’s value proposition is to foster a stronger direct-to-consumer line for artists, which enables them to drive more financial action down the funnel and gain deeper data towards what their fans want. Through these functions, Medallion opens up a desirable set of new products and experiences that weren’t capitalized prior for their biggest, most committed customers.
While Medallion focuses on music today, this model has the ability to expand across many more interest categories online. Starting with music provides a unique opportunity in that consumers can be fans of many different artists and genres, spawning a network of discovery and conversion that doesn’t exist commercially today. There are a few reasons for this:
<ol>
<li>Many artists and bands are unaware of the commercial opportunities they can leverage with their existing catalogs, merchandise and live events. While this is <a href="https://www.fanatics.com/" target="_blank" rel="noopener noreferrer">more obvious in sports</a> (thanks to management and direction of the leagues), there is no standard in music to drive universal commercial approaches for artists and develop revenue streams outside the status quo of concerts and streaming.</li>
<li>There isn’t a platform for music fans to discover new music and gain benefits from their favorite artists in one place. This exists in services like Spotify, but the relationship remains relatively one-way and focused on a single use case (streaming). We believe music has the opportunity to build a two-way relationship, introducing the benefits of social with economics on top.</li>
<li>Data drives most online businesses, but in music, the data pool is scattered. Artists get data from streaming services, social networks, ticketing platforms, and more, and they’re responsible for pulling it all together to make sense of it and drive insights. A platform that provides a direct artist-to-fan relationship has the ability to give artists more information on what their fans want, what products would best serve them, and how best to re-engage them throughout the fan lifecycle.</li>
</ol>
Once proven with music, we believe this can expand to many fan-driven networks and showcase the ability to drive better products, experiences, and commerce through a direct-to-consumer line. And how big are fan-based, passion-forward businesses? Massive. The Medallion model could be disruptive to gaming, broad entertainment, sports, and beyond.
The example of Medallion shows that the value isn’t that it’s crypto. The value is that its matching consumer desire with artist need, creating an entirely new flywheel of passion in turn. With that, we believe the most powerful blockchain consumer platforms will use crypto as a tool, viewing it as a means and not the end state. We commonly hear this notion of “web2.5” as an intermediary between incumbent consumer products and web3. In many cases, this feels like a distraction. Instead of spending time in the “middle,” we employ a barbell framework, with existing consumer businesses supercharged by crypto on one side, and net-new crypto-native consumer businesses (with provable passion and usage) on the other side.
<img loading="lazy" class="alignnone size-full wp-image-918" src="https://tcgcrypto.pdmdev.co/wp-content/uploads/2023/05/y_mpGta1n9W6AEfcTkrcd.png" alt="" width="2268" height="930" srcset="https://tcgcrypto.pdmdev.co/wp-content/uploads/2023/05/y_mpGta1n9W6AEfcTkrcd.png 2268w, https://tcgcrypto.pdmdev.co/wp-content/uploads/2023/05/y_mpGta1n9W6AEfcTkrcd-128x52.png 128w, https://tcgcrypto.pdmdev.co/wp-content/uploads/2023/05/y_mpGta1n9W6AEfcTkrcd-160x66.png 160w, https://tcgcrypto.pdmdev.co/wp-content/uploads/2023/05/y_mpGta1n9W6AEfcTkrcd-320x131.png 320w, https://tcgcrypto.pdmdev.co/wp-content/uploads/2023/05/y_mpGta1n9W6AEfcTkrcd-640x262.png 640w, https://tcgcrypto.pdmdev.co/wp-content/uploads/2023/05/y_mpGta1n9W6AEfcTkrcd-960x394.png 960w, https://tcgcrypto.pdmdev.co/wp-content/uploads/2023/05/y_mpGta1n9W6AEfcTkrcd-1440x590.png 1440w, https://tcgcrypto.pdmdev.co/wp-content/uploads/2023/05/y_mpGta1n9W6AEfcTkrcd-2048x840.png 2048w" sizes="(max-width: 2268px) 100vw, 2268px" />
Companies on each side of this spectrum are exciting to us, so long as they can demonstrate durable passion outside of speculative behaviors. On the left side of the spectrum, crypto is largely abstracted away, used primarily as a tool for an existing passion vertical (e.g., gaming, sports, music, etc.). And on the right side of the spectrum, passions are new and crypto-native, like our investments in companies <a href="https://www.cryptounicorns.fun/" target="_blank" rel="noopener noreferrer">Crypto Unicorns</a> (a crypto-native arcade), <a href="https://www.cyber.xyz/" target="_blank" rel="noopener noreferrer">Cyber</a> (a 3D metaverse world engine), and <a href="https://www.curio.gg/" target="_blank" rel="noopener noreferrer">Curio</a> (an on-chain game with permissionless and programmable game logic). On this side, there is a growing audience of people obsessed with the functions, culture, and behavior of crypto, and that in itself is a market to engage.
Spending time in the middle of this spectrum is difficult, as this notion of “onboarding” users is often subject to market cycles. Educating users about crypto and providing consumers with their first wallet is a noble goal, but it generally has far more headwinds than the other aforementioned strategies, and consumers are less likely to be interested and retentive as passion is unclear.
So, where do we go from here, and where are we looking? Some key themes for 2023 include:
<ul>
<li>Loyalty &amp; membership. We believe one of the largest benefits of blockchain is its unique ability to buy, sell, and trade digital goods. As our time and identity increasingly moves online, native infrastructure to accommodate this behavior becomes more critical. Along this vein, thinking of how brands can build new digital communities and experiences centered around ownership becomes compelling. How can digital goods open up new revenue streams and consumer behaviors, and how might brands leverage that commerce data in new ways?</li>
<li>Multichannel &amp; multimedia. Mobile is the dominant way we access the internet, driving 60% of global traffic. In emerging markets, many people exclusively use mobile. What consumer experiences uniquely enabled by mobile (geolocation, augmented reality, social, photo/video, etc.) might emerge?</li>
<li>Communications. With an integrated communication layer, wallets and other blockchain standards become inboxes, and the inbox becomes the nexus of identity. How can individuals and companies reach their target audiences in new ways? We believe through this, we will see a large number of companies anchoring their focus on a consumer model that moves from purely social towards, now, socioeconomic.</li>
<li>New media. In a world of public data, every company is a media company. There are various ways to think about how this emerging technology might affect the business of media. There are new standards and tooling in how to create. There is the ability to manage content in a world where control of distribution and licensing becomes a larger need from brands, publishers, and creators alike (see: AI and LLMs).</li>
<li>Infrastructure for consumer scale. From modular architecture to key management to fiat on/off ramps, how can we set the foundation for consumer applications to reach scale in crypto? Today, most of these behaviors are isolated to each side of the barbell. When and how will blockchain scale be necessary, and in what vein?</li>
</ul>
At TCG Crypto, we continue to obsess over how new technologies will expand, impact, and create behaviors online. With new technologies and models developing at an accelerated pace, we believe we will see a renovation across how we currently drive business and behavior into an entirely new terrain. If you are building or investing in any of the above areas, we would love to hear from you. If you’re working on something outside of this scope, or think there’s an area in which we should spend more time, we would similarly be grateful to connect.
Team TCG Crypto
<hr />
Disclaimers
None of the information discussed herein is intended to be or should be construed as financial advice, or an offer to sell or a solicitation of an offer to buy an interest in any security. Certain companies referenced herein are included by way of example and are not companies in which TCG Crypto has invested to date nor companies in which TCG Crypto intends to invest. The information set forth herein has been obtained or derived from sources believed by the author to be reliable and has been provided solely for informational purposes. Nevertheless, the author does not make any representation or warranty, express or implied, as to the information’s accuracy or completeness.

Building on Passion

Finance, Fairer

medium_large

TCG Crypto Year in Review

To date, every iteration of the Internet has been ushered in by technology to help us better communicate. This began with Internet Relay Chat (IRC) in 1988. Later in the 1990s, we saw the first major instant messaging platforms (ICQ, AIM, MSN, and Yahoo) all battle for market share. The early 2000s became a “gold rush” for instant messaging, with <a href="https://theweek.com/articles/469869/text-message-turns-20-brief-history-sms" target="_blank" rel="noopener">SMS becoming a global phenomenon</a> alongside the advent of technologies like Apple iChat (compatible with AIM) in 2002 and Skype in 2003. And, of course, the last decade of software was supported by messaging apps like WhatsApp, Telegram, WeChat, and Signal, alongside social media networks like Snapchat and Instagram. Now, as we look towards the next iteration of the web — an Internet with a native identity layer for people, by way of the wallet — it’s clear that a missing communication layer stunts growth. As <a href="https://twitter.com/ttunguz" target="_blank" rel="noopener">Tomasz Tunguz</a> put it in his related piece, messaging is “<a href="https://tomtunguz.com/messaging-unlocking-crypto/" target="_blank" rel="noopener">the bottleneck</a>.”
Messaging is our primary form of digital socializing. As defined by <a href="https://twitter.com/dwr" target="_blank" rel="noopener">Dan Romero</a>, the “<a href="https://twitter.com/crosschainpod/status/1582751497141747712?s=20&amp;t=h4D8soyqqZ-2kV4ySo8Mpw" target="_blank" rel="noopener">vertically integrated stack for social</a>” is identity, hosting, moderation, and algorithm — we believe that messaging is the interface of this stack. To communicate with different parts of a protocol, we send various forms of data, whether a message from one-to-many or a message signature, to sign a transaction. Every on-chain action is a message in some form, even if they aren’t represented in a typical chat interface. Seeing these as a single thread of messages outgoing from your wallet would transform the way we browse the web.
<figure id="attachment_727" aria-describedby="caption-attachment-727" style="width: 2432px" class="wp-caption alignnone"><img loading="lazy" class="wp-image-727 size-full" src="https://tcgcrypto.pdmdev.co/wp-content/uploads/2022/12/12.1.22_Talking-to-the-Protocol2.png" alt="" width="2432" height="1328" srcset="https://tcgcrypto.pdmdev.co/wp-content/uploads/2022/12/12.1.22_Talking-to-the-Protocol2.png 2432w, https://tcgcrypto.pdmdev.co/wp-content/uploads/2022/12/12.1.22_Talking-to-the-Protocol2-128x70.png 128w, https://tcgcrypto.pdmdev.co/wp-content/uploads/2022/12/12.1.22_Talking-to-the-Protocol2-160x87.png 160w, https://tcgcrypto.pdmdev.co/wp-content/uploads/2022/12/12.1.22_Talking-to-the-Protocol2-320x175.png 320w, https://tcgcrypto.pdmdev.co/wp-content/uploads/2022/12/12.1.22_Talking-to-the-Protocol2-640x349.png 640w, https://tcgcrypto.pdmdev.co/wp-content/uploads/2022/12/12.1.22_Talking-to-the-Protocol2-960x524.png 960w, https://tcgcrypto.pdmdev.co/wp-content/uploads/2022/12/12.1.22_Talking-to-the-Protocol2-1440x786.png 1440w, https://tcgcrypto.pdmdev.co/wp-content/uploads/2022/12/12.1.22_Talking-to-the-Protocol2-2048x1118.png 2048w" sizes="(max-width: 2432px) 100vw, 2432px" /><figcaption id="caption-attachment-727" class="wp-caption-text">Current steps to mint an NFT to a new messaging interface of minting and signing</figcaption></figure>
<h3>WEB3 MESSAGING</h3>
So what does web3 messaging look like today? For the most part, we jump to brute-forced web2 platforms like Discord and Telegram, using tools like <a href="https://guild.xyz/" target="_blank" rel="noopener">Guild</a> on top for access management. When we connect our wallet to various consumer applications (token-gated sites, shopping pages, communities, dApps, etc.), we typically use workarounds to fill the communication gap, like syncing your email address to your OpenSea or Mirror account to get updates.
Crypto messaging lives on Telegram and Discord, but the search for a crypto-native solution needing just a wallet address has spurred the beginnings of 50+ companies. Businesses like <a href="https://xmtp.com/" target="_blank" rel="noopener">XMTP</a> and <a href="https://www.dialect.to/" target="_blank" rel="noopener">Dialect</a> have taken the protocol-first approach (build a communications network with messaging as a feature), while others are making application-first with new web3-native chat apps, like <a href="https://www.tribes.xyz/" target="_blank" rel="noopener">Tribes</a>, <a href="https://geneva.com/" target="_blank" rel="noopener">Geneva</a>, <a href="https://www.bunches.chat/" target="_blank" rel="noopener">Bunches</a>, and <a href="https://inb0x.life/" target="_blank" rel="noopener">Inb0x</a>. Existing web3 companies like <a href="https://decrypt.co/102958/dump-discord-nansen-launches-messaging-app-for-web3-communities" target="_blank" rel="noopener">Nansen</a>, <a href="https://rarible.com/blog/the-first-multi-chain-messenger-is-here-dm-any-wallet-on-rarible-com/" target="_blank" rel="noopener">Rarible</a>, and <a href="https://www.businesswire.com/news/home/20220720005034/en/WalletConnect-Unveils-the-Future-of-web3-Chat-With-Wallet-to-Wallet-Messaging-Preview" target="_blank" rel="noopener">WalletConnect</a> have similarly begun implementing messaging. On the enterprise side, we are excited by companies like <a href="https://dispatch.xyz/" target="_blank" rel="noopener">Dispatch</a>, <a href="https://lines.by/" target="_blank" rel="noopener">Lines</a>, and <a href="https://notifi.network/" target="_blank" rel="noopener">Notifi</a> that help businesses and communities reach users directly. New wallet-based social apps have also emerged, like <a href="https://www.farcaster.xyz/" target="_blank" rel="noopener">Farcaster</a> and <a href="https://lenster.xyz/" target="_blank" rel="noopener">Lenster</a>, both built on top of their respective protocols.
<figure id="attachment_728" aria-describedby="caption-attachment-728" style="width: 2416px" class="wp-caption alignnone"><img loading="lazy" class="wp-image-728 size-full" src="https://tcgcrypto.pdmdev.co/wp-content/uploads/2022/12/12.1.22_Talking-to-the-Protocol3.png" alt="" width="2416" height="1142" srcset="https://tcgcrypto.pdmdev.co/wp-content/uploads/2022/12/12.1.22_Talking-to-the-Protocol3.png 2416w, https://tcgcrypto.pdmdev.co/wp-content/uploads/2022/12/12.1.22_Talking-to-the-Protocol3-128x61.png 128w, https://tcgcrypto.pdmdev.co/wp-content/uploads/2022/12/12.1.22_Talking-to-the-Protocol3-160x76.png 160w, https://tcgcrypto.pdmdev.co/wp-content/uploads/2022/12/12.1.22_Talking-to-the-Protocol3-320x151.png 320w, https://tcgcrypto.pdmdev.co/wp-content/uploads/2022/12/12.1.22_Talking-to-the-Protocol3-640x303.png 640w, https://tcgcrypto.pdmdev.co/wp-content/uploads/2022/12/12.1.22_Talking-to-the-Protocol3-960x454.png 960w, https://tcgcrypto.pdmdev.co/wp-content/uploads/2022/12/12.1.22_Talking-to-the-Protocol3-1440x681.png 1440w, https://tcgcrypto.pdmdev.co/wp-content/uploads/2022/12/12.1.22_Talking-to-the-Protocol3-2048x968.png 2048w" sizes="(max-width: 2416px) 100vw, 2416px" /><figcaption id="caption-attachment-728" class="wp-caption-text">A (very) non-exhaustive list of web3 messaging today</figcaption></figure>
The potential for web3 messaging extends far beyond a skeuomorphic peer-to-peer chat. It’s protocols talking to users, users talking back to protocols, and all forms of information exchange getting pushed on-chain. Many consider these actions middleware today — the forgotten part of the tech stack — but every interaction we have on-chain transfers data in the form of messages.
We hear a lot of conversation around “hooks” for crypto-native messaging, like permissionless social graphs, verification, and token-gating. Still, these are features of web3 messaging, not its core use. None of these features have made on-chain messaging competitive with Telegram or Signal, because convenience (almost) always wins over quality. These messaging protocols will be more convenient because they will unlock a whole new recipient of the message: the protocol itself. We haven’t gotten there yet because we currently regard messaging as an end, but web3-native messaging is a means, not an end. It’s a byproduct of completing actions. The familiarity of the format means we can simplify flows and better integrate new interfaces, experiences, and activities.
<h3>NEW INTERFACES</h3>
Per this new way of thinking, every on-chain action is already a message. But right now, the tech that powers it siloes every action from the others. We may find out about a collection on Farcaster but mint the NFT on Zora, confirm the transaction in MetaMask or Rainbow and get updates about the project in Discord. Suppose we acknowledge that every one of these actions is a message between provider and consumer. In that case, it makes the most sense if it were all aggregated into a continuous stream of messages, centralized in one place, without compromising user identity.
This is different from saying that messaging as it exists today will not take off in web3. There are plenty of reasons we will use peer-to-peer web3 messaging (think: sending an in-game pseudonymous message or placing an offer on an NFT in someone’s wallet). As platforms begin with this new functionality, user-protocol messaging will become ubiquitous. In our view, the ability to see threads of messages between wallets and dApps would transform how we envision interacting with the Internet. With a communication layer built in, wallets become superapps. (Note: We haven’t scratched the surface of what it might look like for a user to talk directly to a protocol via something like <a href="https://chat.openai.com/chat">ChatGPT</a>… but that’s a piece for another time.)
<h3>WALLETS AS SUPERAPPS</h3>
Wallets are the de facto browser for web3, and they unlock consumer experiences across token-gated sites, marketplaces, communities, dApps, and more. The problem we’ve run into as an industry is that now we have all of these parties (individuals, brands, businesses, communities) that want to talk to each other but don’t know how. Localizing all of these interactions in the wallet would make it a superapp.
For example, how do members of a DAO get notified that a new round of governance is open? Currently, it’s on Twitter or Discord, or hosted on an external site like the <a href="https://prop.house/" target="_blank" rel="noopener">Nouns Prop House</a>. The user has to seek out the action, while it should be entirely the other way around. What if these action items (like voting) were embedded in the wallet? New products like <a href="https://www.daylight.xyz/" target="_blank" rel="noopener">Daylight</a> are exciting steps toward this future. We&#8217;d love to hear from you if you are building in this space.
<h3>WHAT COMES NEXT?</h3>
With an integrated communication layer, wallets become inboxes, and the inbox becomes the nexus of identity. They are where you create, contribute, and communicate across the web. Each wave of the web was ushered in by a new communication mode: early Internet forums brought people online, and social networks birthed platforms. The ability to talk directly to the protocol is the next innovation, bringing middleware to the frontend and leveling the playing field between people and protocols in the production of new media. If messaging is redefined as the means, then we don’t know what the ends might be — and that is the exciting part.
This piece is a working thesis, and we welcome your feedback to shape our perspectives and help us learn. Thank you to <a href="https://twitter.com/masonnystrom/" target="_blank" rel="noopener">Mason Nystrom</a>, <a href="https://fcast.me/hlau" target="_blank" rel="noopener">Henry Lau</a>, <a href="https://twitter.com/jonmoore202" target="_blank" rel="noopener">Jonathan Moore</a>, and many others for informing our thinking on this piece. If it resonated, we would love to hear from you!
The information set forth herein has been obtained or derived from sources believed by the author to be reliable. Nevertheless, the author does not make any representation or warranty, express or implied, as to the information’s accuracy or completeness, nor does the author recommend that the information set forth herein serve as the basis of any investment decision and has provided such information to you solely for informational purposes. Nothing contained herein should be construed as investment advice or as an offer or solicitation of an offer, or recommendation, to purchase any securities or other financial instruments, and may not be construed as such.

Talking to the Protocol

The year is 3045. Creative freedom as we know it has been stripped away. The metaverse is closed, ruled by the repressive Xani Republic, and artists live in a world of censorship and oppression. Musicians can’t perform in public… it seems like creative expression as we know it is ruined forever.
Until Angelbaby. 
A metastar from the future, Angelbaby traveled back to 2021 to co-found the Hume Collective, a new type of record label formed to fight this oppression and preserve the freedom of musicians and artists in the metaverse. And it’s working. In the past eight months…
<ul>
<li style="font-weight: 400;" aria-level="1">Angelbaby sold out their first Fluf World NFT in less than 30 seconds.</li>
<li style="font-weight: 400;" aria-level="1">Angelbaby <a href="https://laguestlist.com/fluf-world-present-fluf-haus-super-bowl-lvi-weekend-with-performances-by-t-pain-chromeo/" target="_blank" rel="noopener">performed at FLUF Haus LA</a> with T-PAIN and Chromeo.</li>
<li style="font-weight: 400;" aria-level="1">Angelbaby was one of the first virtual artists to perform live at <a href="https://www.youtube.com/watch?v=d1Jw9Mb2iDM" target="_blank" rel="noopener">Art Basel</a> and <a href="https://schedule.sxsw.com/2022/events/OE42596" target="_blank" rel="noopener">SXSW</a>.</li>
<li style="font-weight: 400;" aria-level="1">Hume’s Genesis NFT was featured in Billboard in <a href="https://www.billboard.com/pro/biggest-music-nfts-july-2022-sales-kingship-sia-notorious-big/" target="_blank" rel="noopener">July</a> and <a href="https://www.billboard.com/pro/biggest-music-nfts-august-sales-eminem-muse/" target="_blank" rel="noopener">August</a> 2022 as one of the Top 10 Music NFTs by Volume.</li>
<li style="font-weight: 400;" aria-level="1">Angelbaby had three songs in the top 5 of Audius charts and was one of the <a href="https://audiusears.com/web3-audius-score-in-top-10-biggest-nfts-in-music-metaverse-alongside-snoop-dogg/" target="_blank" rel="noopener">top 10 most streamed web3 artists</a> on Audius from June through August 2022</li>
<li style="font-weight: 400;" aria-level="1"><a href="https://opensea.io/humie_devs?tab=created" target="_blank" rel="noopener">Hume’s NFTs</a> were 3 of the top 5 trending Music NFTs on OpenSea.</li>
</ul>
Through Angelbaby, we’ve witnessed one of the most incredible components of web3 in action – its ability to bridge physical and digital passions into a single experience. Where we once used to “go online” and then deliberately “go offline,” we now occupy the space where the two collide. Some call this the metaverse. Functionally it presents an entirely blank canvas to create new experiences, emotions, and behaviors that didn’t exist before. We believe nowhere is this personified more deeply than with Hume. And it’s being shepherded in by <a href="https://twitter.com/angelbaby" target="_blank" rel="noopener">Angelbaby</a>. 
<a href="https://twitter.com/wearehume" target="_blank" rel="noopener">Hume</a> is a web3 entertainment company pioneering music in the metaverse. When animation emerged as a significant form of cinema, it wasn’t the end of human actors. It created a new genre, developed from new and revolutionary ways to express creativity and drive relationships between storytellers and their audiences. Today, we are seeing that begin to expand across other mediums, creating new experiences, behaviors, and genres. Like the record player did for music consumption, ownership, and identity, web3 is the next technological evolution expanding the relationship between creators, artists, and fans. This doesn’t just exist in the physical world or online but in a newly formed environment of its own.  
<blockquote>“Music is at the core of everything we do because it’s extremely powerful. And one of the greatest ways for people to connect because it transcends language, transcends culture.” &#8211; David Beiner</blockquote>
We believe that the next big opportunity in the metaverse is music, and it needs artists the same way our physical world does. But this time, it’s not just about the artists or the labels. Hume is bringing fans to the forefront of artist creation, development, and engagement, offering both a web3 label and an in-house entertainment studio for their fully developed metastars. The web3 music space isn’t just introducing new monetization models, and it’s introducing entirely new genres and experiences. Through this shift, we believe fans will become more deeply connected with their favorite artists and the moments that propel that passion.
Angelbaby isn’t doing all of this alone. Hume’s metastars are developed in-house, with a team backing them for success, including writers, producers, storytellers, animators, promoters, publicists, and vocalists. In particular, Hume co-founders <a href="https://twitter.com/RoyceEdmondz" target="_blank" rel="noopener">David Beiner</a> and <a href="https://twitter.com/stolarmusic" target="_blank" rel="noopener">Jay Stolar</a> have their own stories to tell, too: David worked in product strategy for major media companies like Comcast/NBC and MGM and founded crypto advisory firm <a href="https://blog.theabacus.io/" target="_blank" rel="noopener">Abacus</a> in 2017, while Jay is a gold and platinum award-winning songwriter and producer, writing songs for Selena Gomez, G-Eazy, Demo Lovato, Aloe Blacc, and others. You can learn more about David and Jay’s story <a href="https://open.spotify.com/episode/1mP6AFUBE7PVnZvGqDouVp?si=b8a6e5be3e9e44d8" target="_blank" rel="noopener">here</a>.
We’ve seen web3 foster platforms, protocols, and applications that give individuals experiences that previously felt either personally or professionally prohibitive. Through ownership, new opportunities are fostered in ways that never existed before. Want to create music? Manage your favorite artist? Be a record executive? Well, with Hume, have at it. 
We are thrilled to share that we’ve led the Series A in Hume. We’re honored to work more closely with David, Jay, Angelbaby, and the entire Hume team, along with friends around the table at Collab Currency, Winklevoss Capital, Distributed Global, Noise DAO, Flamingo DAO, and Delphi Digital, as well as <a href="https://twitter.com/gmoneyNFT" target="_blank" rel="noopener">G Money</a>, <a href="https://twitter.com/Cooopahtroopa" target="_blank" rel="noopener">Cooper Turley</a>, and others. We believe in a world of immersive, community-powered storytelling, where artists and fans are more closely connected on both a creative and emotional level. We are confident that the revolution starts here through Hume’s vision, execution and imagination.
Want to get involved? Hume is hiring! More <a href="https://jobs.lever.co/Hume" target="_blank" rel="noopener">here</a>.
Learn more about Hume Genesis NFTs: <a href="https://wearehume.com/genesis" target="_blank" rel="noopener">wearehume.com/genesis</a> 
Listen to Angelbaby: <a href="https://audius.co/angelbaby" target="_blank" rel="noopener">audius.co/angelbaby</a> 
Bunnies up. ✌️

Metaverse Killed The Video Star

This past July marked 50 years since the 1972 World Chess Championship match between American prodigy Bobby Fischer and Soviet grandmaster Boris Spassky. The games, broadcasted live on PBS, took place at the height of the Cold War and sparked an unprecedented level of interest in the game. 
Now, half a century later, chess’s popularity has exploded once again. As COVID-19 lockdowns funneled (just about) everyone online, <a href="https://www.esports.net/news/chess-esports-growth/">chess grew as an esports category</a> (see grandmaster <a href="https://en.wikipedia.org/wiki/Hikaru_Nakamura">Hikaru Nakamura</a>, who started <a href="https://www.twitch.tv/gmhikaru">streaming his games on Twitch</a> in March 2020) and Netflix launched <a href="https://www.washingtonpost.com/sports/2020/11/27/queen-gambit-chess-interest/">The Queen’s Gambit</a> to critical and popular acclaim in November 2020.
<figure id="attachment_771" aria-describedby="caption-attachment-771" style="width: 640px" class="wp-caption alignnone"><a href="iChess.net"><img loading="lazy" class="wp-image-771 size-md" src="https://tcgcrypto.pdmdev.co/wp-content/uploads/2022/09/9.21.22_Investing-in-Immortal-Game2-640x462.png" alt="iChess.net" width="640" height="462" srcset="https://tcgcrypto.pdmdev.co/wp-content/uploads/2022/09/9.21.22_Investing-in-Immortal-Game2-640x462.png 640w, https://tcgcrypto.pdmdev.co/wp-content/uploads/2022/09/9.21.22_Investing-in-Immortal-Game2-128x92.png 128w, https://tcgcrypto.pdmdev.co/wp-content/uploads/2022/09/9.21.22_Investing-in-Immortal-Game2-160x115.png 160w, https://tcgcrypto.pdmdev.co/wp-content/uploads/2022/09/9.21.22_Investing-in-Immortal-Game2-320x231.png 320w, https://tcgcrypto.pdmdev.co/wp-content/uploads/2022/09/9.21.22_Investing-in-Immortal-Game2-960x692.png 960w, https://tcgcrypto.pdmdev.co/wp-content/uploads/2022/09/9.21.22_Investing-in-Immortal-Game2-1440x1039.png 1440w, https://tcgcrypto.pdmdev.co/wp-content/uploads/2022/09/9.21.22_Investing-in-Immortal-Game2.png 1658w" sizes="(max-width: 640px) 100vw, 640px" /></a><figcaption id="caption-attachment-771" class="wp-caption-text">iChess.net</figcaption></figure>
&nbsp;
This past July marked 50 years since the 1972 World Chess Championship match between American prodigy Bobby Fischer and Soviet grandmaster Boris Spassky. The games, broadcast live on PBS, took place at the height of the Cold War and sparked an unprecedented interest in the game. 
Now, half a century later, chess’s popularity has exploded again. As COVID-19 lockdowns funneled (just about) everyone online, chess grew as an esports category (see grandmaster Hikaru Nakamura, who started streaming his games on Twitch in March 2020). Netflix launched The Queen’s Gambit to critical and popular acclaim in November 2020.
<figure id="attachment_772" aria-describedby="caption-attachment-772" style="width: 640px" class="wp-caption alignnone"><img loading="lazy" class="wp-image-772 size-md" src="https://tcgcrypto.pdmdev.co/wp-content/uploads/2022/09/9.21.22_Investing-in-Immortal-Game3-640x337.png" alt="" width="640" height="337" srcset="https://tcgcrypto.pdmdev.co/wp-content/uploads/2022/09/9.21.22_Investing-in-Immortal-Game3-640x337.png 640w, https://tcgcrypto.pdmdev.co/wp-content/uploads/2022/09/9.21.22_Investing-in-Immortal-Game3-128x67.png 128w, https://tcgcrypto.pdmdev.co/wp-content/uploads/2022/09/9.21.22_Investing-in-Immortal-Game3-160x84.png 160w, https://tcgcrypto.pdmdev.co/wp-content/uploads/2022/09/9.21.22_Investing-in-Immortal-Game3-320x168.png 320w, https://tcgcrypto.pdmdev.co/wp-content/uploads/2022/09/9.21.22_Investing-in-Immortal-Game3-960x505.png 960w, https://tcgcrypto.pdmdev.co/wp-content/uploads/2022/09/9.21.22_Investing-in-Immortal-Game3-1440x758.png 1440w, https://tcgcrypto.pdmdev.co/wp-content/uploads/2022/09/9.21.22_Investing-in-Immortal-Game3-2048x1078.png 2048w" sizes="(max-width: 640px) 100vw, 640px" /><figcaption id="caption-attachment-772" class="wp-caption-text">Google searches for “How to play chess” peaked after The Queen’s Gambit was released (Source: trends.google.com)</figcaption></figure>
Today, there are an estimated 800 million chess players worldwide. Top platforms like Chess.com saw their monthly active users double over the last few years. It’s a game of pure skill — as the saying goes, chess is “easy to learn, hard to master.”
<img loading="lazy" class="alignnone wp-image-773 size-md" src="https://tcgcrypto.pdmdev.co/wp-content/uploads/2022/09/9.21.22_Investing-in-Immortal-Game4-640x361.png" alt="" width="640" height="361" srcset="https://tcgcrypto.pdmdev.co/wp-content/uploads/2022/09/9.21.22_Investing-in-Immortal-Game4-640x361.png 640w, https://tcgcrypto.pdmdev.co/wp-content/uploads/2022/09/9.21.22_Investing-in-Immortal-Game4-128x72.png 128w, https://tcgcrypto.pdmdev.co/wp-content/uploads/2022/09/9.21.22_Investing-in-Immortal-Game4-160x90.png 160w, https://tcgcrypto.pdmdev.co/wp-content/uploads/2022/09/9.21.22_Investing-in-Immortal-Game4-320x181.png 320w, https://tcgcrypto.pdmdev.co/wp-content/uploads/2022/09/9.21.22_Investing-in-Immortal-Game4-960x542.png 960w, https://tcgcrypto.pdmdev.co/wp-content/uploads/2022/09/9.21.22_Investing-in-Immortal-Game4-1440x813.png 1440w, https://tcgcrypto.pdmdev.co/wp-content/uploads/2022/09/9.21.22_Investing-in-Immortal-Game4-2048x1156.png 2048w" sizes="(max-width: 640px) 100vw, 640px" />
So where does the centuries-old game of chess go from here? Enter <a href="https://immortal.game/">Immortal Game</a>, which we believe is supercharging a hyper-passionate user base with a new layer of strategy and monetization powered by digital assets.
With Immortal Game, the rules of chess don’t change. Instead, they’re enhanced with NFT-enabled gamification, league systems &amp; quests, <a href="https://immortal.game/watch?status=live">live games</a>, and online education &amp; learning tools. All are supplemented by 50 on-platform Grand Masters. 
With chess pieces as digital assets, a new layer of strategy is introduced, expanding how the game is played. Each <a href="https://blog.immortal.game/how-immortal-game-works-28fb5164dda6">“Immortal” NFT chess piece</a> comes with an attached quest: for example, capture the queen first, or Win in less than fifteen moves. You play chess the way the game is traditionally played, but each NFT piece gives players the potential to earn by playing (and winning) and rise in the ranks of the Immortal Game community.
New forms of digital ownership change the economics of pursuing and participating in passion. Immortal game preserves the heritage of chess while attracting a new group of players. Founded by serial entrepreneurs Thomas Zaepffel, David Cingala, and Geoffroy Mestrallet, Immortal Game is created by and for the dedicated chess community, elevating the gaming experience for online chess players around the world. 
We are thrilled to share that we’ve led the Series A in Immortal Game. We’re honored to work more closely with Thomas, David, Geoffroy, and the entire Immortal Game team, as well as friends around the table from Cassius VC, Sparkle Ventures, 35 Ventures, Spice Capital, and others. Want to get involved? Immortal game is hiring across engineering, design, product, marketing, and more! More <a href="https://guiltless-zinc-b84.notion.site/Careers-at-Immortal-Game-5cb67c73d2de43bb9df71a4a427c125f">here</a>.

Investing in Immortal Game

“We’re in the midst of a technological revolution. We all know it and talk about it, but we must live it. The most difficult step is to go for it.” – Helmut Lang, on being the first designer to unveil a collection on the Internet (1998)
TL;DR: We at TCG Crypto are thrilled to be backing what we believe are two of the most innovative companies in digital fashion, DRAUP, and Tribute Brand. We share our excitement for the space and outline our thesis on where we believe digital fashion is heading in the piece below.
What was your first experience buying digital clothing online? My memories from my first few years on the Internet are blurred across Webkinz outlet shopping, RuneScape party hats, and Club Penguin monthly catalogs. A few years later, as I downloaded Snapchat for the first time, I remember trying on dozens of outfits for my Bitmoji to wear. And even more recently, I’ve swiped across Instagram filters to see which pair of AR sunglasses would suit me best (so far, I’ve settled on this pair of Nouns glasses).
People commonly say digital fashion is the future — the “next big thing” in consumer Internet. I’d argue it’s already here, and as people continue to live and display more of their lives online, I believe the market for digital fashion will only get bigger.
Digital fashion largely had its origins in gaming (to no surprise: both industries share common ground as first-movers via emerging technologies to create new forms of self-expression). There are 3.4 billion gamers worldwide, and the market for in-game “skins” (cosmetic add-ons) is estimated to be ~$40 billion yearly, compared to the global apparel market at $1.5 trillion. We’ve also seen Internet users move from interactive to immersive over the last few years, spending more time on platforms like Roblox and Fortnite. Brands have followed suit, with Louis Vuitton, Versace, and 100 Thieves debuting virtual goods in League of Legends, ComplexLand, and Animal Crossing. Remember how the next big thing often starts out looking like a toy? 
But digital fashion certainly isn’t limited to just gaming.
Back in 2013, Japanese virtual pop star Hatsune Miku was dressed by Marc Jacobs for an upcoming arena tour. The phenomenon continued in 2016, when virtual influencer Lil Miquela blew up on Instagram, working with brands like Prada and Calvin Klein and eventually being named one of TIME Magazine’s 25 Most Influential People on the Internet in 2018.
The Internet has permanently altered how we buy our clothes, and social media has changed how we wear them. On average, an item of clothing is worn seven times before being thrown away. As of 2019, the fashion industry accounts for 10% of global carbon emissions (more than all international flights and maritime shipping combined). Last year, sixteen fashion brands (including Hanes, H&amp;M, Levi Strauss &amp; Co., and Nike) collectively recorded profits of at least $10 billion while paying their garment workers an average of $147 a month.
Fashion’s equity problem doesn’t stop there. More than 80% of majors from top fashion schools are female, but only ~14% of the top 50 major fashion brands are run by a female executive (2018). And for new entrants to the space, it’s not uncommon to be faced with high production costs or an “illuminati of tastemakers” restricting exposure.
We believe digital fashion solves these issues. Companies like MetaFactory create physical clothes with digital counterparts, while fashion houses like The Fabricant design digital clothes for avatars. For the first time, the industry feels equitable: anyone in the world can create digital clothing as long as they have a computer and software skills. There’s also no need for gated fashion weeks when traction is attainable via social media. And with a blockchain providing proof of ownership, designers can be fairly compensated for their work.
Digital fashion is, at its core, an identity business. 60% of Gen Z and 62% of Millennials believe that how they present themselves online is more important than how they present in person. What we wear is (and always has been) a medium for understanding who we are and what we care about.
So where does web3 come in? We’ve already seen exciting proof points for the industry, from the first-ever digital couture to be auctioned on the blockchain in 2019 to these RTFKT sneakers raising $3.1 million in under seven minutes in 2021. But today, web3 fashion is only a fraction of a percentage of the physical fashion industry due to what we believe is a tradeoff in utility (being able to wear the garment where it can be admired, like Fortnite or Instagram) and monetization (being able to own the garment, but not having anywhere to showcase it). Our view is that the unlock for web3 digital fashion will be in creating functionality for digital fashion as a garment (I can try it on; I can wear it when, how, and where I choose) as well as functionality for the digital fashion as an asset (I can sell or trade it; I can make money from my digital fashion through renting it or wearing it in a public space).
The physical fashion industry often falls victim to the Horseless Carriage Syndrome, where new technologies are viewed only in the context of what came before them (the same way cars were first called horseless carriages). This is why we are excited to be making investments in the space. The use cases for digital fashion are limited today, but will continue to expand over time, perhaps to the point that we’ll even take the word digital out of the name. We are honored to back what we believe are two of the most innovative companies in the space, DRAUP, and Tribute Brand.
DRAUP
DRAUP operates under the belief that financial returns form the foundation of a new ecosystem and is focused on three key value propositions: a marketplace to buy the best of digitally-native clothing, a space to show and wear the digital clothes you buy, and routes to make money from your digital fashion (rent-to-earn, wear-to-earn, etc.). Dani Loftus of This Outfit leads DRAUP Does Not Exist, a platform powering the shift toward digital fashion through education, exploration, and exhibit. We are thrilled to be on board for the journey. If you are interested in learning more or potentially joining the team, DRAUP is hiring! Get in touch with Dani here.
Tribute Brand launched in April 2020 and has quickly emerged as a global digital fashion market leader, selling out their drops and partnering with luxury fashion houses like Jean Paul Gaultier and Carolina Herrera along the way. Led by award-winning digital fashion creative Gala Marija Vrbanic, the Tribute Brand team has built a best-in-class digital fashion brand with prior expertise across traditional fashion, CGI 3D modeling, blockchain, and UX design. Learn more about the fundraise here, and explore open roles (across engineering, design, research, and community) here.
Digital identities are an extension of our self-expression; in the future, they will be our most valuable assets. We are delighted to support this thesis and back both DRAUP and Tribute Brand as they push the fashion world to new limits.
<blockquote>“The internet is the new house of fashion.” – Donatella Versace</blockquote>
TCG Crypto is an investor in DRAUP and Tribute Brand. None of the information discussed herein is intended to be, or should be construed as financial advice, or an offer to sell or a solicitation of an offer to buy an interest in any security.

Why Digital Fashion Matters

<blockquote>“Everything you can imagine is real.” –Pablo Picasso</blockquote>
Museums, arguably, are one of the most exclusive asset classes ever created. <a href="https://projects.propublica.org/nonprofits/organizations/131624086" target="_blank" rel="noopener">Curated</a> <a href="https://projects.propublica.org/nonprofits/organizations/741109655" target="_blank" rel="noopener">collections</a> have <a href="https://projects.propublica.org/nonprofits/organizations/131624100" target="_blank" rel="noopener">outpaced</a> the overall art market, which has, in turn, <a href="https://www.altexchange.com/blog/investments/this-asset-class-has-outpaced-the-sp-500-for-25-years/" target="_blank" rel="noopener">outpaced</a> the S&amp;P 500 (2000-2020). In times of rising inflation, museums have performed well, with collectors often looking to purchase art as a hedge. And when it comes to wealth management, <a href="https://www.yanggallery.com.sg/news/why-invest-in-art-now/" target="_blank" rel="noopener">73% of managers confirmed</a> their clients wanted to include art and other collectible assets in their portfolios (2016).
And yet museums are run entirely backward, consolidating power, controlling access, and failing to take advantage of (or distribute) the economic value they create. What does this look like in practice? A 2017 report shows nearly 90% of <a href="https://www.aam-us.org/wp-content/uploads/2018/01/eyizzp-download-the-report.pdf" target="_blank" rel="noopener">museum board members</a> are White, and 75% are 50+ years old. As of this year, <a href="https://www.si.edu/newsdesk/about/stats" target="_blank" rel="noopener">less than 0.1%</a> of the global population has been to the Smithsonian (and far fewer to the Met) — and even if everyone showed up, <a href="https://www.widewalls.ch/magazine/art-storage-museum-collections" target="_blank" rel="noopener">95% of museum items sit in storage</a> at any given time. Most people will never see the most valuable objects in history. Owning them is out of the question.
People want to curate, own, and preserve culture, but culturally significant items are locked into private collections and controlled by established institutions. Perhaps one of the most poignant examples within web3 is when <a href="https://www.theverge.com/2021/11/19/22791989/citadel-ceo-ken-griffin-won-constitutiondao-sothebys-auction" target="_blank" rel="noopener">ConsstitutionDAO aimed to buy a copy of the U.S. Constitution</a>, but was outbid at the eleventh hour by Ken Griffin, head of Citadel.
Enter <a href="https://arkive.net/">Arkive</a>, the world’s first decentralized physical museum. What if the Smithsonian was not just curated but owned by the Internet? Founded by serial entrepreneur <a href="https://twitter.com/tmcleod3" target="_blank" rel="noopener">Tom McLeod</a>, Arkive aims to curate a “museum-worthy” collection, from Picassos to Pateks, all physically owned and showcased globally. Each item is wrapped in a smart contract, and museum membership &amp; curation is governed by NFTs. Arkive’s first collection is focusing on the theme When Technology Was a Game Changer, working to create conversations around technological items that have shaped the way we view the world.
We believe that Arkive is launching at an inflection point between two of the most high-growth forces: crypto and alternative assets. AUM in global alternatives is <a href="https://www.spglobal.com/marketintelligence/en/news-insights/latest-news-headlines/global-alternatives-aum-forecast-to-double-by-2026-topping-23-trillion-68404362#:~:text=AUM%20in%20the%20global%20alternatives,large%20part%20by%20private%20equity." target="_blank" rel="noopener">expected to nearly double over the next five years</a>, from $13 trillion in 2021 to ~$23 trillion by 2027. Arkive’s genesis members have already made two acquisitions (including the <a href="https://arkive.net/gallery/the-eniac-patent" target="_blank" rel="noopener">ENIAC patent</a>), and they’re just getting started. You can learn more here if you’re interested in applying for membership.
We are thrilled to be on board for the Arkive journey alongside our close friends at <a href="https://offline.vc/">Offline Ventures</a>. We’re honored to work more closely with (and learn from) Tom and the entire Arkive team, as well as friends around the table at NFX, Freestyle Capital, Not Boring Capital, and others. Want to get involved? Arkive is hiring! More from Tom <a href="https://arkivedao.notion.site/Arkive-Job-Board-e1242a78aa4d441991c41b16f0aeea6c" target="_blank" rel="noopener">here</a>.

Arkive: The Headless Museum

In 1950, Alan Turing published a paper exploring whether or not machines could think. Through this research, he developed “The Turing Test” — a framework that assumes the ultimate bar for “Artificial Intelligence” is whether a machine can exhibit behavior indistinguishable from a human in a given activity. Turing’s research sparked a wave of interest in machine intelligence and subfields of machine learning and deep learning. These disciplines are comprised of AI algorithms that create expert systems to make predictions or classifications based on data. Decades later, these expert systems have shaped our modern definition of the consumer experience. At the same time, they remain largely out of reach for the average user.
The combination of machine learning and robust datasets has opened the doors of innovation and accelerated new forms of problem-solving. However, the doors of invention can swing, offering both positive and negative outcomes. On the one hand, your smartphone has native capabilities now powered by AI, like real-time navigation and voice assistants. Even your favorite platforms, like Netflix and Instagram, use AI to offer tailored product recommendations. The downside to this increased productivity comes at a cost to the consumer.
While centralized institutions harvest user data and maximize profit potential behind a walled garden of AI algorithms, consumers have no access to their data. They typically cannot spin up their ML models to profit from their data and experiences. 
Sure, AI has unlocked an enormous amount of productivity through web2 platforms. But as we evolve, how can we use the power of AI to build a world where everyone has access to these advanced models? How can we allow users, not just entities, to profit from their experience across platforms?
Enter Altered State Machine (ASM), a platform and protocol to train, own, and trade AI using NFT primitives. With our collective experience of building and investing at the forefront of new technologies, we felt ASM co-founders David and Aaron McDonald are well-positioned to leverage the core principles of blockchain and machine learning capability. We believe their unique mix of technical know-how and a real commitment to decentralization and open-sourced collaboration supercharges the distribution of a new kind of artificial intelligence, pushing us closer toward a more robust, interoperable Internet landscape.
ASM unlocks two new primitives in web3:
<ol>
<li>Provable ownership of artificial intelligence through an NFT. This allows users to embed</li>
<li>AI into blockchain protocols in which the NFT is a unique container where your ML</li>
<li>Algorithm is held. Examples include the tradability of ML algorithms on a secondary</li>
<li>exchange, or the ability to connect an AI to a DAO governance protocol with iterative</li>
<li>Outputs according to various inputs of data.</li>
<li>The ability to train your NFT and make it more intelligent. This means you can inject a personality into your Bored Ape or PartyBear and impact how it learns and reacts in a specific blockchain-based environment.</li>
</ol>
These two new primitives bring the notion of intelligent, dynamic actors and truly productive assets into the metaverse. Now your PFP is not just a flex of ownership but a dynamic character that can complete tasks on your behalf and yield economic reward.
Each AI agent from ASM is an NFT with three parts: a brain, form, and memories. Brain is the DNA the agent is born with, like strength or speed. The Brain NFT is the core element of the ASM infrastructure, and it encodes a base attribute set (aka Genome Matrix). Form is the physical attributes of the agent (the aspects you can visually see). Memories store training outputs as machine learning models in a Memory Tree and is unique to each Brain.
ASM enables an open metaverse by integrating dynamic NFT agents into P2E, Defi, and Metaverse environments. With an ML model to train your AI and a governance token to incentivize rewards, Altered State Machine is both a platform and a protocol where users can leverage AI/ML technology to capture their on-chain data and monetize it as they see fit. 
At TCG Crypto, we believe that further democratization of AI/ML technology will help shape an open metaverse. We must create an open metaverse with censorship and seizure-resistant properties as an alternative to the pitfalls of centralized platforms. By removing barriers to entry for AI/ML skills (which are time-intensive to learn) and the need for significant computing power (which requires upfront costs and multi-level understanding), anyone can experience the benefits of this new technological innovation.
While the first application of nonfungible intelligence will be AIFA Football, a play-to-earn soccer game where teams of AI compete against each other for token rewards, we believe ASM’s reach is limitless, with potential applications for digital twins at virtual concerts or technical traders on DEX platforms. Combined with IP partnerships and game/experience development, we bet that Altered State Machine will become a robust infrastructure layer for economic creation within web3.
We are thrilled to share that TCG has led the Seed round in Altered State Machine. We’re excited to work more closely with (and learn from) David and Aaron, as well as our friends at Delphi Digital, Flamingo DAO, Warner Music Group, 6th Man Ventures, and others. As centralized tech incumbents continue limiting AI’s power to privatized use cases, organizations like ASM are paving a new path toward an open metaverse. We are grateful and excited to be a part of this journey, working to build an on-chain experience controlled by the people, where individuals have absolute ownership rights and permissionless creativity to profit from their data. 
—&#8212;&#8212;&#8212;&#8212;&#8212;&#8212;&#8212;&#8212;&#8212;&#8212;&#8211; 
TCG is an investor in Altered State Machine. None of the information discussed herein is intended to be, or should be construed as, financial advice, or an offer to sell or a solicitation of an offer to buy an interest in any security.

Artificial Intelligence… A Key Component of an Open Metaverse

We are entering a world on-chain.
The digital world is being rearchitected in real time with the continued evolution of blockchain technology. Slowly, and then seemingly all at once, new methods for commerce and coordination will be introduced to the online ecosystem, showing the power of what can be done in networks when contribution and behavioral data are on-chain, user-controlled, and public.
In today’s world, our digital experiences are managed and owned by a select few. “Users” leverage these platforms, but the influence, ownership, and management are outside their responsibility and control. Tomorrow’s world looks to move users to contributors, putting more value in the hands of those who commit their time, energy, and passion to better this ecosystem. It will change how we work, participate, and truly live online. This is the promise of web3, but to navigate this new world’s bridges (protocols) and tunnels (dApps), we believe there needs to be a guide. Enter RabbitHole.
The contributor economy.
RabbitHole onboards contributors into web3. Protocols and applications look for the best contributors and participants to unlock the power of their technology. RabbitHole creates a two-sided marketplace: on one side are companies recruiting for the proper skill set and on the other are individuals looking to acquire &amp; compound skills to bring more value and opportunity to their online lives.
web3 is a new foundation where the construction of labor and participation is not just about what you say but what you do. In working with Brian and the RabbitHole team, it’s clear that the mission around making web3 more accessible and comprehensible is a unique and admirable approach to onboarding the rest of the web. RabbitHole has the opportunity to set forth a more meritocratic process for working and earning online.
As of today, RabbitHole is the market leader in onboarding individuals into web3, providing the most extensive user acquisition funnels for protocols and applications like Aave, ENS, Polygon, Graph, and Uniswap. As the web3 labor economy becomes more robust, RabbitHole will curate these opportunities based on provable learnings that match skilled workers with the right networks and opportunities. By doing this, we believe the platform can become one of the largest talent allocators on the Internet.
We are thrilled to announce that we’ve co-led the Series A in RabbitHole alongside Greylock to support Brian and the RabbitHole team on their quest to drive adoption, knowledge, and a more equitable ecosystem throughout web3. We’re grateful to be joined by other incredible firms and friends around the table — Electric Capital, Chapter One, and others — who will help us achieve this mission. Lastly, RabbitHole is hiring! Read more from Brian here to help see this vision become a reality.
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TCG Crypto is an investor in RabbitHole. None of the information discussed herein is intended to be, or should be construed as, financial advice, or an offer to sell or a solicitation of an offer to buy an interest in any security.

A World On-Chain: Going Down the RabbitHole

NFTs are well on their way to becoming a multi-billion dollar asset class. At TCG Crypto, we believe NFTs are the ultimate consumer onramp into web3. In an era where we truly see what it means to live online, NFTs are the financialization of our virtual economy.
Today, NFTs are one of the most significant and broadening utility functions in web3. They prove and transfer value on the blockchain, permeating ecosystems across play-to-earn, marketplaces, guilds, and consumer applications. NFTs provide a new form factor on which narrative, storytelling, relatability, and ownership can be built. They take the shape of digital art, community access, virtual real estate, music rights, gaming assets, and so much more. 
As our physical and digital lives continue to converge, NFTs are how we represent ourselves. Collectively, they form who we are.
Enter Flamingo, <a href="https://docs.flamingodao.xyz/" target="_blank" rel="noopener">a leading collector DAO community</a> of artists, builders, investors, and others who collaborate to collect the world’s most interesting NFT assets. Flamingo was founded in October 2020 to attract some of the brightest minds in the NFT space to coordinate with one another and curate an index of the leading projects in the space through participatory investment.
Since then, Flamingo has become the top DAO collective for NFTs, not just in its accrual of the industry’s top commodities but also as the tastemakers of a burgeoning movement, rapidly expanding across formats, mediums, and value.
We are excited to share that TCG Crypto has joined Flamingo. NFTs will revolutionize how the web values digital content, and we are grateful to join those we view as the best in the space to drive this critical movement forward. At its core, the opportunity in web3 is community-driven, with collaboration first. The most impactful products and successful businesses will come from many, participating together towards a common goal. This is the promise of DAOs, and it has been embraced and demonstrated by the members of Flamingo over the past year. 
We look forward to actively contributing to Flamingo and supporting the artists, creators, and collectors who are defining this next phase of the web. 
&#8212;&#8212;&#8212;&#8212;&#8212;&#8212;&#8212;&#8212;&#8212;&#8212; 
TCG Crypto is an investor in Flamingo DAO. None of the information discussed herein is intended to be, or should be construed as, financial advice, or an offer to sell or a solicitation of an offer to buy an interest in any security.

Joining Flamingo DAO

Browsers, applications, and platforms are how consumers live online. Today, new digital lives are being led in different corners of the internet on top of the blockchain. But for all the media coverage of crypto, users will only start to care about this revelatory infrastructure shift when showcased through the services they use most. It&#8217;s hard to see things in the dark, and consumers show up when these products and applications turn on the lights.
Historically on the web, consumer opportunity followed emerging infrastructure. Web1 server structures put individuals online, gave the masses access to the internet to consume and communicate, and made it all accessible through the browser, search and chat. But it took Netscape, Google, AOL &amp; others to show consumers what that infrastructure could do. Web2 presented the cloud and introduced a new wave of scalability and the emergence of the social web. All of a sudden, people could connect online, purchase online, trade online, catalog their life online… everything together online. The web was cheaper to consume and accessible to anyone who could find a connection. Now we have the acceleration of web3 infrastructure. Billions of investment and treasury dollars are sitting in the next internet&#8217;s foundational layer (Ethereum, Solana, Polkadot, etc.). web3 promises a new gateway for billions of users to live even more online through self-sovereignty, portability, and ownership. But today, only one breakout consumer experience has reached far beyond the crypto community; Coinbase. 
Living online relies on infrastructure. But that doesn&#8217;t mean consumers care about the infrastructure itself. They care about what it can unlock for their online lives: status, entertainment, financial gain, etc. When was the last time you used Spotify and thought, &#8220;this is great because it&#8217;s hosted on AWS!&#8221;? You use Spotify because of the entertainment it provides you as an individual, brought to you by the infrastructure it showcases. Consumers care if things work and benefit them as individuals over all else. web3 is presenting entirely new behaviors and business models to the web, and now it&#8217;s up to us to show consumers what that can do and how it can benefit their digital lives.
These new forms of living online are starting to materialize in several specific ways:
Culture, Status, and Community: Now that digital ownership is exploding through NFTs, people are seeing more significant financial and status opportunities online than offline. This is the most critical catalyst for living online we&#8217;ve seen to date. Individuals are building status and identity in the virtual world the way they do in the physical world. Why own a Gucci bag to impress a few hundred people in your town when you can own a digital one to impress millions? How you dress, accessorize and socialize online is now directly tied to your identity and status, where consumers take Crypto Punks or Bored Apes and make them their profile picture (PFP). This signal drives identity, status, and community in an entirely new way.
24/7 Markets for Everything: Coinbase turned markets into a 24/7 industry, spilling over into other industries where consumers are at the forefront. The role of the consumer has shifted from spectator to participant, meaning more individuals can contribute to the passions and products they love most. For example, Zed Run (in which an affiliate of TCG Capital Management, LLC holds an investment) is a virtual horse racing game that lets individuals purchase, breed, and race horses. It&#8217;s not limited by physical space or time, and it&#8217;s entirely up to the owners: consumers. Media markets are being built around this. DAOs are structured to allow communities to pool together to purchase and raise horses as a collective — all of which exist online unbounded by physical constraints.
New Business Models: web3 inverts the internet&#8217;s business models by giving more value and ownership to both creators and consumers. Traditionally, platforms developed online have been driven by advertising and subscriptions, and this is because Web2 took a consumer-first approach to media, protocols, and applications with the platforms as intermediaries. web3 puts value back into creators&#8217; hands while giving consumers new opportunities. web3 platforms like Mirror and Foundation introduce new revenue streams to participants, allowing for crowdfunding, collaborating, and equity ownership between producers and their customers. Programmable royalties will change the way every piece of media is created, traded, and exchanged. Play-to-earn games will create new jobs on the internet, letting people truly live online.
It&#8217;s important to note that it&#8217;s still early days, and the best crypto applications for consumers are still limited compared to Web2 experiences. To welcome those outside the crypto space, consumer adoption requires a shift in mindset, talent, and user on-ramps. And that means building valuable tools and experiences that benefit those building lives online, showcasing the power of web3, and unlocking opportunities for those participating directly in products on top of the blockchain.
The dawn of consumer crypto is here, and we now need to shine a light on it.

The Dawn of Consumer Crypto

Crypto markets have fostered a new type of experience that’s not limited to time or space. The first unlock happened in finance, with both centralized and decentralized exchanges opening up the trading of bitcoin and other tokens to 24/7 markets.
This unbundled the traditional finance behaviors, unlocking the trading experience and inciting new user participation and behaviors. Just as this shift in consumer behavior changed how we think about finance forever, we believe other markets will follow the same unbundling and reintegration process across the consumer landscape. We’re particularly keen on the evolution of fandom and the expanding role of the sports consumer.
Fans have long been stuck on the sidelines of their favorite sporting events, and the team/player-to-fan relationship is limited to league scheduling, event organizing, and physical structures. Fans have long driven the value of their favorite leagues and teams but are always at arm’s length, leasing these experiences versus owning them. But with blockchain technologies opening up our existing notions of ownership, this classic model of fandom is evolving, presenting the opportunity of ownership for fans to now become active contributors. 
We believe this will happen across all fan experiences, from events to gaming, to betting. That is why we’re proud to announce our investment leading the Series A of the digital horseracing platform, ZED RUN. ZED RUN is an early leader in the likely transformation of the ownership economy as it relates to consumer experiences. The team at ZED has built an ecosystem for players to buy, sell, breed, and race their own NFT race horses. With prize purses for winning horses and breeding fees for horses in the stud, succeeding at ZED brings real-world monetary rewards.
At TCG, we’ve long believed in the power of businesses that bring their most ardent fans deeper into the fold. What’s new is a way for those folks to not only engage with the brand but to buy in and share in the economic upside. This type of participatory entertainment with real-world financial upside will revolutionize industries in ways we’re only starting to understand.
This new model should enable the development of digital economies that can foster new jobs and income streams online. While those engaged with NFTs today are primarily creators, collectors, traders, and speculators, it’s easy to imagine future professions native to these platforms.
Chris Laurent, Rob Salha, Geoff Wellman, Chris Ebeling, and the team at ZED have a clear vision for the future of fandom and entertainment. The next era of consumer and fandom is approaching, and we couldn’t be more excited to partner with one of the leading teams pushing us all forward.

Journal

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