You’ve heard of bitcoin and possibly the blockchain, but what about NFTs and how they might become a major part of our metaverse future? Today, we’re going to hear about how you can purchase digital items that you truly own and can resell, hopefully for a profit. Mike Damazo is a video creator for Cult of Money, as well as his own channel MDNFT. He’s incredibly passionate about the NFT space, as well as cryptocurrency and DeFi in general. He is also known as BAYC 916, based on an NFT he owns. 

 

Welcome to the Maple Money Show, the podcast that helps Canadians improve their personal finances to create lasting financial freedom. Willful’s user-friendly online platform means you can create your legal will and power of attorney documents from the comfort of home, in less than 20 minutes, and for a fraction of the price of visiting a lawyer. Get started for free at maplemoney.com/willful and use promo code Maple Money to save 15 percent. Now, let’s chat with Mike… 

 

Tom: Hi, Mike. Welcome to the Maple Money Show. 

 

Mike: Thanks for having me. 

 

Tom: I wanted to have you on to discuss NFTs. On the podcast we’ve discussed crypto, bitcoin and all that but we’ve never gotten too deep into NFTs. And I’m starting to take them more serious now than I was before. I just want to go through everything NFTs, with you. If you could set us up, can you explain what an NFT is and what it even stands for? 

 

Mike: First, an NFT stands for non-fungible tokens. If you think of a dollar bill where one dollar is actually one dollar, that’s fungible. But, if you compare it to, say, collectibles, would a Michael Jordan NBA card be the same as a Tom Brady NFL card? That’s why it’s not fungible. Right now, what a lot of people are seeing with NFTs is just being able to collect, art, collectibles to even metaverse lands in virtual worlds—owing a virtual world in the sense of a game like Fortnite. Being able to own a piece of that world where people are playing expands ownership to the individual. NFTs are backed by the blockchain showing verifiable ownership. To me, there are a lot of things with the web right now where we could copy and paste and say, “Okay, I have this. I have it because I copied it. It’s right here,” but there’s no ownership and proof of that. Let’s say it was an image you took a picture of that I posted on Instagram. There’s nothing showing that. But with NFTs, it shows you were the one that put it on the blockchain and you are the owner of it. Then, let’s say I bought that from you. Now, I’m now the owner of it. 

 

Tom: Yeah, it’s interesting, but it’s still kind of confusing how this all works. What you said there about how you can copy something, I’ve heard people say that even with NFTs. Someone may just be using it on their Twitter profile as an avatar where you copy it and show it, but that doesn’t mean you own it. You could show it and just pretend you own one but you get no value from that. You can’t sell your JPEG. You need to sell the actual NFT. How did you get started in this? Was it NBA Top Shot or was there something before that?  

 

Mike: In 2017, I got into Ethereum, just dollar cost averaging. It was the end of 2017, early 2018 that CryptoKitties came onto my radar. Now, at the time, I thought it was interesting, being able to own digital cats that live on the blockchain. I was all for it. However, I didn’t purchase any CryptoKitties. It was just something I kept track of. And then another thing popped up, which was an RPG game called, Neon District. With that, I thought, “Okay, more stuff where it’s games implementing blockchain technology.” I kind of fell off and just kept dollar cost averaging and didn’t really purchase any NFTs at that time. Come 2021, I noticed something on Twitter where someone was saying, “Hey, there’s this thing called NBA Top Shot. It’s done by Dapper Labs—the people that did CryptoKitties.” That’s the point where it clicked for me. I’m very familiar with CryptoKitties, Dapper Labs, from way back in 2017. It wasn’t something I jumped into. Now, at the NBA, it’s huge. And I thought, “Okay, those are two different things that I know were never in the same conversation. I need to go look into this.” That’s when I started digging deep into the NBA Top Shot and figured, I’ve dollar cost averaged since 2017 and need to learn this—but not spend too much time where I have analysis paralysis—where I’ve decided to go all the way in. That’s where my journey started—covering people’s NFT sale in Christie’s, which garnered $6.9 million. That’s when I said, “Okay, I need to pay attention to this.” I know a lot of people will say it’s a bubble, but they don’t realize it has been around before 2021, even before 2020. 

 

Tom: Whenever I try to explain any of these things to people, I try to bring it back to the real world, too. When you talk about something like the kitties, it’s basically just art. Yes, it’s a 2D image, but so is art. How do you value that? How do you look at different artists and decide that picture has value. And then something like Top Shots, I compare more to collectibles. In this case, sports cards would be the most obvious comparison so it’s just a digital version of that. That’s kind of how I see NFTs. Some of them are art, and then some of them are more like pop-culture collectibles. How I got started was, Vivi. For one, it was a lot simpler to get into like Top Shot. You can just use your credit card, pay, and you’re in. You don’t have to set up wallets and everything like that. It was something I could wrap my head around more. I knew that a statue of the first Disney princess had importance in value. With some of these other NFTs you get almost copycat versions of someone else having some ape thing or kitties thing. They’re kind of just copying the same format. I have a hard time wrapping my head around the art side. But in the real world, it would have been the same. I’ve collected comics and sports cards and all these things, but I would never know how to find an upcoming artist and then buy just the right picture. With NBA Top Shot, I don’t know a lot about it, but I heard it had a crash at one point. And it kind of makes me wonder sometimes, especially more on the collectible side, if they’re kind of like Beanie Babies. They went way up and then everybody’s said, “Yeah, we’re done with those.” I don’t know where you were with these NBA Top Shot cards, but did you see that? Do I have the history right? 

 

Mike: Yes, you’re right. With NBA Top Shot, I actually came in at what is considered a top moment. It was around March or April where there was a lot of great feeling about the market where new entrants were coming in from before 2020. Some people (who didn’t watch NBA) were just buying cheap LeBron moments. Then NBA Top Shot released more moments, therefore, diluting the market with a lot more moments so all the previous “series one” moments rose up in value. But for people like me, that didn’t get into series one, it was a bit more expensive. And all the “series two” ones, their value wasn’t as much. And I get it. I know part of the market I entered, and I’m fine with that but I will look for players I know. People pay attention to LeBron, Giannis so I was very specific in moments that I wanted to collect. Even if it goes to zero, I would like to have those moments. I’m a big Spider-Man fan. If I could have like an old Steve Ditko who is an old artist that drew Spider-Man, I would want that. Even if they said it wasn’t worth anything, to me, he adds significance to artists. It’s Spider-Man—you know automatically. It was just a dilution of the market. I think we’re seeing that when it comes to derivatives. Basically, they’re copies of apes from the Bored Ape Yacht Club to CryptoPunks, which was huge. When it comes to derivatives, with an NFT or PFP (which stands for profile pictures), I would be cautious. Instead of chasing what’s the next Bored Ape Yacht Club, look at projects that offer a different utility. 

 

Tom: I heard you got into Bored Ape Yacht Club. How did that come about? Because again, I can’t wrap my head around how to find these things. Nowadays, more than ever, there’s all sorts of people you can listen to that will, hopefully, find the right things, but you never know. How did you get in on this one early and how did that work out for you? 

 

Mike: I was following an account, Pranksy, who is big into NFTs since the CryptoKitties days. I listened to him on a podcast where they were talking about their approach and I thought, “Okay, this is a person that’s very well respected in this space.” They’re anonymous, but you could see the people following them and those who would trade their NBA moments with Pranksy knowing they didn’t know this person. I’m about to send you $1,000 worth of moments and they make that trade. I was just following that person and other people in NBA Top Shot. What happened was it wasn’t as noisy, meaning there weren’t as many people at that time. I noticed three accounts shared the Bored Ape Yacht Club. I looked at the website, the story (and lore) that draws me in. It wasn’t something I saw before. The term “aping” is just like getting into an investment or buying something without that much research. The website is awesome. The first layer entrance brings you to a world almost. So I said, “Okay, I’m going to go mint.” Mint means putting it on the blockchain when you when you purchase so I don’t know which Bored Ape I’m going to get. I minted and decided to just hold for now. I just wanted to buy one. Then I went into the Discord. There were a lot of people in Discord and a lot of conversations going on. Something seems different. It was one of the things I noticed from NBA Top Shot when I went into the Discord, there’s a lot of people and a lot of conversations going on. It wasn’t just, “Hey, we have Discord where there’s a bunch of people and conversations going on.” For people that don’t know what Discord it, it’s another place for groups to go to, similar to a Facebook Group. That’s kind of how I ended up aping into the project was seeing the art, seeing people I follow on Twitter talk about it and just doing my own research. But like you’ve mentioned, there is a lot more people and there’s a lot more noise so I’ve taken a different approach of also looking at conversations in Discord. If someone talks about a specific project, I’ll go to different discords and kind of surface the noise and look at who’s talking about this. What do they think about it? I’ll have that data in mind, and I’ll switch over to Twitter to look at the Twitter account of that NFT to see who is talking about it. I take that information and I’m going to move onto the next step, which is to look at on-chain analytics. This is the part that probably will confuse you. Blockchain is a public ledger so you see all the people making deposits, making withdrawals, purchasing NFTs and selling NFTs. I’ll look at that specific contract to see how many different holders there are. Who are the holders? If the holders are people that are my trusted set, I’ll purchase the NFT. I’ll also look at if there is even distribution because, say I really like something and there’s 10,000 unique NFTs and only 1,000 is being bought out right now, I’ll wait because there’s still a lot of the supply. I don’t want to purchase it because what if it doesn’t sell out right away? Then, for sure, I know I’ve lost that money. That’s my approach. I take all three items, and as long as it hits my mark I say, “Okay, that’s a project I’m going to ape into based off those three items.” That’s my approach. 

 

Tom: How does the minting work? I’ve seen market places to buy after the fact, but with minting itself, is it on those same market places? Is it on the that NFT’s website. I also hear about all this “white list” talk too. Does this make it more complicated to even get in on these mints for different NFTs? 

 

Mike: No, not necessarily. There is a learning curve for minting. A lot of PFP (profile pictures) are generative art in a way where you don’t know what you’re getting until you mint it, meaning you purchased through their website and then it cements it on the blockchain that you own that one. But you don’t know what you’re getting until after the reveal. It is a bit harder now because a lot of times people do a “white list.” People who kind of grind it out, trying to get a white list, that in itself became a place for people to be able to capitalize on. I noticed someone was selling a white list for 4ETH. But I thought, no, I’m okay. I’m not about to spend 4ETH for a white list. There’s plenty of other opportunities out there. White lists came about just to be able to circumvent gas wars. With Ethereum, you pay gas fees, which are transaction costs—to be able to transact on the network. Now, if you meet someone else, someone else starts aping into a project, that gas goes higher because we’re all in that network. You’ve got to think about different blockchains as a highway. If you and I are driving and other people want to get to that destination, there’s a congestion going on. That’s why people started doing a white list. That way only certain people that meet that criteria will be able to mint. I’ll pick up stuff on the secondary market, like OpenSea. OpenSea is one of the biggest secondary market places. Think of it like eBay, but for NFTs. At least that way, if it’s a project I like, I can pay attention to the gas prices and purchase it on secondary without having to go into gas wars. 

 

Tom: Even though you did well with your Bored Ape Yacht Club, with the minting, do you normally avoid minting? I assume it’s not just the gas fees but the white list hassle that makes it sound like a lot of wasted time. Basically, they’re gamifying this by saying, “Oh, comment in the discord and Tweet out…” to build some activity. But is it worth that? Because sometimes it seems like things will mint for a cheap enough price and then sell for quite a bit more the first day on the marketplace. 

 

Mike: It really depends on going back to those three items I used to serve as signal depending on how much hype has this project and how much do I like it? I will pay the gas fees and go into gas war just because I’ve done it before. It really just depends on the project. I wouldn’t just dismiss minting a project based off of gas wars. But I’ll happily look at NFTs at drop and look at the on-chain analytics. If it looks undervalued in the sense that this team is building—as an example, have if they have like an AR (augmented reality) capability. Being able to implement that NFT in VR and virtual space, you could use it in VR chat or whatever. People don’t realize this potential, but I see it in the sense of they’re building data, “Oh, we sold out. Our price is low. We’re closing shop. It’s not a rug pull.” There’s an actual team there and there’s an actual community forming. 

 

Tom: When one of these artist’s companies sell an NFT, what’s their motivation to keep going? They say they sell 10,000 of something and they’re not going to sell anymore, what keeps them in that project? Is it the fact that they’re holding some, I assume? They obviously have a bit of an interest there in keeping the value up. 

 

Mike: It’s just creating for the community. I feel like with Web2 it was a creator economy where Web3 is a community economy where people holding that NFT will say, “Oh, well, I have open copyright for this, so I want to sell coffee and whoever else wants to use our NFT, we could put it on the coffee branding and I’ll send you to coffee.” So it’s small things like that to where there is a lot to keep up with on this project, like, “I just want to start a podcast.” Now you have a whole new community just listening to your podcast because you’re covering a specific project. For the teams, they’ll usually do, like you said, the 10,000 drop and they’ll add on another one. I think of it as rock stars almost where it’s their first album was that “first drop.” Then they say, “Okay, we’re going to do another drop for collectors,” which is like their second album. If you take the example of the Bored Ape Yacht Club, I held it. I forget how soon it was, but it may have been around August that they’d air dropped—air dropping is just sending you NFTs or cryptocurrency of DOGs. So I just held it. It wasn’t on my Bored Ape Yacht Club but they sent me another NFT and the price of DOGs right now—last I checked was maybe 6ETH. Essentially, they just gave me 6ETHs free. I could sell it. I could hold onto it. And then after that, they airdropped what was called, serums, so you could mutate your ape. You would have another ape. The game theory is, I could sell that serum or I could mutate it, and now I have another ape, and I could sell that ape. You’ve got to think of the value add these projects are creating. Not every project is like that. A lot of projects will try something like that. Will it be successful? I’m not really sure. It really comes down to a community of people building. Not the big whales in that sense of form. If, in the beginning I surface a signal with whales and what they’re talking about and what they’re holding, I stay for a project based off of the smaller creators in the sense that they’re keeping track of the team’s projects—and there is a lot to keep track of when you’re tracking a bunch of other projects. It’s like, “Okay, this person I need to pay attention to because they’re doing a weekly Twitter post showing some of the things people made at the community.”  

 

Tom: Something I just wanted to point out too was, with a lot of these NFTs, if you’ve got the copyright to it. You can put it on coffee and all that. So that is the other differentiation there where I said it was like art and collectibles. With the art side, those are the ones you do have the copyright. But with the collectibles it might be a limited edition, like 10,000, 30,000, that kind of thing. I mentioned a Disney statue in Vivi. I own it in a collectible sense, but I can’t go and use that image for a commercial use or anything like that. There are two sides to NFTs that I see. And that would be the other big thing—you see people using their apes and such for interesting uses. You mentioned coffee. I think I heard there is a band of apes—some kind of virtual band. So, yeah, when you own that, you actually own it more than just a profile picture, right? 

 

Mike: Yes, for sure. And right now, when you see bigger celebrities owning NFTs or even institutional companies like Visa buying a CryptoPunk, it makes you wonder what they would use that for. Is it like a marketing write-off for them? Those are the things, in my head, that I play with. Like, “Okay, well, I’m glad I got it but I’m not about to spend as much as they spent.” I’m good with anything under 1ETH. The lower, the better, for me. Because I know if it gains traction, it’ll bring those bigger names. They’re going to start paying attention and they have the capital to deploy 173ETH for an NFT. I don’t have that. Nor would I ever deploy that for one single NFT. 

 

Tom: And some of that’s not used to what ETH is, it’s thousands of dollars. Ehen you say 1ETH, you’re already talking about thousands of dollars. It’s not a small amount. The other thing you mentioned earlier on that I wanted to come back to was this idea of buying land. A lot of people heard about this whole metaverse idea, thanks to Facebook. But there’s a lot more going on there. There’s different games. You mentioned the idea of Fortnite if it were an NFT thing. You can do things like buy land and items to wear and such. But I hear a lot of people will say things like, “It’s not a real thing. It’s still all digital.” It’s hard to wrap your head around that. But people have been doing this for a long time. They buy the downloadable content on regular video games. They’ll spend tons of money on something that’s not “real” in phone games where they give you a chance to spend a few dollars and make this game so much easier because you’ve unlocked something new. People have been paying money in a digital way (sometimes just for something like a T-shirt) in whatever game they’re playing. I don’t think it’s as new and weird as people sometimes think, but it’s a lot more real. I’d rather buy a DLC in a game. But I own that. I could sell that off in the future. It’s not the same money-out kind of thing. You’re not just spending it on this game that you may never play again where that’s just lost money. I’ve spent so much money on songs for Rock Band years ago, and I’ve never turned it on since. So it would be nice to have something where you could sell it. Or if this is metaverse stuff really starts to connect, maybe it’s transferable into other games and such. Just because I know Vivi so well, that’s one of the things people are hoping for—once it’s fully out in the world that maybe these things can go into other metaverse and different chat things and such where it’s going to start to feel more like you’re “Ready Player One” or “The Matrix” where you’re in this virtual world but still interacting with real people. You’re still showing off your fancy T-shirt or your little statue or whatever. It all ties back to real stuff even though it’s digital. But with this whole metaverse and such, where do you see this going? The idea that you can buy land, T-shirts, and characters in these games and stuff, there’s a lot to take in there. I’ve heard people talk about buying land and it sounds like real, real estate where there could be jobs in the future for property managers and such. Is this the kind of case where everything real life could apply here? And where do you see it going? 

 

Mike: I definitely see it scaling within this decade of the metaverse. When it comes to Facebook’s meta, I associated with it being centralized, controlled by them, and pushed for their hardware of the Oculus. When it comes to decentralized—I haven’t been keeping track of Vivi but if they build something on Immutable X, (that’s who Vivi’s under now) they have this Game Gods Unchained and just different game applications that, for people that are a bit older, it might not click as much. But if you look at kids nowadays that play Roblox, play Minecraft, that is something they’re native to. They bought that but they’re not native to owning it. As they get older and learn to own stuff, I think that’ll click to want to jump into Web3 and actually have that digital ownership. I don’t think there’s going to be one metaverse land like Sandbox Central to rule them all. There’s a lot of places that you and I already go to online, be it Facebook, Instagram, or Twitter. It just depends on where you want to spend your time. Sandbox is interesting in their approach of making sure they’re connected to NFT communities when they drop. They’ll say, “Hey, we’ve reserved a land sale for you.” But I think people’s concerns are that they could just keep making new land. They can, yes. But if you take the time to read their white paper or look at what their intentions are, you’ll notice they only have a limited amount of land that they want to do. My thought process is, if there’s only a limited amount of land, people are already coming in so brand new people will know they’re in that specific metaverse. That will bring them over there. It’s kind of like New York where you say, “I wish I could own real estate in New York City,” but nobody at that super early was saying, “Oh yeah, I’m just going to go buy this out.” There was that network effect that it became that. And that’s what I feel like Sandbox is doing. Decentraland is another one. I don’t think they’re pursuing it as much as Sandbox. And I’m sure there’s Facebook’s meta. I have to look at that. But I don’t think they’re selling any land or anything like that. 

 

Tom: It’s exactly what you said about it being centralized in their case. I’m sure they’re going to want to keep that all under their control, whereas with these things get you truly have the land in a digital sense. But it all really applies because people are talking about how maybe you want to build your own mini game on there. Maybe you just want to be an investor in the land and you’re going to rent out that little square plot of land to some other company that didn’t buy land. You could literally be renting your land. And all the other real estate things apply—where it’s all about location. Are you near the big block for Atari, or something like that. If you had your own company, you really want to make sure you’re beside something else to sort of feed off, where all these virtual people will be going. I like the Roblox and Minecraft comparison too. My kids play both of those so I fully get it. For lots of birthdays and such, they’ve asked for these Robux, I think it is. It’s the Roblox gift cards. And every time they ask, I say, “Can’t you just ask for something real?” Let me buy you a game instead of buying you what’s just going to be some new level or clothes or such. But if it was something where there is ownership to it, I’d be much more interested. I’ve actually thought about getting my kids playing these games because there’s even a play-to-earn part to this. You can earn coins. You don’t have to just invest from the outside. You can earn whatever the currency is in these games, just like any other game. But that’s kind of real money. If you’re earning whatever the currency is in these games, that’s real money that could be taken out of the game (in most cases) and used for other things. You’re basically just transferring to a different coin, right? Yeah, it’s all very interesting but it just seems that with any of this stuff, you can forget that it’s digital, which is what I always hear, “This isn’t real—the whole copy, paste thing—everything. There is just some real world dynamics to this. It’s art. It’s collectibles. It’s real estate. It all kind of applies once you accept the fact that this is just where things are headed—that we’re going to be spending more time in these virtual worlds. 

 

Mike: For sure! Two things I wanted to kind of go back to is, Fortnite had a concert. I forget which DJ it was. One was Travis Scott, and there was…

 

Tom: I think it was Marshmello. 

 

Mike: I just remember going into work and asking a friend of mine who said he went to a Marshmello concert where he performed and he said, “Oh, it was on Fortnite.” And I said, “Whoa, that’s sick! Tell me more.” It was genuine curiosity. This was around 2019 maybe so you could see that application already being implemented. Even in 2020, there was Animal Crossing. There was a comedian that held a comedy club in Animal Crossing. Entertainers and such are making that transition. We’re all making do with what we can working from home. I think that’s where it’s headed. To go back to that pay-to-earn, there was somebody who was in the Bored Ape Yacht Club, I was just chatting with. He shared his story of how he was someone who was playing around the Decentraland, and there’s a part there that you could mine. You’re just kind of like “shoveling” it in this game. And once you mine enough of whatever token they have, you could change it for a shirt. It’s so funny that you were mentioning a shirt. He traded out that shirt, put it in the secondary market and someone actually bought it. So, he earned ETHs (the cryptocurrency for Ethereum) because he spent some time in that game, then sold the shirt. I think he borrowed some ETHs from somebody else too. But, with the profits from the money he bought, the ETHs he borrowed and the ETHs he made, he bought his first ape. And this was went it was less than 0.1 (I want to say). That was like one of the craziest stories. I’m not sure if he still has his ape. I wouldn’t be surprised if he sold it. Take the profits when you can. A lot of people are almost “sell” shaming, but profit is profit. And everyone’s financial journey in this is different. 

 

Tom: Thanks for walking us through all of this. This has been a great overview of all things NFT. Can you tell people where they can find you online?

 

Mike: They can find me on Twitter. It’s, twitter.com/mikedamazo. Or, if you look on YouTube, my channel is, MDNFT. You can also search for Mike Damazo. I’ve pivoted my channel from military personal finance to more NFT Web3 space just because it’s something I love talking about and being able to cover. And it’s geared more toward deep dives for NFT projects and also tools associated with NFTs. 

 

Tom: Great. Thanks for being on the show. 

 

Mike: Thank you so much. 

 

The world of NFTs is interesting, but complicated. Thanks, Mike, for helping to demystify it for us. You can find the show notes for this episode at maplemoney.com/182. If you have a moment, head over to our YouTube channel, and subscribe there. We’ll be getting back to releasing never-before-seen content, soon. Search for Maple Money Show or go to maplemoneyshow.com/youtube and subscribe today. Thanks, as always, for listening. I look forward to seeing you back here next week.