 From theCUBE Studios in Palo Alto in Boston, bringing you data-driven insights from theCUBE and ETR. This is Breaking Analysis with Dave Vellante. When a piece of digital art sells for $69.3 million, more than has ever been paid for works by Gogan or Salvador Dali, making it's created the third most expensive living artist in the world. One can't help but take notice and ask what is going on? The latest craze around NFTs may feel a bit bubble-ishous, but it's yet another sign that the digital age is now fully upon us. Hello and welcome to this week's Wikibon Cube Insights powered by ETR. In this Breaking Analysis, we want to take a look at some of the trends that may be difficult for observers and investors to understand, but we think offer significant insights to the future, and possibly some opportunities for young investors, many of whom are fans of this program and how the trends may relate to enterprise tech. Okay, so this guy, Beeple, is now the hottest artist on the planet. That's his Twitter profile, that picture on the inset. His name is Mike Winkelman. He's actually a normal looking dude, but that's the picture he chose for his Twitter. This collage reminds me of the million dollar homepage. You may already know the story, but many of you may not. Back in 2005, a college kid from England named Alex2, T-E-W, created the million dollar homepage to fund his education. And his idea was to create a website with a million pixels and sell ads at a dollar for each pixel. Guess how much money he raised? Million bucks, right? No, wrong. He raised $1,037,100. How so, you asked? Well, he auctioned off the last thousand pixels on eBay, which fetched an additional $38,000. Crazy, right? Well, maybe not, pretty creative and a way, way early sign of things to come. Now, I'm not going to go deep into NFTs and explain the justification behind them. There's a lot of material that's been published that can do justice to the topic better than I can. But here are the basics. NFTs stands for non-fungible tokens. They're digital representations of assets that exist on a blockchain. Now, each token has a unique and immutable identifier, and it uses cryptography to ensure its authenticity. NFTs, by the name, they're not fungible. So unlike Bitcoin, Ethereum, or other cryptocurrencies, which can be traded on a like-to-like basis. In other words, if you and I each own one Bitcoin, we know exactly how much each of our Bitcoins is worth at any point in time. Non-fungible tokens each have their own unique value, so they're not comparable on a like-to-like basis. But what's the point of this? Well, NFTs can be applied to any property, identities, tweets, videos, we're seeing collectibles, digital art, pretty much anything. I mean, it's really, the use cases are unlimited. And NFTs can streamline transactions, and they can be bought and sold very efficiently without the need for a trusted third party involved. Now, the other benefit is the probability of fraud is greatly reduced. You know, so where do NFTs fit as an asset class? Well, they're definitely a new type of asset. And again, I'm not going to try to justify their existence, but I want to talk about the choices that investors have in the market today. The other day I was on a call with Jay Poe, he's a VC and a principal at a company called Stage Two Capital. He's a former Bessemer VC and one of the sharper investors around. And he was talking about the choices that investors have, and he gave a nice example that I want to share with you and try to apply here. Now, as an investor, you have alternatives, of course. And we're showing here a few with their year-to-date charts. Now, as an example, you can buy Amazon stock. Now, if you bought just about exactly a year ago, you did really well. You probably saw around an 80% return or more. But if you want to jump in today, your mindset might be, hmm, well, okay, Amazon, they're going to be around for a long time. So it's kind of low risk. And I like the stock, but you're probably going to get, well, let's say maybe a 10% annual return over the long term, 15% or maybe less, maybe single digits, but maybe more than that. But it's unlikely that any kind of reasonable timeframe within any reasonable timeframe, you're going to get a 10x return. In order to get that type of return on invested capital, Amazon would have to become a $16 trillion valued company. So you sit there, you ask yourself, what's the probability that Amazon goes out of business? Well, that's pretty low, right? And what are the chances it becomes a $16 trillion company over the next several years? Well, it's probably more likely that it continues to grow at that more stable rate that I talked about. Okay, now let's talk about Snowflake. Now, as you know, we've covered the company quite extensively. We watched this company grow from an early stage startup and then saw its valuation increase steadily as a private company. But even early last year, it was valued around $12 billion I think in February. And as late as mid-September, right before the IPO, news hit that Mark Benioff and Warren Buffett were going to put in $250 million each at the IPO or just after the IPO. It was projected that Snowflake's valuation could go over $20 billion at that point. And on day one after the IPO, Snowflake closed worth more than $50 billion. The stock opened at 120, but unless you knew a guy, you had to hold your nose and buy on day one. And maybe you got it at 240, maybe you got it at 250, you might've got it at higher. And at the time, you might recall, I said, you're likely going to get a better price than on day one, which is usually the case with most IPOs. Stock today is around 230. But you look at Snowflake today, and if you want to buy in, you look at it and say, okay, well, I like the company. It's probably still overvalued, but I can see the company's value growing substantially over the next several years, maybe doubling in the near to midterm. I mean, it hit more than $100 billion valuation back as recently as December. So that's certainly feasible. The company's not likely to flame out because it's highly valued. I have to probably be patient for a couple of years, but let's say I like the management, I like the company, maybe the company gets into the $200 billion range over time, I can make a decent return. But to get a 10x return on Snowflake, you have to get to a valuation of over half a trillion. Now to get there, if it gets there, it's going to become one of the next great software companies of our time. And frankly, if it gets there, I think it's going to go to a trillion. So that's what your bet is, and then you would be happy with that, of course, but what's the likelihood? As an investor, you have to evaluate that. What's the probability? So it's a lower risk investment, Snowflake, but maybe more likely that Snowflake, they run into competition or the market shifts, maybe they get into the $200 billion range, but it really has to transform the industry and execute for you to get into that 10-bagger territory. Okay, now let's look at a different asset that is cryptocurrency called Compound, way more risky, but Compound is a decentralized protocol that allows you to lend and borrow cryptocurrencies. Now, I'm not saying go out and buy Compound, but just as a thought exercise, here's got an asset here with a lower valuation, probably much higher upside, but much higher risk. But so for Compound to get to 10x return, it's got to get to $20 billion valuation. Now maybe Compound isn't the right asset for your cup of tea, but there are many cryptos that have made it that far. And if you do your research and your homework, you could find a project that's much, much earlier stage that yes, is higher risk, but has a much higher upside that you can participate in. So this is how investors, all investors really look at their choices and make decisions. And the more sophisticated investors, they're going to use detailed metrics and analyze things like Moeq multiple on invested capital and IRR, which is internal rate of return to TAM analysis, total available market. They're going to look at competition. They're going to look at detailed company models and ARR and churn rates and so forth. But one of the things we really want to talk about today, and we brought this up at the Snowflake IPO, is if you were Buffett or Benioff, and you had to quarter a billion dollars to put in, you could get an almost guaranteed return with your late in the game, but pre IPO money. Or look, if you were Mike Spicer, or one of the earlier VCs, or even someone like Jeremy Burton, who was part of the inside network, you could get stock or options much cheaper. You get a 5x, 10x, 50x, or even north of 100x return, like the early VCs who took a big risk. But chances are, you're not one of these in one of these categories. So how can you as a little guy participate in something big? And you might remember at the time of the Snowflake IPO, we showed you this picture. Who are these people? Olaf Carlson, we, Chris Dixon, this gal Sonal, and of course, Tim Berners-Lee, you know. But these are some of the folks that inspired me personally to pay attention to crypto. And I want to share the premise that caught my attention, it was this. Think about the early days of the internet. If you saw what Berners-Lee was working on, or Linus Torvalds, and wanted to invest in the internet, you really couldn't. I mean, you couldn't invest in Linux, or TCP IP, or HTTP. I mean, suppose you could have invested in Cisco after its IPO, and that would have paid off pretty big time for sure, or you could have waited for the Netscape IPO, but the core infrastructure of the internet was fundamentally not directly a candidate for investment. By you or really, by anybody. And Satya Nadella said the other day, we have reached maximum centralization. The main protocols of the internet were largely funded by the government, and they've been co-opted by the giants. But with crypto, you actually can invest in core infrastructure technologies that are building out a decentralized internet, a new internet, you call it Web 3.0. It's a big part of the investment thesis behind what Carlson Wee is doing. And in Dresen Horowitz, they have two crypto funds, they've raised more than $800 million to invest. And you should read the firm's crypto investment thesis. Yeah, maybe even take their crypto startup classes. There's some great content there. Now, one of the people that I haven't mentioned in this picture is Camilla Russo. She's a journalist. She's turned into hardcore crypto authors doing a great job explaining the white-hot definance space or decentralized finance. If you're interested, read her work and educate yourself and learn more about the future. And perhaps you'll find some 10x or even 100x opportunities. So look, there's so much innovation going around, going on around blockchain and crypto. I mean, you could listen to Warren Buffett and Janet Yellen who imply this is all gonna end badly. But well, look, these individuals, they're smart people. I don't think they would be my go-to source in understanding the potential of the technology and the future of what it could bring. Now, we talked earlier at the start here about NFTs. Now, DeFi is one of the most interesting and disruptive trends to fintech. Names like Celsius, Nexo, BlockFi. BlockFi lets actually the average person participate in liquidity pools is actually quite interesting. Crypto is going mainstream. Tesla, MicroStrategy, they're putting Bitcoin on their balance sheets. You know, in 2017, Jamie Dimon, he called Bitcoin a tulip bulb-like fraud. Yet, just the other day, JPM announced a structured investment vehicle to give its clients a basket of stocks that have exposure to crypto. PayPal allowing customers to buy, sell and hold crypto. You can trade crypto on Robinhood. Central Banks are talking about launching digital currencies. I talked about the Fedcoin for a number of years, and why not? Coinbase is doing an IPO that will give it a value of over a hundred billion. Wow, you know, that sounds frothy. But still, big names like Mark Cuban and Jamat Pallipataya have been active in crypto for a while. Gronk is getting into NFTs. So it does have a little bit of that bubble feel to it. But look, often when tech bubbles burst, they shake out the pretenders. But if there's real tech involved, some contenders emerge. So, and they often do so as dominant players. And I really believe that the innovation around crypto is going to be sustained. Now, there is a new web being built out. So if you want to participate, you got to do some research, figure out things like how Polkadot works, make a call and whether you think Avalanche is an Ethereum killer. Dig in and find out about new projects and form a thesis and you may as a small player be able to find some big winners. But look, you do have to be careful. There was a lot of fraud during the ICO craze. There's your risk. So understand the tokenomics and maybe as importantly, the pumponomics because they certainly loom as dangers. This is not for the faint of heart, but because I believe it involves real tech, I like it way better than Reddit stocks like GameStop, for example. Now, not to discredit, there's some good information on Reddit if you're patient, you can find it. There's lots of good information flowing on Discord and there's people flocking the telegram as a hedge against big tech. Maybe this all sounds crazy. And you know what? If you've grown up in a privileged household and you have a U.S. education, maybe it is nuts and a bit too risky for you. But if you're one of the many people who haven't been able to participate in these elite circles, there are things going on, especially outside of the U.S. that are democratizing investment opportunities. And I think that's pretty cool. You just got to be careful. So look, this is a bit off topic from our typical focus and ETR survey analysis. So let's bring this back to the enterprise because there's a lot going on there as well with blockchain. Now, let me first share some quotes on blockchain from a few ETR Venn roundtables. First comment is from a CIO to the diversified holdings company who says correctly, blockchain will hit the finance industry first, but there are use cases in healthcare, given the privacy and security concerns and logistics to ensure provenance and reduce fraud. And to that individual's point about finance, this is from the CTO of a major financial platform. We're really taking a look at payments. Yeah, do you think traditional banks are gonna lose control of the payment systems? Well, not without a fight, I guess. But look, there's some real disruption possibilities here. And this last comment from a government CIO says, we're gonna wait until the big platform players bake it into their software. And so that is happening. Oracle, IBM, VMware, Microsoft, AWS, Cisco, they all have blockchain initiatives going on. Now, by the way, none of these tech companies wants to talk about crypto. They try to distance themselves from that topic, which is understandable, I guess. But I'll tell you, there's far more innovation going on in crypto than there is in enterprise tech companies at this point. But I predict that the crypto innovations will absolutely be seeping into enterprise tech players over time. But for now, the cloud players, they want to support developers who are building out this new internet. The database is certainly a logical place to support immutable transactions, which allow people to do business one-on-one and have total confidence that the source hasn't been hacked or changed. And infrastructure to support smart contracts, we've seen that. The use cases in the enterprise are endless, asset tracking, data access, food tracking, maintenance, KYC or know your customer. There's applications in different industries, telecoms, oil and gas, on and on and on. So look, think of NFTs as a signal. Crypto craziness is a signal. It's a signal as to how IT and other parts of companies and their data might be organized, managed and tracked and protected and very importantly, valued. Look today, there's a lot of memes, crypto kitties, art, of course, money as well, money's the killer app for blockchain. But in the future, the underlying technology of blockchain and the many percolating innovations around it could become, I think will become, a fundamental component of a new digital economy. So get on board, do some research and learn for yourself. Okay, that's it for today. Remember, all these episodes, they're available as podcasts, wherever you listen. I publish weekly on wikibon.com and siliconangle.com Please feel free to comment on my LinkedIn post or tweet me at D-Valente or email me at david.valente at siliconangle.com Don't forget to check out ETR.plus for all the survey, action and data science. This is Dave Vellante for theCUBE Insights Powered by ETR. Be well, be careful out there in crypto land. Thanks for watching and we'll see you next time.