 And suddenly, 7,000 transactions slam the Ethereum blockchain, and it has the capacity to deal with a fraction of those in any given block. And again, this is a competitive process, right? Where people really, really, really want to get one of these things. With NFTs increasingly in the news, today we'll be discussing the perspective from Inside a Popular Token Launch, a new project from Mila Kunis and Ashton Kutcher called Stoner Cats. Hey, folks. I'm Anand B. Levine, and this is Speaking of Bitcoin. On today's show, we're talking blockchain collectibles and how the blockchain part is somehow both critical and also a freaking disaster. To do that, as always, I'm joined by the other host this show, Steppi Murphy. Hi there. And Jonathan Mohan. Hey. Hey. Andreas is traveling this week. So I'm not exactly sure how to set up this topic. Like I have not participated in a lot of NFT launches, but I saw this project coming out, a cartoon that involves Mila Kunis, Ashton Kutcher, Chris Rock, Seth McFarland, Jane Fonda, and Vitalik as animated cats. Well, Jane Fonda is not an animated cat. She plays a cat lady who are made self-aware by being exposed to marijuana or something along those lines. I don't know. I watched the first four-minute thing after I got one of these Stoner cat collectibles finally, which took a really long time. But again, the project is still very early in its development cycle. There's going to be a season coming out, but it's a really kind of cool way to look at how pop culture is dealing with this on one side as a way to build a community before a show is even out, and then also using it as a fundraising mechanism. So they were selling an NFT of the characters or something? Yeah. So if you think of a project like CryptoKitties or CryptoPunk, something like that, these are what are called generative NFTs or generative art. And the idea here is that you have 10 different kinds of eyes, 10 different kinds of faces, 10 different kinds of mouths, all of these different variable pieces that fit within a particular collection, all the different possible expressions that these cats can have, et cetera. And then when you generate one of these tokens, it picks randomly from this grab bag of different elements. And the one that you get is part of a set, but is unique unto itself. So no one collectible is like any other exactly in every way. These are things that back in the early days of collectible tokens, when we were looking at these unique ERC721 structures, ERC721 is the standard that has now been at this point built into Ethereum for how you actually do these things on the Ethereum blockchain. At first, these were not a big deal, but this year they have exploded. And I believe as I was looking this morning, CryptoPunks are now trading for something like $100,000 as the absolute least expensive one that you can get for something that is literally like a 32 pixel by 32 pixel image of like a face, right? But they've become this status symbol. You know, I was reading an article the other day that was kind of talking about the reason why people go to college partly is to learn, but mostly it's because you want the credential, you want the accolade that comes with going to a school. And these days, it's not even really good enough to go to a college at all. You have to go to one of the Ivy League colleges where there's really only 20,000 spots per year that they can fill. Well, there's 10,000 CryptoPunks, right? And so in a lot of ways for the internet generation, that is increasingly becoming how you demonstrate that you were either early and you got one really cheap because you couldn't afford one now or you got one later and it's like your OG credentials, right? People are increasingly using them as avatars on Twitter and stuff like that. And of course, it's not just CryptoPunks. CryptoPunks is one of the kind of biggest ones so far because it's one of the earlier projects. There's a board apes yacht club and avastars and a number of other projects, a growing array of projects. The point isn't the art. The point is that you are part of a limited cohort of people who have either self-selected or been selected to participate in it and kind of what that says about you. That's the background for this conversation, right? NFTs in that way have started to become kind of important not because of what they are, but because of what they represent about you if you have one of particular sets. Does that make sense? Yeah, that sounds a lot like what MetaCoven was saying when we interviewed him about why he bought this Beeple NFT. It was more about being part of something and sort of owning a piece of digital space that says that you are part of something at the very beginning and you helped bring this into the world. Yeah, I really think that that is increasingly if there's the thing that it is and then there's the thing that it represents. The thing that it is wouldn't be that expensive if it was just an abstract thing, but because they're limited and because they're in demand with crypto punks and with many of these projects that have become popular, they actually didn't as far as I can tell really make any money off the initial sales. It was really just like basically in order to get a crypto punk and kind of the time when they really didn't matter, all you had to do is pay an on-chain transaction fee. And that was at a time when Ethereum was so much cheaper. So the amount of money that you had to spend, you're talking like sub $50 for something that now is selling for routinely hundreds of thousands of dollars in which you really can't buy for less than that amount. That's kind of like where these projects can go sometimes if they really get picked up by the zeitgeist and they build a community that is simply larger than the 10,000 or whatever number that they issue. So what Mila Kunis and her team are doing with Stoner Cats is they're funding the production of a cartoon that is really fully animated, right? Which is typically a very expensive thing. Typically in order for something like this to actually get into production, you would need to go to a studio or you would need to have a publishing partner. They would effectively buy into it, right? And then they would give you the money to go produce it. And then you would, at the point that it's produced, hope to make money off it there. Well, what happened in this case is that they released about 10,000 Stoner Cat NFTs. They cost about $700 a piece. I believe it was three-tenths of an ether that it actually cost. And they raised, I think in total, about $9 million. Now there was a lot of trouble that occurred with this launch. It was not a clean launch. And there were a lot of people who were unhappy with it. But that kind of sets us up for the conversation today. But from their perspective, even with the trouble, it still just was a revolutionary thing because it allowed them to completely bypass the typical infrastructure that would be required and effectively that act as gatekeepers around whether a project gets made. Like I said at kind of the beginning, this feels a lot like ICOs. ICOs really intended to do exactly that. Even thinking back to Ethereum. Ethereum did crowd sale of their token. And the purpose of that was that you weren't really going to get investment from traditional firms that would have put $30 million into a speculative project like that. But there were lots of believers on the internet and lots of believers in the world of Bitcoin who thought that something like that was totally plausible. And so they were able to effectively crowd fund it. These days, ICOs are not so much of a thing effectively because whenever you do sell something like that and it represents some type of interest or some type of utility with that system. Well, at least in the US regulators see that as a security, which has all kinds of troubling legal implications. And it's not to say that every project that used that mechanism was good either. Plenty of them were not. But the point is that it really is kind of like an enabling type of technology that allows people to get outside of the traditional sort of gatekeepers who typically get to the side what does or doesn't happen by nature of providing money or not providing money and instead go directly to the audience who you think is going to be interested, which in this case for them was very successful. This reminds me of a conversation that we had like really, really early on the show Adam, you probably remember this about Kickstarter and about like the amount of projects that crowdfunded a bunch of money and then just never materialized. So was there anything in this whole project that was kind of reassuring you that they would actually do this if they raised the money? Or was that not what it was about? Like, did you even care if they made the cartoon? I do care if they make the cartoon, actually. And I think that most of the people do. Now there's a couple of reasons why people participate in something like this. One of the reasons is that they're legitimately interested in the project. But another big reason is that they think that the project is going to succeed. And by nature of the project succeeding, more people will know about the collectible and then more people will then want to buy that collectible, which then allows them to actually make money by supporting an early creative project when it isn't really well known. And when it does need the money in order to kind of get off the ground and prove to people that, hey, this is actually a thing. So I do personally care about that. And that's the reason why I participated, but I did buy two. And I bought two with the intent of having the option that if I wanted to, then I could effectively, you know, actually make some money off of it. So I haven't participated too much in the NFT thing. We've created some ourselves. I've created some personally and I've bought maybe three or four over the course of the last year. But this was the first project that really got me excited. And again, it's because of the names involved. And it's also because it feels like in this year, we have seen a major shift. And that shift is away from kind of this insular crypto space that we're all a part of and towards this mainstream culture space, right? Where this is just being accepted into that. And I'm, you know, in the work I do for CoinDesk right now, I'm working on a show called NFT All Stars. Again, trying to explore these ideas. I won't get into really what the show is here. But I can tell you, we've been talking to a number of guests who are very, very big and very, very mainstream and are very, very interested. I've probably done 40 or 50 calls with fairly high profile brands or agents. And there isn't a single one who we've talked to who isn't doing something. And most of them also were offering us people from like elsewhere in their catalog, right? Not the person who we went to them for, but somebody else or five or six other people who are working on these NFT projects. So again, I think that that's the part that's most exciting to me about this is it really feels like, although we've had many kind of mainstream moments that felt that way before, this one is so broad and there's so much interest. And all of the incentives line up to push this vision of sort of collectibles on the internet across all of the various types of implications that it has into reality. That's certainly what I'm excited about right now. Yeah, that's really interesting. Can you talk a little bit about some of the problems that happened when you were trying to buy these NFTs? You obviously weren't the only one who was interested in this. And that may have been causing some problems or maybe it was about the Ethereum network. Tell us what happened. Well, so it's everything. I mean, that's really what it comes down to, right? I remember back in 2014, 2015, my company Tokenly ran a series of on-chain vending machines that you could put Bitcoin into and it would send you a collectible token out of it. And we worked with one of the earliest companies in the space who was doing that sort of thing called Spells of Genesis. And a problem that we ran into really quickly was that if you had a hundred people who wanted to buy the cards all at once, well, then you actually had kind of a problem with the blockchain not really being able to deal with that. And it's so important, right? Because the amount of fee that you pay, the order that you get in, like that stuff really winds up mattering when there's, you know, a hundred people going after something where there's only 10 of the collectible that you're trying to get. Blockchains are a lot of really good things, but they're not particularly efficient. And they're a little bit random until they settle, right? There's always kind of the potential to move around. So what I saw with StonerCats was that on all sorts of human growth, hormones, steroids and kind of everything else. Instead of a hundred people pounding down the door for one of these collectible cards in 2014, we were talking about somewhere between 6,000 and 8,000 people doing it with this StonerCats launch against only 10,000 potential collectibles that you could create. And then also you could buy up to 20 of those collectibles in a single transaction. So it was always going to be a situation where not everybody got what they wanted. So this is a process that actually took two days. It was scheduled to launch on one particular day. And I'm in the Discord channel, which is incidentally where all this stuff happens in the very early days. I remember the kind of early Ethereum discussions that we had before that thing launched, and that was all in Skype groups, right? Skype groups was the really cool chat app that we were using at the time. Years later, we would switch over to Slack for almost everything. And these days and for the last couple of years, everything is on Discord these days. So this was happening on Discord. And because there was so much demand, the company that was helping them do the launch had actually limited it so you could only send one chat every 10 minutes. And still, even with that restraint in there, it was just a constant scroll of people just asking, where is it? When is it going to happen? And why isn't it happened yet? You know, like, am I doing something wrong? And so the first day when they were slated to launch continued for two hours after they were slated to launch, with them constantly saying, we're almost done. We're almost done. We're almost done. And then later, we would find out that the problem they actually had was they had discovered a very small bug in one of the kind of graphical elements and they had gone to fix it. But because all of this stuff uses distributed storage mechanisms like IPFS, sometimes it's kind of hard to update all those things because you don't have direct control of the servers. You're pushing to a distributed network. Long story short, things broke and it didn't work. And so the first day at the end of two hours, they were finally like, OK, OK, OK, we're going to call it off. We're going to do it again tomorrow. Come back at that point. And keep in mind, this is, again, thousands and thousands of people who are trying to spend at least $700, not including fees on the Ethereum network. So this is, again, like a lot of money that's sitting there and just people who are getting very frustrated. So you come back the next day and they fixed this part of the problem. And so instead, the project launches, the smart contract becomes available. It's a classic NFT launch, so everything happens on chain and suddenly 7000 transactions slam the Ethereum blockchain, right? And it has the capacity to deal with a fraction of those in any given block. And again, this is a competitive process, right, where people really, really, really want to get one of these things. So I placed my first transaction maybe a minute after the thing has gone live. And I'm pretty early in the overall queue. And I look at the estimate for how much I should pay in fee. And it says $15. I was expecting more than that. So I was like, oh, that's great, I'll pay $15. And so I pay the $15 and I'm sitting there and I'm watching, waiting for it to confirm. And it says 45 seconds to confirmation. And then it ticks up and up and up and up and suddenly it's at 59 minutes and 59 seconds. And I'm like, ah, crap, I guess it was more expensive and I just did the wrong thing. And so then I'm like, all right, well, MetaMask, which is the wallet that I was using, lets you boost very easily, like a replace by fee in Bitcoin, but lets you boost the amount of fee that you're actually putting to that transaction. And so I'm like, oh, OK, cool, great, I'll do that. I'll increase the amount of transaction fee that I'm paying. And that transaction fee, again, looking at the estimates based on the current number, suddenly now it's $25 for slow, $40 for regular and $55 for fast. And I'm like, OK, cool, $55. Well, I'm spending $700. This is very much like a cost of doing business. Yeah, like it's a cost of doing business. Like clearly I'm not here because this stuff is as cheap as possible. I legitimately want one of these and want to participate in this community. So let's see what happens there. And again, same thing happens, right? It says, all right, 45 seconds. And then it ticks up. Were you thinking at that point that everyone else is doing the same thing? I was, yeah, it was very obvious to me that they were, but I didn't realize to the extent or how much people would pay. I had set kind of like a personal limit for myself of like maybe 50 bucks to $70 in terms of what I thought was reasonable fee, because that's, you know, like 10 percent of the purchase price. So OK, I can justify that to myself at that point was like, all right, I'm going to go to dinner, right? Like if I get it, I get it. If I don't, I don't, then it is what it is, right? And so I come back a couple of hours later and I look through the chat and it's still people constantly talking again, limited to once every 10 minutes, but so many people talking. And now the thing that they're saying is I spent $700 on fees and it ate my fees and I still didn't get a cat. And then more people come in and they're like, oh, I spent $3,000 on fees and I still didn't get a cat. Oh, stoner cats. I mean, what? Like these numbers are just wild. They're just wild and I don't understand that. So to the blockchain part of things, I think there's a real tendency in the world of cryptocurrency to feel like we need to do all of this stuff on chain because that's how you do it. It's possible to do it. So why wouldn't we do it that way? Anything else is sort of a betrayal. And I think that that's just a fundamentally dumb way to look at this sort of thing. The stoner cats project had actually coordinated with other projects to make sure that there weren't two projects launching at once because this is understood to be a problem, right? People effectively on the Ethereum blockchain wait around for when no other project is launching because whenever anything that's even reasonably popular launches, it has this effect, at least for a short period of time. Now, recently, Ethereum rolled out the London hard fork and the London hard fork contains within it EIP. That's Ethereum Improvement Proposal 1559, which among other things does actually add some capacity. It allows under certain circumstances the size of blocks to double for short periods of time. But even if you were to do that, it's not going to change anything, right? Effectively, you've got a limited supply of a thing. You have to bid for space in the blockchain. And so there's a meaningful sort of incentive to bid as much as you are willing to bid as quickly as possible so that you can kind of maximize your outcome for it. But it's just crazy, right? And what actually happened, my understanding is that more than a million dollars worth of ETH was spent in fees that did not wind up generating a cat. And so the project has since come back and said, OK, well, we're actually going to refund you out of our pocket money that they didn't get that went to these miners. We're going to fund you out of our pocket so that you can not feel bad about this. But it took like a million dollars of funding that otherwise would have gone to the project had they not done this fully on chain blockchain purist launch. So I'll stop here for a second. What else can I tell you about this? It's again, fascinating example for me and feels so ICO-ish in ways that I think are mostly positive. But again, these types of like FOMO rushes are I don't think those are just positive. I just think it's phenomenal to hear that without, you know, even the obligation to they're taking a million dollars out of their own pocket to return to people who aren't even their customers. That just sounds like the really classy thing to do. Well, community management, I think, is what it comes down to, right? Like the cost of having people who wanted to give you a bunch of money and then who wound up wasting a bunch of money now feels super negative torture, right? They're saying that and then there's losing a million dollars to do it. Yeah, that's fair. That's totally fair. It's real money. And then the other thing I wanted to say, you know, it is really good to finally see Ashton Kutcher doing stuff on Ethereum. Most people don't know this, but Ashton Kutcher was extremely eerily in the Ethereum community. He actually had a call with while I was on it and the staff and it was in April or March of 2014 about building a DAP in Ethereum. Yeah, he basically like read all the marketing release and was like, great, so you can do this now, right? Like let's do it. And in 2014, we were like, I don't think there's really anything here we can do for you because there's really nothing here yet built. But most people don't know this, but he has like this massive nonprofit that deals with child trafficking. He's actually spoken before Congress about it and did a ton about it. And actually now in light of all the Me Too stuff, it makes even more sense. He came to the Ethereum Foundation and he didn't come to it. It was a conference call. But he was talking about if there's a way that we could make a DAP for people to call out sexual abusers anonymously, because he said that there were so many people that everyone knows are the people that need something to be done about, but they can't speak out about it and like no one's doing anything about them. And he was like, could we use Ethereum to like make a DAP to like do something about that? And this is before like even solidity had existed. It was called Serpent and it didn't even work yet. You know, clearly that never got built, but just it had always surprised me how early to tech adoption he was and thinking about these ways of using decentralized technology, even in like very serious contexts. So it's just kind of interesting that now, you know, what is it like six years later or seven years later, he's finally doing his own project and of all things, it's an NFT, which is kind of cute. But it's great because it's just the guys been in the Ethereum space very quietly for a very long time. Thanks for talking about that, Jonathan. I had no idea. That's really interesting. I'm going to look into it. Yeah, if anyone's interested, it's called Thorn and it's this giant network and he does so much for this problem that he speaks before Congress regularly about it. But yeah, so he came to the Ethereum project back when this was three months or four months before the crowdsale. Crowdsale was in August to September. This was in like April, needed a conference call about how to build a DAP. So his mind has definitely been in the space for a very long time. So when did you actually receive what you were trying to buy? And then what did you do with it once you got it? I didn't get a cap during the actual event itself, which, like I said, was a little bit disappointing. And I looked around an open sea, one of the decentralized marketplaces where all of these things sell. And I basically just looked for what's the cheapest one that I can buy. And it wound up being, I think it was like a 20 or 30 percent premium above what I would have paid had I actually minted it, not including fees. And I really wonder if it didn't wind up being cheaper for me just by nature of having not paid any fees in order to compete on that side. Because it's certainly a lot of people paid a lot of fees. But anyways, that's what I did. I just look for one of the cheapest ones with buy now prices. And then I found two that I felt like I liked and wound up buying two because I can't help myself when I like to gamble. I like to gamble twice. But yeah, so that's kind of where it is now. Since I purchased them, they've gone up about another 10 percent, something like that, maybe 20 percent. But again, for me, the value of holding this is actually not about the price appreciation, although that would be a secondary benefit that I wouldn't mind. Mostly it's about wanting to be part of that community and then having an avatar that effectively represents kind of how I feel about that community. So one of the things that I made sure to do with my cheapest possible cats that I could get is I got ones that had smiles on them or that looked like they were laughing. And it's really interesting to me to see again as time goes on, how kind of the price of these things changes as we've seen with things like crypto punks, you know, like the most valuable ones over there and the most desirable ones are, you know, like the ones that have green skin, right, or that have some type of really weird feature that's kind of implicit in that. In the world of stoner cats, those are the Vitalik character, which is a taxidermied cat and then also the Jane Fonda character, of which I think that there's only maybe 10 or 11 of those in total out of the 10,000. So I didn't get any of those. I got the Mila Kunis character and I got the Ashton Kutcher character. But yeah, and then as far as what I've done with it, well, the first thing I did with it was I watched the first episode, which was really just like a six minute kind of origin story type of thing that shows them becoming self aware with sort of some early animation. And now I'm kind of just waiting for the actual series to come out. And then because I have these tokens, I'll be able to watch the episodes as they come out of production, but before they actually go to distribution. And so again, it does have this very Kickstarter like feel to it, where effectively the early consumers of the product, the early consumers of in this case, the show are the ones who fund production, which then allows the people who are doing the production to one, produce it without having really any risk and to already have a lot of validation for when they go to find broad distribution, right? They have a lot of leverage compared to, hey, we have no revenue. We have no money. We need a bunch of money from you. And also, can you distribute this on our behalf? Because look at our name recognition. That's kind of the situation that this is replacing. And I'm pretty sure that just given the success that they've had and what I'm hearing from elsewhere in the industry, that this is not a one off. This is a first of type, and then we're going to start seeing projects like this come out increasingly over the next year or two. I remember talking with a movie director who's interested in NFTs, and I kept telling them like one of the things I think is the future is just to take like the MacGuffin of your story and even just make it a one off NFT, just see what it does. Because they always take movie memorabilia after the movie is over and auction it off. And I was like, well, you could also just make like one off NFTs of whatever the plot contrivance is and just see what that does. It's just free money on the table. I'm glad you defined what a MacGuffin is because I always forget. Yeah, I actually have a project that I'm working on very quietly in the background. That's actually a radio drama that says that's a go figure that I would do something like that. Oh, that's so cool, Adam. Wow. So anyways, I'm thinking along these lines to building this type of thing into the story, right into the actual narrative itself so that you can kind of have these things not be kind of a tacked on thing at the end, but actually part of the overall experience itself. And again, I'm usually early on this stuff, but the trend seems to be in that direction, although we're probably still several years out from seeing something significant along those lines. So like I said, it's a quick story today. It's a kind of exciting time to be involved with cryptocurrency, because although the technology continues to improve, really what's happening is the culture is coming to us and it's changing cryptocurrency, right? It's changing the community that we're part of, but it's because it's becoming everything and it's not everything yet. I'm not saying it's going to be everything tomorrow, but it's going to be everything. It's going to become one of the most common ways that you interact with many of these things. And that to me, again, is a real fulfillment of a vision that I've had and I've been chasing since basically 2014. So I'm excited about it. I appreciate you guys listening to me act about it. That's a super cool story. OK, the one question I have, you sent a link and you can see some of the different NFTs of the stoner cats and they're really cute. I definitely want to watch it now. But do you have to have one in order to watch it or do you think they're going to release it later so that anyone can watch it even if they don't own one of these NFTs? So the NFT gives you early access. It's not exclusive access. And my understanding is that in a very similar style to Kickstarter, they had like a whole list of different things that depending on how much they sold. And again, I had a phone call with their team before they actually launched this project again, unrelated. And at the time, they were not at all sure that they were actually going to sell out on these things. And I was like, you guys are 100 percent going to sell it. I'll be shocked if you still have inventory after a day. And I won't be surprised if you sell it immediately. And in practice, that's what happened. They sold out completely immediately. So there's all of this stuff that they're going to be doing as well. You know, there's going to be posters and swag and stuff like that that she'll claim with the NFT. And again, it has a very Kickstarter vibe. But to your question, Stephanie, yeah, it sounds like once they find distribution, these are just going to be broadly available. And, you know, it'll be cool to see what happens. And that's a wrap on another episode of Speaking of Bitcoin. Today's episode featured Stephanie Murphy, Jonathan Mohan and myself, Adam B. Levine. This episode featured music from Jared Rubins with editing by Jonas. If you enjoyed this episode, send me an email at adamatspeakingofbitcoin.show or just leave us a review on your favorite podcast player. Until next time, thanks for listening.