40. Calling Out The BS In Web3, This Is The Real State Of The Industry & Warning Signs For Your Investments

A lot of people are now putting up this facade of who they are perhaps on social media to represent something that they're not to try and showcase that they are building something or doing something where the reality is maybe they just got lucky and they just made a shitload of money, you know And I think social media and web3 is a lot around like this idea of having a digital character and not representing who you are, you're just a representation of who you are online and I think that is fueling this wave of people in web3 that honestly just so much talk. So I respect everyone out there that's actually like showing results in this space or just being true to themselves. Welcome back to another episode of the Bennett Berg Show. Ladies and gentlemen, you're in for a treat today because Bergs and I fired up. Dunno, I'm just juice of flow on my first coffee. Had a protein shake this morning. Bergs I am up and a bout how you doing?

I'm doing all right mate. I was in the gutter about 10 minutes ago. It's been wild weather out west, bloody 40 degree days and there's wind like a million kilometers an hour whipping through at night, whipping through my roof. Keep me up and I'm like mate, I feel like crap and going I'm amped. There's lightning coming out of my hands. I'm like all right bro, fine, you got me amped now I'm ready to go mate. That's all I needed. I just needed someone to pump me up mate, I'm ready to go.

Brilliant. So everyone today we're gonna. This is a crypto episode so we do three episodes a week. For those that are new, first of all, quick shout out. Over the last week we are up to a new record of audience size on the pod. We have 152 unique listeners over the last seven days plus YouTube so we're sort of sitting somewhere around 250 unique listeners per week. So huge shout out. Thank you so much. We're so grateful for everyone that's tuned into the pod. We absolutely probably did not realize we'd have more than my mum and Bergs's Bergs and mum listening to this so it's, it's been good to have mate.

Not even my mum listens to it. I tell, I'm like hey mum, I've got a podcast. I talk about all this awesome stuff and she's like piss off, I don't care.

It's just, it's more like my mates that want to Catch me out saying something just to rag on me. Yeah, that was my expected audience. And to have that many people listening is just blow me away. It's phenomenal. Thank you so much, everyone out there, for listening. Yeah, it spurs us on to keep going and make better content and make things more valuable for everyone out there.

100%. And, you know, if you're new to the pod, we talk about three core things each week. Crypto, business and personal growth. So we, we split these episodes into three and we talk about different things. And today we're Talking about why Web3 is just too hard and more of some bearish, I guess, commentary just around some of the stuff that goes on this space. And like, you know, Bergs and I've been in crypto for a long time. I've been in it for six years. I've been building crypto businesses for six years, which is like, you know, a long time in crypto. And we see everything right. Like we're sort of on the cutting edge and we. There's a lot of crap in this space, honestly, and I don't know why that is. I think it perhaps just attracts that, you know, maybe, you know, the people that want to get into something new before everyone else and people really haven't really figured out what they're. What they're building. The other one is like, I just see a lot of talk and I think that's. I was having conversation with someone last night. I think it's around. A lot of people got lucky in crypto. If you look at the people that got early into punks, early into apes, OG Bitcoin is. There's some 100%. There's absolute smart people that like, you know, caught it. Exactly. But there's also a lot of people that just accidentally fell into it. And I think that's okay, you know, good on you. But I think a lot of people are now putting up this facade of who they are perhaps on social media to represent something that they're not, to try and showcase that they are building something or trying to doing something where the reality is maybe they just got lucky and they just made a shitload of money, you know, And I think social media and web3 is a lot around, like, this idea of having a digital character. And, you know, you know, you're not docs, you're someone online that has a character or an image as your. As your, like, Twitter profile. You're not representing who you are. You're just a representation of who you are online. And I think that is fueling this wave of people in web3 that honestly just so much talk and you know, and, and not much building. So I respect so many people. So I respect everyone out there that's actually like showing results in this space or just being true to themselves. It's something that you and I at a Callbergs like. I know it's why you and I get along so much and everyone in collective Shift I think is like transparency, open honesty and just vulnerabilities is such a core, I guess value to all of us. I just don't see that to a lot of people in crypto. And I saw this especially when I went to Dubai. So many people just talk the talk, you know, had the, had the Rolex, had the Lambo, you know, and, and they're in debt, they don't have a job, they're living at home. It's just all a facade.

It definitely attracts a certain type of person. And I will say when we just to frame this up, that Ben and I are super bullish long term on crypto. That's why we work in here, that's why we invest in crypto. We love this space. But you also see a lot of rubbish as well. And the first point you made was people that were early into the space and you think about the people that were early. If you were early to bitcoin or crypto, you are weird. There is something different about you. You're either a libertarian or you hate the government, or you've got this magic trinity where you understand economics, technology, finance, which is very, very rare. But you have a contrarian view of the world. You're deep into technology and you understood how to use it using like command line wallets and all that kind of stuff. You're just an outlier. You're a weird person. All those people that kind of got in relatively early, these are the people that have a lot of money. And then when you have a lot of money, what do you do with it? You want to see the things that you have and you want to see the change in the world. So you start to build those things. But the vision that you have for the world might not be what everyone else wants and it might just be super weird, but you pump money into it. That was like one of the big things that I saw. And the other one was you're right where you're in Dubai, you know, you've got mates, almost got the Rolex, but they're deeply in debt. But they come to this space because they see There's a lot of money. You can make it quickly, you can.

Get VCs to invest in you, you can launch a token and it can be a solution to their problems. And then probably the third thing I would say is that people genuinely want to make good product and they like the space and they like crypto, but they're just inexperienced. So they'll be able to sell a vision to a vc. But they've never run a development team, a product team, a business. They've never done finance and they just end up floundering. They're not managers. They don't know how to manage large teams, let alone decentralized teams. And that's why you see these projects just fall over and people burn out, because it's a very difficult thing to do.

Yeah, totally agree. And one of the mistakes we made early on, or me as a founder as well, like, I wasn't building for a customer. We sort of, you know, we got swept up in the bull market of 2017 when things were going crazy in my past business. And you know, you just go gun ho. And then when the bear market hits, the tide goes out. The old saying, when the tide goes out, you see who's naked on the beach. Like, man, it is a fucking nude beach right now. Like, you know, there's not, there's not much going on in this space in terms of, you know, businesses that are building.

For customers and customers problems. And, you know, I really see that the infrastructure layer, there's so much, there's been so much capital being poured into building infrastructure layer. When I talk about infrastructure layer, I mean like blockchains, Ethereum, you know, scaling solutions, Ethereum alternatives in terms of other blockchains. And so much time and attention has been put into that space. But I constantly go back to the thing of like, who are they building for? Like, why, why do we have a thousand different blockchains with all different tokens and they're all competing to be the fastest and the quickest and the lowest this and the best that and da da da da. It's like, okay, great, but like, who are the ones that have got customers right now? Ethereum Flow blockchain, you know, and then you just sort of go, you know, Polygon a Cardano data, there's a few others. But like, where is the actual results and why are you building what you're building? Because I don't see customers knocking down the door screaming at us going, we need this particular blockchain right now. You know what I mean? I feel as though there's so much building for potentials or building for hope or building for down the line. And you're going to get that in a, in a nascent space like, you know, you know, crypto web three, when we are looking ahead and we're trying to build for future problems. But I just, I just struggle to see how a lot of these blockchains and tokens are going to survive. And I'm like, who, who's paying for this stuff? How are you making money? How are you paying for all of your staff?

Yeah. There was a comment by Checkmate saying if we did have product market fit, then we wouldn't have a bare market. People would actually be using this technology. And there are two customer segments that are served extremely well by blockchains. The first one is like people in Venezuela and Argentina using Bitcoin. It makes sense to them because they've got hyperinflation. And literally you take your money out of the bank, you're waiting in the line and by the time you get to the front, the price has changed to pay for your goods at the store. So it makes perfect sense for them to stay in a more stable asset that's easy to access. They convert to cash when they need to pay for something. The majority of countries, you know, emerged nations, sophisticated, have sophisticated banking. Right. You and I have sophisticated banking. So does America, so does Europe. We really don't need blockchains, right. To, to hold our cash on. The second use case, which is for us, is that we are looking for investment or we're looking to hold a different asset class that's not correlated and that is a bearer asset so the government can't confiscate it from you. That would be Bitcoin and potentially some Ethereum as well. So that's a good use case for us. And if you look at like macro, who has the money at the moment? Well, generally wealthy countries. Right. And they're only going to deploy sparingly because there's a lot of tasty assets out there if we're heading towards a recession and a lot of people are cash heavy. So who's actually utilizing and using those blockchains? It'll be those people that have hyperinflation. But it's very small amounts. And you're right where we experiment a lot and we want to see what the next thing is. But this technology is very new. 99% of the projects won't work out. A few of them will, but we haven't really found that use case where I need to use this every single day. Apart from investment that I can see.

And, and I think you've touched on a really good point there where I totally agree, but I don't think enough people in crypto and web three acknowledge that. I was on a panel in Dubai recently at the Metaverse conference. I was one of four people and the three other people on the panel were talking about how in five to 10 years time everything will be on a blockchain. We won't have a physical world, it'll all be virtual. We're all being a Metaverse and it's all going to be NFTs. Absolute load of crap. That is not true. Like it's not, that's not, it's not reality, you know. Yes. Could you. That's not, it's not possible. You know, like there's, you do not everything. And there was someone on Twitter, I think Ben Mossoff tweeted, you know, he's out of the mine site, like with this, I don't even know what it was. Like this, you know, machine with like spanners and wrenches. He's like, I can't wait to see this on a blockchain, you know, that's so good. Not everything needs this slow distributed database that takes forever to like process and they're just like, you know what I mean? We don't need it.

This is it. And the analogy is like with blockchains, you're driving a tank to the shops and it's like, no, you don't need a tank. It's slow, it costs a million dollars in fuel, you'll never get there. There's not bombs hitting you all the time. You need like a really cheap like little Hyundai or something to get to the shop. Zip up there, zip back, nice and cheap, gets the job done. And it's hard enough to build a company and then all the tech stack you have, then you add blockchain on top of that. It is just mental to think that you're going to do that. And all these people that say blockchain solves this, majority of the time it doesn't. The things that blockchains do quite well is, you know, they're open, they're borderless, they're permissionless, they're censorship resistant. All the good things, right? If you need any of those aspects, then yes, use a blockchain. But the majority of time like almost a hundred percent of companies want to have some aspect of control or an Atom intermediary or be able to help their users. You don't need this big decentralized beast to add.

Yeah, sorry to interrupt. I was gonna say, look at the. Probably the most utilized blockchain for Web2 companies right now is not Ethereum, it's flow blockchain. If you Google flow blockchain, you'll see some of the clients this blockchain has. And it's not completely decentralized. Actually, it's got a lot of centralization because these Web2 brands need to have that. You know, I don't want this completely decentralized thing because I guess what if they cock it up? They've got no way of undoing it. It doesn't suit everyone.

That's the other thing. And one of the other properties of blockchains is immutability. You only ever add to it, you can fork it, but you can't change, you can't rewrite history. That is not good for a company. If you have a cock up, you want to be able to fix it straight away. You want to be able to delete that from the Internet, put out a little message saying, sorry guys, here, we've fixed it. You don't want to have this giant like, I don't know, dick pic on your blockchain that's associated with the afl. Like that's just not going to fly. Like you do not want that to happen. And that can absolutely happen with a block blockchain. I guarantee you some shit posted in web 3 will do it.

You spot on burgs and there's. We're sort of going through right now like the things that blockchain and crypto is not good for. But obviously we are so bullish around the things that it is good for. And I think what this episode is more to bring to light that we love crypto and blockchain, but we're not hiding behind the fact that, you know, it's not good for everything.

And I'm talking talk about the experience you just had. You were going to go to an event and you had to connect your wallet to something and do something else. And you work in Web3 and you do this every day. What was that experience like for you?

So for context, it was an nft, gated physical event. So to get the event ticket you had to go to Token Proof, which is like a. Basically a way of gating access to something that you need an NFT to get in. And I've used it before and I remember when I did it last year was at a conference I went to in the US it was bloody complicated. You know, you had to download a mobile app and then you had to scan a QR code and then you had to get your metamask and you had to sign a transaction and then you needed to like get a kill another, you know, code that was generated to your email and then you had to send it over to this website and it's like, oh my goodness. And I tried to do it the other day to go to this event and just failed. And the site just failed constantly over and over. And I, you know, went to the whole rigmarole, like refreshing everything, like getting rid of the data, like, you know, trying different browser, trying a different nft and it just were failed, failed, fat. I'm like, oh my God. This is the epitome of Web3 products right now. Yeah, I want to go to an event. I've bought this thing to go to this event. And it is the hardest thing on planet earth to even go to the fucking event. So I didn't go. It was all too hard.

That's it. And there's, there's no one to call, there's no support. And I saw a photo of someone at the event and he's probably the biggest web 3D gen I know and it was just him and his mates and the rest of the stands were empty. So I don't think anyone else could get in either, mate.

And this, this is the Web3 user experience, right?

This is Web3 user. But this is the opportunity, right? Like we as an industry, like Checkmate said, like, we don't have product market fit. And the reason we don't have product market fit is because a, we're building solutions to problems people don't have. And the solutions we are building are so difficult to use, no one even tries to use them. So one thing that we're trying to really do at Collective Shift is really try and build experiences and usability that anyone can access. You know, you can learn about crypto, you can educate yourself, you can go from 0 to 1, you can be on board in this space in a way that's just easy to understand. Let's talk simple language, let's talk in plain English so the people up the back can understand exactly what we're talking about and why it's important. And also calling out all the bullshit because there's just so much crap in this space that people are, you know, find. When you Google crypto or you Google this, that and the other, you land on YouTube as you land on Twitter, you land on goodness knows what and it's just so complicated.

Absolutely. And we've even got a guy, Nick, one of our senior researchers and analysts and people ask like, hey, what about, you know, this particular project? It looks great. I'm hearing all this hype, man. This guy goes deep. He goes into their discord, he looks at their treasury, he looks at how it's being managed, which accounts it's going to going their discord, looking at the infighting and rules they have to change, how much they're burning per month. And he's like, no, this ain't dirty. This is really bad under the hood. And it's really difficult to go to that level and understand it. But that's something we do at Collective Shift where we make it simple and say, hey, these are the top five things that are going on the project. This is what you should be aware of and it really helps you to make decisions.

One thing that blockchain is really good for and NFTs and sort of this idea of a digital ecosystem. I was talking with a brand new agency last night, went out for dinner with them and you know, they're talking to some of the biggest brands, you know, household brand names that are looking to have some sort of exposure to Web3. And it's not talking necessarily about Web3 or NFTs or having a token, whatever it is. It's about how they can add more value and build a better experience for their users that connects both the virtual experience and the physical experience. So you think like, you know, loyalty points, you know, on steroids. So like, you know, for example, Starbucks, how they launched their NFT platform but you didn't even know it was NFTs, they just launched a rewards program. And then you go into the Starbucks store and you scan your membership and you know, you start to build these loyalty points within the space and then you can take that membership online and you can get discounted, you know, tickets or merchandise. And then the brand knows you know, you as a member, the things you've done, the things you bought and it might be able to airdrop other things to you. For example, it can give you like another NFT or can give you an access to another brand that can give you, you know, access to in, in person events through this membership. And it's like this idea of, you know, rather than having separate logins, if you think about how you have a login of Facebook login for Twitter, you log in for wherever you have a single identity and that identity, if you think about, you know, Web threes is interoperability the idea that that wallet or that identity can plug into different ecosystems and you can, you can bring that with you. So if you take your Starbucks to, you know, a restaurant, that restaurant might, might see that now that you're a, you know, you're an ex member at Starbucks, you can plug in your identity into that new restaurant that you might get additional, you know, experiences or services or like a discount on food or whatever that might be. So it's just about this idea that you can take that data with you and it's yours and you can plug it in and get extra experiences no matter where you're going.

That's exactly right. And I like to think of, if any Web three brands out there are listening, think of it as rewarding and activating your superfans. If you got like 2,000, 3,000, whatever, super fans of your brand that want absolutely everything that you put out there, these are the people that are going to buy it. Great, they've bought the thing. But in order for them to buy the thing and stick around, what are you offering them? And it's like a digital village. Like normally you would go somewhere, you have a, in real life kind of meetup and everyone would be there. But with this, these people online, you don't necessarily know who they are or where they are, but you know they're there and you can target them. And a good example for us would be we've got NFT integration on our website. We could go to any brand that we like potentially. Let's, let's just say moonbirds, let's just pick one and we could say, right, everyone with a moonbird, with this specific trait, if we want to get that specific, can now connect their wallet to the Collective Shift site and claim a membership. So if you think about cross brand promotion or even your competitors that have NFTs by the Porsche NFT that came out, if I was Audi or something, I'd be like, yeah, connect your Porsche NFT through this site and we'll give you this for free. Like convert them to Audi customers. How good.

It gets really, really interesting. And you can. And with this identity concept, instead of having, you know, different cards, different loyalties, different rewards, these people can, you can connect, you can be targeted, you can be drop stuff to your wallet, it's open and you have that access. I think they're the things that brands are starting to explore in Web three.

Yeah, and obviously back to where we started, like you need the infrastructure layer to do that. You know, web3 identity, wallets, et cetera are being built on things like Ethereum, Polygon, Cardano. They are being built on these blockchains. But, but I guess the takeaway that I want to wrap up with here is for those that are investing in this space, really think hard around the assets that you own in crypto and, and what are the real world problems that they're solving? Who are the customers? Are they generating revenue? Is there a path to generating revenue? Is there a future where that problem will be solved? Or is the token or blockchain or project or whatever you're involved of just built on hype and sentiment and FOMO and Hopium? That's the worst you could be positioned with?

Absolutely. Give that a lot of consideration. And just one final thing I'd like to say is that we bring immutability back into it and you create a history. So say you're a Porsche fan and you bought the Porsche nft. It'll have a date of when you bought that, how long you've held that NFT for, and any other NFTs or tickets or events or anything will be against that account. So you start to build this real history of who this person is, what they've rocked up to, how much of a fan they actually are. And in the future, I do believe quite a lot of like tickets will be on a blockchain. I don't know what that blockchain will look like. But the reason I say that is because ticket stubs to amazing games are collectible. Why would you not turn them digital and sell them and then think about that. If you're a baseball fan, you've gone to every single game for like two years, the club will know that and they'll be able to reward you specifically or invite you to specific events. I think that's a really awesome mechanism that people are going to exploit in the future.

Yeah, I agree. You know, I think it's where we're going through this evolution of, you know, we went from NFTs to sort of this now Web3 trend. And like, what even is that? I think it really is around the, the idea of being able to enhance experiences and brands having more data and opportunity to deliver more to consumers through the idea where they can connect between different things. The data and the characters and the assets aren't just stored in one particular brand.

This is it. To use a blockchain, it needs to add a certain amount of value that you can't get in another way. If you could get it using normal technology, SQL database, aws, whatever you're going to use that because it's cheap. Cheerful people understand a lot of people use it. But if there's that one thing that only a blockchain can offer you that you want to give to your supporters or your members or your fans, that is the area you're going to go after.

Okay, so key sort of takeaways there was, we really wanted this episode to be around some of the, some of the stuff that was going on. This space that probably is a little bit smoke and mirrors. Be careful around, you know, any projects that you might be investing in that there might be a little bit more hype and FOMO and sentiment. Really dig in to see what the problem is that that project or blockchain is solving. And you know, if it is solving real world problems and you're getting customers, fantastic. But if it's not, maybe it's time to reconsider that investment. And you know, we're super bullish on where this space is going. You know, Bitcoin, Ethereum, web3nfts, like we're super bullish, but you know, we're still at a point where we haven't really figured out exactly who the winners and the losers are going to be. So, you know, not all the projects right now are going to succeed. Probably 90, 95% are going to fail. So just review that when you're looking at your portfolio, especially going in this next Bull Run.

Spot on, mate. Love that episode. That was great.

Epic, guys. Thank you so much. I hope you enjoyed the episode. If you or a friend or a colleague, you know they earn some coins, send this episode to them so they can get a bit of this in their ears. And if you have any feedback, we'd love to hear. Do you agree? Do you disagree? Love some of your comments. Please tweet at us, at Ben Simpsonau and at Babyback Berg Burks. Did you have something to say then?

No, mate, I'm all good.

Amazing, guys. Thank you so much. We'll see you next episode.

See you, folks. Bye.