Increased liquidity is causing a paradigm shift in NFT markets, Floor founders say

Ladies and gentlemen, thanks so much for tuning in to welcome to the Scoop. I'm your host Frank Chaparro, editor at large at the Block and I'm very excited to have on the show on the other side of the mic, the dynamic duo of Chris Madden and of course, Christine Brown. Thank you guys so much for taking the time to join us to talk about everything that's going on at Floor in the wild world of NFTs. But before we dive into that and more, I want to take a moment to thank our sponsors.

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Christine, you were always a big fan of NFTs, but you become ultra NFT pilled on Twitter. So walk us through sort of like the origin story of the firm and how we sort of got to this point.

Yeah, I can jump in. So Floor was really born out of just how hard it was for us to get into NFTs in the first place. And so we really believe that the intersection of culture, community and tokenization is where the future of the Internet is and where the most exciting things over the next 10 years are going to happen. And we think that NFTs represent the kind of very early today form of that, but that it's so hard to get it. It's so hard for like get the Fox app, get your elite fit to your non custodial wallet. Like figure out what community you might want to be part of. You know what's going to rug you, what's not, like all of those problems that you hear about all the time, but there's something really beautiful here and something really powerful here. And so our goal is just get as many people involved and included in that as we can. Even better if we can get folks that don't look like what you typically see as the early adopting communities, like typically very male, typically very financially privileged and help them get in and understand early to what we think is going to be an important part of the future of the Internet. And so Floor in its current form is an app that helps you understand NFTs, both your NFTs, the communities behind NFTs, and kind of the world of NFTs more broadly.

And I met Chris when I was at Robinhood, so I was lucky enough and fortunate enough to run the crypto business there for about two years. We see millions of users, you know, buy crypto for the first time through Robinhood's, you know, centralized platform, mostly doge, and learned a lot through that. Mostly, you know, reduce financial friction to get started, you know, put it in their pocket and make it culturally relevant. Right. Like, Dogecoin is a meme, but it's approachable and accessible because it doesn't have a white paper and it's not some secret founder, you know, on a blog somewhere telling you what's going on. It's a meme. It's really accessible. So when we started thinking about Web3 and NFTs, I went out looking for who was the product builder in the space doing this the best right now, and came across floor and couldn't quite convince Chris to jump ship and join me, but he did a good job of doing the inverse.

That must have been a funny conversation. How'd you convince her?

Honestly, I felt like an idiot for asking because she had this big, cushy, fancy job and I was just some guy on the Internet. Cushy is a strong word, trying to build something.

My job was tough.

Yeah, for sure. It's all relative.

I have the cushiest of jobs.

From my perspective at the time, it looked pretty. Pretty cushy. Yeah. And I was. And I was like, hey, like, why is this person, like, spending so much time talking to me and, like, giving me advice and, like, you know, at one point there was like a deck of like, here's some advice I have on, like, building support and operations. And I was like, I wonder if there's like, any chance at all she'd be interested in working on this. And so I was just like, sorry if this is a dumb question, but any chance. And she's like, wow. If you're serious, Maiden, it's like, okay, great, let's go. Don't give away your negotiating position all at once.

So what do you think the state of the market is for NFTs right now? Obviously, transactions are relatively low when compared to the pico top interest is wane. What do you expect will maybe reignite the engine?

I think with all things in crypto, like, all markets in general, highly cyclical, and I think we can all say we got to a place where prices were not in Any way reflective of value or really anything sensible rooted in utility or literally anything. And so as people who believe in the space long term and here now, like honestly I'm super happy to see that prices are down 70, 80, 90% because like I think we can all say a picture of a monkey. I don't know if that's worth a quarter million dollars or half a million dollars or a million dollars. And so we've definitely seen that happen. And I think we have seen a reduction in attention because of that. You know, a lot of it was like highly sensational attention where it's like, wow, maybe I can make a million dollars tomorrow. And so you get a lot of that kind of short term interest. I think there still is a lot of folks around in the space. So one of the interesting things that we see as floor being non transactional is the attention that's being spent on the space versus the amount of on chain transactions. So during that same period where we've seen yeah like a 70% reduction in the bull prices of most collections, we've seen 70, 80% red in on chain transactional volume. We've actually seen a 200% plus increase in the number of users that are checking in every day to understand what's happening in those communities, to understand what's happening kind of more generally in the space. And so I think while measuring in kind of pure financial volume, which is how historically We've thought of NFTs, the numbers are all pretty down in terms of actual like interest and engagement. We're seeing a lot of growth even while the actual numbers are going down.

Growth in terms of just new projects.

Coming online at floor we have seen recently like 50% month over month growth of users coming onto the platform and using it to stay connected with their NFTs without having to be like connected to their NFTs. And I think that what you're getting at is transactional volume and trading is one way to measure success in the space. I think that as we move away from NFTs primarily being speculative assets and more towards like hey, you can do a thing with this. It is a membership pass. It is something that you get utility from. It is your ticket to an event. It won't be so much trading that will define the market, it will be usage and utility of these tokens.

How would you describe the engagement in various communities? To what degree is that engagement connected to price? Do you see people still interested in the communities of projects that are down horrendously? You know when I think about all my NFTs that are now worth nothing. I don't really participate in those communities. But maybe there are people who are less cynical out there.

Yeah, there definitely are. But I think this is where you start to see why people are coming together in the first place. So Floor's actually a really interesting example where it started as first in NFT communities, we were kind of building in public together and engagement in that group of people has increased because they're really interested in using the product and they have that thing that brings them together. I think inside of communities where the only reason to have it was financial speculation. Yeah, you've lost 100% of the thing you were there for. And so, yeah, why will people show up? And I think so a lot of projects have been washed out because people were there purely for the financial incentives.

What other incentives are there?

I think like, at its core, NFT communities represent some kind of shared interest, like any community that exists in the world. And so in Floor, that was very much an interest in seeing the product made and wanting to use that product. And now that group of people are more active than ever, giving us product feedback and telling us where they want new features and things like that. I think there are different degrees to which that's successful inside of the space. I think there's other things that just become communities in and of themselves. So I think Doodles is one of the ones that even though their price action has been destroyed, actually the community's still pretty active and mostly pretty positive.

What do you think gives a project sticking power like that?

It's a great question. I think on the financial side, I think a lot of it is so random. What sticks, what gets a moment in time, what gets to some pinnacle at which point people believe it can go up. I think when you look at the things that aren't just the really big blue chip ones that are 1010 E20E, whatever, what you tend to find is a core group of people inside of it that bring a group of people together around something and then that thing grows organically over time. If you think about communities like Mike Dunas had one as a PFP for a little bit, and that was a really interesting one. Where it found its root in technology, it found its root on it being really exciting, that this thing was entirely on chain, entirely encapsulated, and it spawned a number of side projects off of it. And like, when you think about if this is culture and community meeting tokenization, right now, it's really only culture and community of like Technology oriented Internet subcultures. And so I think a lot of them are about tech, are about the underlying technology because those are the people that are using the thing to do the thing. It's like very self propagating in that way right now.

Yeah. And I think when you ask the question, you know, like who's doing it well, who has staying power? I think folks like their minds automatically go to the PFP communities because those are the most visible. That's what people have as their profile picture. But there's actually a lot more depth there. Like there's pure art, right. Like the artist community, generative art in the space. Right. Like NFTS unlocks a generative art medium that is incredibly powerful, but you also get one of one art addition, art that like I think gives royalties to creators in a way that they didn't have an option for before. I think you have communities beyond just art. You have, you know, the jack butchers, Opeppins, Czechs of the world that are kind of like creating, you know what they would like to say, a movement in the space that's like iterative building in public. Then you have groups like the Nouns Dao and like funding interesting things in the space as well. So like Nouns DAO has built an amazing AI tool that like when you think of okay, how do we progress? Like there's so much going on there. I think that it's like a miss to only think about PFP projects and say okay, which profile picture is going to last here? Without talking about the fact that there are so many different types and categories of NFTs right now that like we miss out on.

Yeah. And that brings you all the way to the flip side of that to R which is like X NFTS and like new on chain tools for building or backpack building over on Solana, which I think new formats like that are really exciting things to see coming out of the bear market because I think they're the frameworks that we're going to build. A lot of the stuff that. Back to your original question, like what's going to get things revitalized? It's stuff that's actually useful or fun for people. And so the more time that we spend building new layers and new fundamentals that help create on top of it, I think the better chance we have of things. Really excited about that stuff.

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It seems like it's going to be multi chain. Do you see different chains maybe solving for specific problems or certain projects having an affinity for a certain type of chain?

Yeah, I think really simply it's easy to see like there's a generative art community emerging on Tezos with Solana. You have state compression and a whole bunch of technological advancements that makes running, storing, creating things on a chain incredibly cheap. So like creators don't actually have to think about the cost to the user when they're making things. I think you'll see gaming and applications live over there. Yeah, I think multi chain is definitely the way that will go. The same way that like in web 2.0 you have AWS, you have Google Cloud, and you have a few different like database providers that all do things slightly differently and they're easier for certain companies to use. Like I think that you'll see the same differentiation with blockchain as well.

Yeah, that's the thing of Ethereum and like what Ethereum's ultimate place ends up being. Like, the interesting thing is everyone complains about eth gas prices. I actually think gas prices are probably the biggest feature that exists of Ethereum because it makes it slow and frictionful to. To transact.

Made me rethink selling mini an NFT.

But like, you know, if it's 15 bucks to do anything, like firstly, you know, am I going to do it?

You're lucky if it's 15 bucks if it's like 150 bucks.

Right. And in order to do that, that thing has to be thousands of dollars. And so like I actually think if tomorrow you took away gas fees, the Ethereum NFT market would go pretty far down pretty quickly. I think, you know, it's interesting to see even just the market efficiencies of Blur and what they've done to the market.

What do you think of that market structure?

I mean, it's interesting because Blur's incentive Structure has done some really great things. It's created liquidity in a space where there wasn't guaranteed liquidity. Right. Like you used to buy an nft, it was truly, truly non fungible and you had to rely on someone wanting that exact thing to actually be able to pull it again.

Never would be the case.

Right.

And now with Blur there is like pretty deep liquidity pools that exist for folks to be able to actually trade with a little bit less risk. I think the opposite side of that is that they've really blended what is traditionally institutional grade market making with retail trading. Right. So like one person is showing up and being a market maker, a similar person, same wallet structure, same entrant into the space has a totally different like reason for being there, reason for showing up. And they're both playing at the same level, which I don't know whether that's good or bad, but it's definitely novel.

I think the assumptions you can normally make about market makers don't hold though. So for example, I typically consider a market maker's incentives to be quite understandable. Whereas like market Big Brother, like he's probably not going to behave the same way that jump might. He's just going to like throw 408 at the bid wall and like all of a sudden the market's completely different overnight. It is pretty interesting.

I think it's pushed us towards. You're talking about like we weren't at a place of like realistic price discovery maybe this time a year and a half ago. I think that having more institutional like liquidity out there does help with price discovery. So we're ending up at a place that is probably more realistic.

It's an interesting point. So how do you see that evolving?

I see the space fragmenting quite quickly. I think there'll be things that continue to exist for primarily financial reasons and that'll be like probably the majority of things that have existed up till now. And you know, people will continue to make art, people will continue to make PFP projects that like try to tie people together around high priced assets. And I think for those, I do think NFTs will be largely fungible. At least 78% of collections will be largely fungible. They'll trade on a floor price basis. I think people will make more advanced markets that take some of that stuff into account. A lot of people are trying to build on chain oracles for estimating values of assets and things like that. At that point you can maybe make a little bit more of an efficient market there. But then I think there'll be very artisanal marketplaces for other things that you want to browse in completely different ways, and the choice of which one is highly personal and maybe it may or may not be transacted at all. So I think the way that you choose browse, discover those things will be quite different from category to category. I think for the most part, the financial speculation assets probably does eventually degrade to blur, like trading experiences. Like, it's just, it's so hard to put the lid back on that because it is an efficient market structure and people are going to keep doing it as long as it's arbitrage to be had in it.

What do you think underpins the value? We've talked a lot about speculation and I remember during the more go, go, heady days of the NFT boom, I would ask a lot of folks who came on the show, like, how would you delineate the characteristics that add to the value of an NFT community? Was one of them aesthetics, memetics, or meme economics, you can call it as well? What are they now and how have they changed, as in your view, the space has become less speculative. What are those defining Characteristics that make NFTs distinguish the wheat from the chef?

I think there's some similar things. I still think when you think about PFPs in particular, they're virtue signaling. They're telling the world that you're part of something first. And I think the things that make those valuable are the things that make it obvious to a viewer that you paid more than the average person in that collection for, unfortunately. And even as that ratchets up and down the relative price, like, this is why you see a lot of collections have very similar traits, like laser eyes or like crowns or like gold coating or whatever, you know, you know that if you have a gold version of that thing, that's like one of the more rare and premium ones. And it's like posturing inside of communities. And I still see a lot of that happening even as the prices come down. The relative prices inside of those collections do that. I think outside of PFPs, it's entirely different.

Yeah. And I think that, like, again, we will probably get to a place where value and price are two separate things, where we may not even have price discovery or price action on NFTs, because the inherent nature of them is not something that's like, okay, I'm gonna go trade this in the market and I'm gonna buy it, thinking it's gonna go up. It has like One specific thing that it does, it provides you access to something. I think that like especially as brands think about coming into the space and like you started to see some brands experiment. I don't think we've actually seen any brand like dive head birth into web3 quite yet. But as they experiment, you know, the Starbucks of the world, like I think they are looking for something that is more around value and access rather than price because I think having something on an open market that someone else can dictate the price of makes it hard for them to actually like associate their brand with it.

Yeah, I think there's a very good chance in the long term that we see something a little bit more like, you know, 95% of NFTs are non transactional in nature. Like whether they're transferable or not, they're just like not necessarily designed for financial purposes. And then a lot of those will exist in ecosystems that do have fungible tokens that are kind of a piece of. So like think about the different tools you have in building a Web3 community. You have like NFTs, you have EOS of 20 tokens and I think right now you see this very either or orientation. I think in time you'll probably see a fluid combination thereof that drives membership identity and kind of financial participation a little bit separately.

Well said. What do you make of what Starbucks is doing?

I love that they're doing something. So like I've definitely participated, like I'm a member and I've bought some of the NFTs just like out of curiosity. I think you have a long way to go in terms of figuring out how to present a UX to users. That makes sense and that is worth the steps you have to take for what you get out of the other side. And I think it took Starbucks 10 years to build a great mobile memberships program.

Yeah, I need to download the app because apparently you get free refills if you have the app. I didn't know that that's separate from the NFT thing.

It's hard for brands to jump in with both feet because the products that we have available for the consumers, they would bring. Right. They already have users and the question that they're trying to figure out is do I point my users who trust me at this thing? And when you say yeah, point them at this thing, they're going to have to download a Chrome extension, they're going to have to write down 16 words, but don't actually write them down anywhere. But also like they're absolutely critical that you never lose them. Like you create this, this onboarding process that is like near impossible for anyone to actually achieve. And then you enter into a totally fragmented space by design. Right. There's a lot of benefits to that fragmentation, but like you essentially send your users off into the wild west. And I think that a lack of consumer grade products that put users first and not put like the tooling and the underlying like, okay, blockchain first. Like without that evolution, we're not going to see a lot of brands actually dive in.

I think there's a lot of this that you can look at regulation for as well. So right now, like the reason we have these two sides of this extreme one is go get your 12 words, your 16 words, like write this thing down, get the fox thing. And then all on the way on the other side is, oh, cool, you want one point worth a penny. Okay, well here's the KYC process. Rotate your head into 18 different dimensions and make sure that we've got like a full biometric snapshot, which is like also not great onboarding. A lot of that comes from just regulatory and clarity. People are scared to, to act in a way that someone won't tell them is completely safe. Right now the only way to say that is either you're on your own, you go do this like crazy thing, or here is an entire KYC craziness kind of thing. On the other side, you guys are.

Making a bit of a push into social elements. How do you see that future shaping up? Like, to what degree do NFTs play a role in? I mean, we saw Facebook, kind of step back a bit. Instagram, step back, Twitter, you get blue, you can have your nft. Pfp. How do you see those sort of worlds intersecting?

Kind of what we talked about a moment ago with the relationship between NFTs and ERC 20s and I think NFTs will be remembered as their primary use case is membership. And sometimes that membership is a tradable, sellable, like financially valuable membership. And other times it's just credentialing and identity and those other things. So I think fundamentally your NFTs represent your interests, the places you belong, the groups that you spend time with. And I think taking that and using that as a framework for a place you spend time to do things together is inherently interesting. I think that particularly, and I think this is where the state today actually really helps us. People actually love to win together, but they also love to lose together. And so I think even as today, which, you know, I think we hope Isn't the whole market forever. It's highly financially speculative. I just think coming together to do that together in the groups that you've already self opted into by being members of the same collective is actually a really powerful and interesting thing to do. And if you're getting started, it's frankly the only safe way to do it. Like, trying to orient yourself today is incredibly hard. And so we hope to give you a set of tools, but also an ability to connect with a community of people who are trying to do the same stuff in a safe way so that you can figure out where you should potentially try and go, spend some time and potentially spend some money.

So what should we expect next from you guys? What's in the pipe?

It's been a busy few months. We acquired WGMI in January. They're an advanced trading platform and then we're pulling in a lot of their features into the app. We announced we were a launch partner with Coinbase as they rolled out their Wallet product, so hints at us building wallet functionality for users in the app. And then yesterday we announced support for Solana. So we've been mostly eth focused over the last year and a half and are now expanding into multiple ecosystems.

Is that how long it's been? A year and a half.

It's crazy, right?

Holy hell. I mean, I was looking at how long I've been at the block and it's like unbelievable. Half a decade.

But outside of those things, like, I think we're just getting started the next few months. You know, we have social features that are rolling out as well.

Yeah, we just started the username claim process a few weeks ago, which is really cool. Like, I still feel like anytime we build anything, I always launch it. And I'm like, I hope someone cares. I hope like one person does this. And we've been super fortunate today and that we have kind of a core community who are incredibly supportive and jump straight into everything. But then also with usernames, got a lot of outside interest. They're claiming their little piece of the floor world and have already had 25,000 people come and claim their full usernames. We're going to roll out the first ways to start using those in the next six weeks, which I'm really excited about, but kind of seeing people come in and try and protect their Twitter name, as well as taking advantage of the ability to, you know, join a namespace early and claim rank, as opposed to, you know, having to have something else.

I still don't have Hristine, who has it. So because the person on Twitter who has Hristine has a certain amount of followers, we aren't opening it up for available claim. Like, we're making sure that people who actually have a following can't be impersonated. So I think, like, in the coming two or three weeks, it'll open up and I hope I'm quick draw on the button there.

Can't you do something on the back.

End and just, can the devs do something?

Can the devs do something?

We like playing by the same rules as our users.

So I am not Chris. Chris is actually Mr. Beast's producer and best friend, I think, on Twitter. So, like, I'm pretty sure I'm never really going to be able to get at Chris, but we've gotten a lot of questions about this. So we're creating a new namespace. We spent a long time trying to figure out how to protect it, which is a mixture of, you know, you can prove it with Twitter handles, you can prove it with ENS ownership. You know, there's certain ability for our early token holders to burn tokens in order to claim them. And now we're kind of gradually building models and heuristics to understand. Does someone claiming this account present impersonation risk? Does it present platform risk? So I think this is something that honestly, everyone else has done really badly and has created kind of cesspooly online communities because of, you know, problems like that. And particularly as you think about a social network that sits really close to transactions, you just want to make sure that you're stopping that stuff a hundred percent.

Well, guys, thanks so much for taking the time to chat with us. Where can folks learn more about what you're working on? Where can they find you on the Internet? They can't find you at Hristine or Hris, but somewhere else.

Floor on Twitter. Follow along with everything that we're doing. I'm Hristinehall.

And I'm Hrismatter.

Fantastic. Well, thank you guys so much. Always a pleasure. The Scoop will be back for you again with another great guest. Have an awesome day.