S2E9 - Stephen Young Founder and CEO of NFTfi

S2E9 features Stephen Young. 

Stephen is the Founder and CEO of the NFT lending protocol, NFTfi. He has a background as an artist, programmer and financier.

In this episode, Nifty talks with Stephen about how it’s like to live in a country with high inflation and how to adapt to it, Stephen’s start in Crypto and NFTs and the origins of NFT lending on how it is evolving.

Prefer video? Watch this episode on our YouTube channel: https://www.youtube.com/@squiggledao

The sponsor of this episode is NFTfi. NFTfi is the most battle-tested and secure lending and liquidity protocol for NFTs. Since launching in 2020, NFTfi has had over 60,000 loans with zero security incidents. Try lending today: https://nftfi.com/

Guest
Stephen Young: https://twitter.com/stephen_yo

Host
Nifty Fifty: https://twitter.com/NiftyFiftyETH

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Transcript

Nifty (00:01)

Welcome to the SquiggleDao podcast. This is Nifty and our guest today is Stephen Young. Stephen is the founder and CEO of the NFT lending protocol, NftyFi. He has a background as an artist, programmer and financier. It's an honor to have him with us today. Stephen, welcome to the pod.

Stephen (00:17)

Hi, Nifty thanks for having me. It's an honor to be here. You guys are some proper OGs in this space, so it's good to be speaking.

Nifty (00:25)

So you live in South Africa and have experienced first-hand high inflation or what is the same quick currency evaluation. And in other interviews, you've shared that 15 years into your career, your salary in dollars was below what you earned in your very first job in the UK. How did that realization shape your outlook in finance and your career direction?

Stephen (00:47)

Yeah, I mean, it was, it was quite an eye opening moment. I was basically just doing the basic calculation and, and realized this and, so really immediately started thinking, you know, what's the point of saving for my retirement in a currency that is just being debased, you know, I'm basically swimming an uphill, been fighting an uphill battle here. And then so immediately started

looking for some way to, you I wanted to stay in the country. loved my family is here. I love the lifestyle, but had to find a way to kind of get my finances out of the country. And, you know, South Africa has also got a foreign exchange control. So, you know, it's not as easy to move money in and out of the country. I mean, you can still do it, but it's, it's more complicated. And then that essentially was how I kind of I'd heard about Bitcoin before, but you know, like this whole exercise of kind of thinking about this, how do you get capital, you know, out of a system that's not working for you. And then basically found out about Bitcoin, read, watch all of Andreas Antonopoulos's videos and kind of really open up my eyes to, you know, this new form of money and what money really is. And then so that year, I put my entire bonus, I was working for a financial institution at the time, put my entire bonus into crypto and basically, I've never looked back since.

Nifty (02:14)

And just to give an idea to me and the audience, what are barriers to get money out of the country and also the inflation rates, how high are those?

Stephen (02:25)

So at the moment, the prime interest rate that you get from the bank is 11 and a half percent. And then depending on your, you know, like if you're a first time homeowner who needs an 80 % or 90 % bond, you're probably paying prime plus 2%, maybe 3%. So you're looking at 13 and a half, 14%, you know, which is which is very high.

So, and then the foreign exchange controls, there's a limit of a million rand, I think, per year that you can take out of the country. And then you can apply for, and a million rand is, you know, that's like $50,000 or something like that. It's not a huge amount of money. And maybe it's 10 million, I can't exactly remember. But...

Yeah, so I mean, so there is foreign exchange control. So they're basically trying to control the currency. So, you know, it's possible, it's just more it's just more complicated. So a lot of what a lot of people do here is they've got, you can invest in a local unit trust, which is a mutual fund, essentially. But they like a local wrapper on foreign stocks. So you essentially investing in like dollar stocks or US stocks, but holding it in a South African entity. So that's how a lot of people get around it.

Nifty (03:43)

And how has, I'm interested in the high inflation aspect as some countries or more countries in the future might experience high inflation as well. And some countries are already suffering it. How do you manage or how do you see people managing differently, household expenses, budgeting and this type of stuff?

Stephen (03:50)

Mm.

Yeah, so I think a lot of what it does is just just like suppresses asset prices, you know, so if you think about if you're paying 15 % on your home loan, versus paying 5%, you know, you that you can afford a three or four times more expensive house on the 5 % interest repayments, because, you know, the affordability, you're paying the same per month, really. So So, so then it's hard to essentially what that means is it's cheap.

in a way to live here, but it's expensive for South Africans to actually afford those houses. And then you also it makes it difficult to move. So if you want to move from South Africa to the US or Europe, you know, you can get a five bedroom house near the beach here for $300,000. You know, like you can't do that in the US, right? So, you know, so just kind of it's in a way you kind of does the financial system.

keeps you even more trapped because your asset base is worth less if you want to move to somewhere else. It's very expensive. It's very difficult to do. And then a lot of people in debt, it's very difficult to make ends meet in South Africa. It's got one of the highest unemployment rates in the world too. I think it's like 40%, which is really, really high. So it is as challenging in the country. But that's also this.

I think I just read a stat this morning, 10 % of South Africans own crypto and only 12 % of South Africans pay tax. So that gives you a sense of, you know, how, you know, what percentage of the population that actually has money is putting it into crypto.

Nifty (05:46)

Wait a second, what does it mean that only 12 % pay tax

Stephen (05:49)

40 % unemployment rate, and then you only start paying tax if you earn over a certain amount, and that's 12 % of the population, and 90 % of the tax in South Africa is paid by 3 % of the population.

Nifty (05:55)

That's it one.

Crazy. And it's like Argentina where real estate is priced in dollars as well or rent.

Stephen (06:09)

No, so it's all local South African, South African round. Yeah.

Nifty (06:12)

Okay.

Yeah, and those were going to be my questions like the interest in crypto. I was assuming that this was and I was expecting a higher number to be honest than than just 10 % because the need is obvious.

Stephen (06:25)

Well, think it's because a lot of, yeah, I think a lot of there's a very big wealth disparity in South Africa. So, you know, it's only a small percentage of the population that actually have any disposable income to put into things like crypto. So, so of the people, you know, so if like 12 % of the country is paying tax, 10 % of the country owns crypto, right? So that kind of gives you most people who are like have a decent, earn enough to pay tax, probably own some crypto.

Nifty (06:55)

yeah anyone who has savings basically and you've mentioned that you put your bonus on Bitcoin I'm understanding how was that starting crypto

Stephen (06:58)

Yep.

Mm-hmm.

yeah, I mean, so that was late 2016. So I think it was like $600 or something for for a Bitcoin. So yeah, so it was just before the ICO kind of boom, and then started kind of buying stuff in the ICOs. And I got very early on got like, you know, bought this thing, the whole bunch of research on it, had this whole thesis on like, it was gonna do well.

then 10 X'd, but like for none of the reasons that I thought and then disappeared shortly afterwards, I managed to sell, and lock in those profits, but very quickly realized that it's, it was just pure luck. You know, there was, everything was going up. It wasn't because I was being super clever about finding that.

And so then I started moving away from those things and just started buying Ethereum, kept buying crypto. So it dabbled a little bit, but was very sure to always take profits and move it into basically Bitcoin and Ethereum at the time.

Nifty (08:05)

And then beat NFTs as well or when the NFTs came to play.

Stephen (08:11)

So NFTs came about late 2019. So I then left a financial institution. was there was an asset manager. I left there to co-found a cryptocurrency exchange. I'd left there then took a little bit of time off was spending some time in Thailand was there for a couple of months and then actually in the airport on the way to the airport on the way back. I messaged my my friend Mads, who's one of the co-founders and basically was telling him that I was looking for whatever my next project was going to be. he basically, I see he had an autoglyph and he wanted to buy more. I think he was preparing for the NBA Top Shots private beta. So he knew that was coming. He wanted to get some more capital available.

His girlfriend wouldn't let him spend more real money. So he wanted to borrow some money from me. And just to give you context, mean, think water gloves at the time were two two and a half ether, right? So, know, wasn't a huge amount of money. And I think ether was $300 or something. Right. So but and then also at the same time, there was a few of the other guys in the kind of collectors in the crypto original CryptoKitties collectors who borrowing and lending from each other. There was like a spreadsheet and they would kind of keep track of, know, if this person doesn't send this to that person by this date, they get this NFT and kind of keeping each other honest. And so then basically we decided, well, why don't we build something that kind of takes that trust element out of the equation and kind of puts it on a smart contract because, know, that's the whole point of having a blockchain.

and yeah, so that's what we did. So kind of had the idea, like brainstormed a couple of back and forths on like what the basic structure would look like, of the, of the smart contracts. and then like, and then basically got home back to South Africa and lockdown happened. and so then basically I spent, and we had very severe lockdowns here. So I then spent the whole of lockdown, essentially building the first version of NIFTIFI launched it in May.

Yeah, like April, May, and then pretty quickly, like it was kind of building up to the NBA Top Shots private beta. And so a lot of the guys that were kind of buying in there had kind of spent all of their money buying packs and wanted to buy some more, had CryptoKitties, this kind of thing, started using the platform. And that's kind of really how everything kind of got started.

Nifty (10:51)

That's one of the OG moments now, the genesis of NIFTIFI. I've heard that story a couple of times and it's crazy. And what were your thoughts back then on the potential of the NFT lending space?

Stephen (11:06)

Yeah, so, I mean, even back then, for us, collectibles and art were just the first example of that was finding kind of product market fits. And I think largely just because, know, blockchains were slow and expensive. So you kind of needed things that, you know, had small transaction counts, relatively high value. So it was, you know, the thing that kind of fit at the time. But

If you think about it, if you want to have a fully functioning economy, you need to have money and you need to have assets to buy with that money, things to own. for me, it's, know, cryptocurrencies and fungible tokens are programmable money, NFTs are programmable ownership. And the first thing we found in the product market for Donald is art and collectibles.

But over time, know, more and more, it just makes sense that you need to be able to represent unique things on a blockchain. And then some of these things will have value and where there's value, there's finance, right? So, you know, for us, it was always kind of a long-term view on like, you know, in the real world, 35 % of all value is non-fungible. In the crypto world, less than 1 % of all value is non-fungible.

If we believe that most value is going to flow over crypto rails over the long run, which I believe, know, it's kind of the same what we had with, again, it goes back to those Andreas Antonopoulos talks with, you know, in beginning, you were using a phone to kind of push digital data over an analog line. And now every time you do make an analog phone call is actually being pushed over digital lines. And that's kind of where we, what's going to happen over the long run with, with blockchains. It's just a better way to move value.

And so most value is going to move over blockchain rails. then you would, it makes logical sense that the asset mix would kind of match the real world asset mix, right? So you can, you'll have to grow that percentage of value in the crypto ecosystem that's non-fungible just to kind of match with the real world that we're slowly kind of taking more and more of the value from.

Nifty (13:16)

100%. My head is running in different directions because that's I want to touch with you. And I want to make a brief comment that you've mentioned Andreas Antonopoulos and I remember watching one of his talks. He's talking to a big giant room and then the camera opens and there are like three people in the audience and it's a really good Bitcoin talk. Probably you've seen it, but just a fact about him.

Stephen (13:37)

Yup.

Yep.

Nifty (13:43)

When I started lending a space, it was the Wild West. I remember not lending below 50 % interest rate. Loan to values were all over the place. Defaults, it could be like a massive in the money default. And now for the top collections, interest rates are super competitive, probably even below the mortgage rate in South Africa. And the LTVs are really reasonable. Could you share how this evolution has looked?

Stephen (13:49)

Mm-hmm.

Mm-hmm.

Nifty (14:11)

from your perspective and the key shifts that have happened for this maturity of the NFT landing space.

Stephen (14:19)

Yeah, yeah. So I think, yeah, I mean, it was completely crazy. You know, like, you know, I was doing a lot of the early loans myself. And, you know, it was just like no idea what the actual risk here is with these things. It was so new, such a new asset, such a new asset class. So I think a few things have happened. I think, like you said, the top, they are now top collections that everyone can agree on.

Right. So, so just the fact that they are now, you know, nobody's going to argue that, you know, it's for Denzer's, autoglyphs, squiggles, crypto punks, you know, X copy, you know, everyone knows that list now, right. when we, when we first started, that wasn't the case, you know, I mean, like I got it. I've got a founder, cryptokitty. So it's cryptokitty number 72 that I think it was, I gave it 28 ether loan on and got a default on.

And they're not worth nearly that now, but they were the OGs and they were the one that everybody thought was gonna be huge, right? So I think it's that hash masks, exactly. yeah. So I think that there's now just some assets that have stood the test of time that have kind of reached this escape velocity of probably staying relevant for a long period of time.

Nifty (15:23)

Hash masks, another example.

Stephen (15:40)

So something that's just like reduce the risk of you just like you're blindly guessing which one of these things is actually going to be good collateral. So I think that's one thing I think the other thing. The other thing I think that's happened really is that there was for a while there was a lot more liquidity than there was borrowers. So this liquidity was the lenders were all competing for business from borrowers.

And that like very aggressively drove LTVs up, durations longer, APRs down. I think maybe even too much. think there's quite a few lenders that lost quite a lot of money in the, recent downturn. And, and I actually, like, I think there's maybe a little bit of a kind of reset needed in the markets. I think a lot of borrowers are still expecting the same terms that were kind of at the time, but there's a lot of lenders that have just.

that are not landing on the top tier assets anymore because the APRs are too low for the risk that they're taking. So I think at some time, probably see APRs and durations go down a little bit, APRs maybe go up slightly, but not a lot. I think it's just kind of like as the market kind of settles again. So, and then I just think it's much more...

people are just more comfortable with the asset class and it really is kind of the underlying assets have more provenance so they are safer to land on so you get better rates.

Nifty (17:14)

It's interesting you were mentioning competition. I remember periods of time where I was completely stopped, stopping all lending because the LTVs, APRs were not making any sense. So it was super competitive, but there was a couple of points in time that it was like, whoever is doing this long-term is going to lose money. So you can get a repayment, but long time.

Stephen (17:36)

Or they've got a very long term, yeah, they got a long time horizon and a lot of capital and they're willing to just hold those assets, right? So I do think that there's a big group of lenders that fit that profile at the moment. So, and because there's relatively, you know, there's relatively more of them and relatively lower demand from the borrower side, they can meet all, a lot of the liquidity needs, which then kind of

Nifty (17:45)

Exactly.

Stephen (18:06)

pushes the rates down. I think if you see a big influx of borrowers, you'll have to get more capital coming in. You'll have to have capital that aren't necessarily happy to hold the underlying asset. And then I think those lenders will probably charge higher LTVs, mean, higher APRs and slightly lower LTVs just because of the risk profile and probably shorter duration.

Nifty (18:29)

It's interesting. You've mentioned a few times that the problem in the lending space to the growth problem is from borrowers, lack of borrowers, not lack of money and funds. For me, it was counterintuitive. Normally it's lack of funds and lack of people willing to put money into risky assets. But here is lack of borrowers, lack of people. There is not enough funds to cover all the month.

Stephen (18:48)

Mm.

Yeah, think it's a yeah, I think that that was true. I think it is. It's evening out a little bit because I think a lot of lenders lost money. And I think a lot of people are just like, exactly like you're saying is like they got burnt with the crypto punks prices going down, basically everything kind of going down like nonstop for a year. And so I think a lot of people are just stepping aside, you know, just until things kind of calm down a little bit. So so I do think the balance is kind of shifting a little bit again there.

But as soon as you can get 25 % again, that's very attractive yields. So basically, that's what will happen is as the demand increases, APRs will go up because lenders don't have to compete so much for business anymore. As APRs go up, more capital comes in, which then pushes the APRs back down again. So it's just normal market forces, really.

Nifty (19:47)

100 % and I was just looking at the data. We track the main collections weekly and just to mention the drawdowns, we have Fidenzes and Glyphs 45 % down in the last three years since we started. Basically that's around three years. It's 32 months, the data set we have. Then we have a Squiggles and Punks 65 % down.

Stephen (19:54)

Mm-hmm.

Mm-hmm.

Mm-hmm.

Nifty (20:16)

And then the other collection, Tringers, 80 % down, MiBit, 95%, Bortapes, 90%. So whoever was really difficult that someone is making money in the NFT or NFT lending space.

Stephen (20:28)

Exactly. Yeah, exactly. So, you know, I mean, and that all sounds very bleak, but you know, so if you take 48 months worth of history, then you know, then autogloss are up 10x, right 20x more 50x probably, right. So it's just, so just all depends on your time horizon. So that's also for me why it's like, yes, it's down. But 35 ether

Nifty (20:43)

Yeah.

kind of person.

Stephen (20:54)

for a or 25 ether for a for crypto punk, which is kind of I think what the floor is right now. That's nuts. You know, like, I mean, when I when I started by I still remember when Bored apes were for ether, and I was like, that is insane. Like, why would anybody pay for anything ether? It was like 500 at the time or something like that, something, you know, maybe a bit more. But

You know, so I missed the whole Bored apron because I bought my first crypto bank for under an ether. So it was just like, I couldn't get my brain to like, the prices. So for me, it's still up. still, I mean, it's a massive market cap for all of crypto punks, right? And at the time it was worth basically nothing five years ago.

So, I think it's also, it's easy to feel bleak that if things are down 45 % in three years, but if you look, go back five years, those things didn't exist and all had almost zero value.

Nifty (21:50)

Great point. The traditional art market is worth around $1.4 trillion and has a lending penetration of around 15%. Please, if you have better data, let me know. I have $1.4 trillion, 15 % lending penetration, $200 billion, approximately. And the NFT lending market is under 2 % lending penetration or $100 million in outstanding debt. What do you think are the main barriers to increase lending penetration in the NFT lending space?

Stephen (21:56)

Mm-hmm.

Mm-hmm.

Yeah, so I think, I mean, part of it is, is just, I think a lot of the who own all of the big, very valuable NFTs right now, like a lot of it is people like Flamingo, or, like collector dolls, or big, you know, so so these people, like just, they just cash flush and they're buying right now, right? So, so I don't think

So they just like they saw a large percentage of that total value is actually sitting with people who don't need to like right now, kind of make you like make that capital work for them. I think that changes over the long run. And then I think also, you know, maybe also, I don't think a lot of a lot of that art lending is happening as part of your, you know, private banker, helping you restructure your

your debt, right? So you're moving debt between, you know, borrowing against your stocks and your paintings and your like holiday homes and all these kinds of things. And you're kind of like, so there's somebody who's kind of managing that for you as part of like a holistic portfolio. And I think you probably need to have, you know, in the long run, if you want to get to 15%, you need to have a NFTs in those kinds of people's portfolios. And you need to kind of have this

thinking about NFTs as an asset that is collateral worthy and it can be used as part of an overall kind of debt strategy. You know, that should eventually trickle into the wealth managers kind of, you know, horizon and radar. I think that's a few years away. But, you know, that's kind of how I you know, for the for the asset class to get

as big as traditional art and, you know, be trillions of dollars. for, you know, for you to have $200 billion worth of outstanding debt, you need to have professionals. A lot of those people don't manage their funds themselves. Right. So, so I think there's a way to go. but I think with, with clearer, clearer regular regulation, like DeFi kind of moving into the DeFi will move into banks, you know, we'll start seeing this kind of becoming much more of a common thing for financial advisors to, to, be able to understand.

Nifty (24:44)

And something interesting I've heard you mention is that those private bankers that are managing those big portfolios, family offices and their debt, they are probably looking for loans above a million, two million, five million dollars. And that's interesting where platforms like NftyFi comes into play for those 500k, 100k loans that are not going to be managed from a family office. So super interesting.

Stephen (25:07)

Exactly. Yeah, exactly. So that it brings this capability to more people. And so I think that'll be part of the and that is, think, what could push you above 15%. Right. So I think in the long run, you probably because it's so much easier, you probably have a much higher penetration. But I do think you need both of those things self managed. And then, you know, this is part of a financial advisors suite of tools that they can use.

Nifty (25:36)

It makes total sense because probably it's better to get leverage on your home and buy stocks. With that, you're not going to get liquidated margin cold from the bank or on your Picasso to buy stocks than get leverage on your stock portfolio and then get liquidated at the worst possible week going down in the market.

Stephen (25:50)

Mm-hmm.

Exactly, Yeah, because it's because they're illiquid assets, you know, they don't get marked to market as often. So you can kind of ride out these steps a little bit more. And typically, yeah, yeah.

Nifty (26:10)

I never thought about that that way, but makes total sense. something as well that I'm starting to see, but we haven't seen a lot of is that every Tradart sale we see in Christie's Sotheby's has a loan attached to it or almost every sale. And this is still not happening for the NFT sales happening through those action houses. And I think once we start including that there will be more sales, higher prices and more lending penetration.

Stephen (26:29)

Yes.

Yeah, exactly. I mean, and Sotheby's and Christie's of I mean, they're very into NFTs. And they're you know, we speak to them on a on a kind of regular basis. So they are they definitely thinking about this. I think it's just, you know, for them, again, for it to be worth their while in terms of, like deal sizes, you know, million dollars really is kind of where they where they start getting interested. So so I think at the moment, it's just, you know, I think the the

the curators are interested there. But the it's just not big enough for the finance guys to kind of do the due diligence to kind of get comfortable yet, right, but that'll change over time.

Nifty (27:19)

Are them doing the loans as well? them the counterparty?

Stephen (27:24)

sorry, the-

Nifty (27:26)

For the trad art pieces, they are doing the loans as well or just brokering them.

Stephen (27:29)

I think there is there is a there is a finance arm of both Christie's and Sotheby's. So so they do a lot of these kind of things.

Nifty (27:38)

talking a little bit about your whole overview that you have from this space, seeing boardwalks, lenders, can you share some interesting loans or deals that you've seen happen?

Stephen (27:50)

Yeah. So, I think it's like just a little bit more on the, what I've been finding very interesting is just like these X copy sales, just one after the other kind of at record prices, like almost instantly, you know, so, so like, he really feels like he's kind of reached an escape velocity that I don't think there's anybody else really has done, which I found quite interesting.

Because on the lending markets, the generative art tends to do slightly better, just because I think there's a larger collector base. But yeah, so I think XCOPY really is kind of that one of one artist that has really kind of taken off, which I thought was interesting. I thought the full set, Autoglyphs sale a few months ago, that was very interesting, $15 million. That's a hefty price tag.

I don't know if you saw how the, there was an auction of the set of seven autoglyphs. I didn't see how that, how that closed. you, do you keep track of that?

Nifty (28:58)

No, I don't remember that one. But do these big sets, for example, the Autoclip set, do they come as well to you asking for a potential loan?

Stephen (29:00)

Yeah, that was recently.

Not really, no. So we've been spoken to a few people, but again, you know, like a lot of those guys just, you know, they got them for nothing. And they had, you know, they had 40 and now, you know, they  you know, they don't need the loans.

Nifty (29:25)

It's interesting that the crypto people have a problem of having too much money, some of them. So interesting.Stephen (29:32)

Yeah, but I think it's also the part of how it originally started, right? So, you know, like those early guys like Nate and Jimmy and all of those guys, they just bought it, you know, 20 % of the supply of every single thing that launched because they just couldn't help themselves, right? So, so then there was this very kind of, because it was like a very small core group of people who were just obsessed with it. They just ended up with such a large portion of of the supply for a lot of those early projects and like all a lot of those early projects are the ones that ended up kind of sticking it out. So I think a lot of them just kind of accidentally got extremely rich. yeah, so that's interesting. But again, over time that'll you know, they kind of trickle out and you know, like anybody who's got 20 autoglyphs is thinking of us about selling some of them and like over time that kind of spreads into into more people's into more people's hands.

So I think, yeah, so I thought those were very interesting. The other things that I'm like more, I'm just shopping for stuff that I want. the harvest and the Keitel Goldit stuff, like I've always wanted and I missed it in the beginning and they got too expensive and now it's kind of starting to become affordable again. yeah, so I think it's more that I'm looking at some of the cheaper assets.

for things that I want to kind of have up in my office or something like that.

Nifty (31:01)

Everyone knows that some borrowers are just levering up, but can you talk about what some smart borrowers are doing with the funds?

Stephen (31:13)

Yeah, so I think there's a lot of people just levering up and kind of make sense to start doing that now. I think, you know, we kind of ride at the like the point in the cycle. so I think even as long as you can manage your debt to equity ratio kind of while there and deleverage as the the market starts running, you know, I think levering up is not

If you do it properly, it's not a dumb move right now. It's just the big thing is to take off that risk as the market goes up. People tend to then just pile on and these things worth more. I'll just take out more debts. I'll take out more debts. So that's when you get in trouble. The other thing that we've seen is the use cases for me that are the most interesting are the ones that are kind of like real life. So we had one borrower that

needed some capital for their business, they were getting a business loan, but it was going to take four weeks to do. So they took out a loan on a bunch of doodles to basically as a bridging loan until they got the finance for the business loan. So it's like those kinds of things I find interesting because that becomes, you know, it starts fitting into kind of a real world use case. The, you know, like the other thing that I find quite interesting is you know, lot of these watch loans that you're seeing, you know, a lot of them are actually watch dealers who are basically financing a transaction. So it's kind of as part of their business loop, they tokenize the watch, put it in the vault, get a loan on that that allows them to kind of finance the second half of the deal. So, so that I find quite interesting ways it's like it is it's part of a existing transaction that they would normally have done off chain, but now that it's on chain, they get access to larger pools of capital. I think really those kinds of things are kind of what's needed to really kind of push NFTs into a new growth cycle. It needs to be part of real business processes in a useful way.

Nifty (33:28)

Super interesting. I think a couple more. We saw one squiggle owner taking a loan on five squiggles to put a down payment on a home, which was pretty, pretty cool use of funds. And then I think I've heard you sharing, borrowing in dollars backed by your NFT to Long Ease and the other way around when we are at the top or

Stephen (33:40)

Wow, very cool.

Nifty (33:54)

people think we are at the top to short it. So that's super interesting as well.

Stephen (33:54)

Exactly. Yeah.

if you can, if you can get you so on blend at the moment, you know, you're getting like 70 % 80 % LTV sometime. So so like that, you can kind of think of that. Maybe now is not the time because things don't go up. But you can think of if you're doing an 80 or 90 % LTV line, loan on something, mean, it's basically speculating on margin, right? So like you, you're longing the assets on margin. And you've got like a cap of losing, you know, 10%. Right. So So I mean, that's also a very valid use case, right? I mean, it makes sense if you can cap your downside to 20%, but be exposed to the full upside. I mean, it's not a bad trade to do that. 

Nifty (34:39)

Yeah, 100%. I think if my data is correct, NIFTIFI still has the biggest NFT loan with an Autoglyph type 10 for $1.42 million. It was a record loan. Can you share a little bit of that deal?

Stephen (34:51)

Yep.

Yeah. So, I mean, that was, we weren't really all that involved in kind of manufacturing that, right? That was just like an organic deal between the borrower and the lender and they settled on, on NIFTIFI. Right. So, yeah, but I mean, like that was, that was very interesting. And that was kind of like, you know, it is a, I mean, that's serious money on a, on a single asset. Right. So, so.

Nifty (35:11)

That's super cool.

Stephen (35:27)

That was pretty exciting. mean, it would have been good one day to see a full set Autoglyph loan. I think that will be cool. That's good goal to have.

Nifty (35:39)

Okay, we have some minutes left, but it's my favorite section, so it's getting longer and longer and it's the rapid fire. Always like to say questions rapid fire, answers don't need to be. First question is, have you been able to replace your mortgage with a loan on your Autocliff?

Stephen (35:46)

Okay.

again.

Not not quite yet. But but yeah, think give me maybe next cycle. Maybe next cycle it'll happen.

Nifty (36:06)

That's pretty cool. I wanted to mention that what we haven't seen yet is the mortgage type loan on NFT. And I think that's an interesting use case where you can purchase an expensive piece like a gold grail, personal grail, and then pay in installments until you complete your Autoglyph bank. And I think that's one I would love to see.

Stephen (36:19)

Mm-hmm.

Yeah, I think that one is interesting. think the only thing with that is on an L1, maybe gas is not so bad right now, but it starts it starts becoming like you have this trade off. I think definitely on L2s that becomes very kind of appealing, or you need to have a very big load, right? On an L1 to kind of pay for the gas.

Nifty (36:53)

Can you do something like repaying on L2 so it's cheaper gas but keeping the asset on L1?

Stephen (37:01)

Yeah, you can. Yeah, you can start doing those things. It just, you know, there's just the I think that that way around probably works better. It's just, you know, like, would you bridge an auto glyph full set, like with a bridge, you know? Yeah.

Nifty (37:16)

No, no, no. I think the asset always stays L1, but the platform, the smart contract allows a borrower to repay via L2. So I think that would be interesting.

Stephen (37:23)

Yes. Yes. Yeah. Yeah. So I think I think that works. And you know, the interop probability is getting much better. You know, like the time is getting much it's going down a lot there. So yeah, I think that is definitely a reasonable use case there is there's something that we kind of looking into, I think it is it is a logical kind of next step. I just don't know, like, quite if it's

ready yet, but maybe buy now pay later needs multiple installment payments for it to actually take off.

Nifty (38:01)

I think it makes sense for something, some of those big pieces. And also sometimes gas is as big as the interest portion of the loan repayment. it makes sense You've lived through several crypto cycles in 2016. What are some of your lessons learned?

Stephen (38:07)

Yeah.

Yeah. Yeah.

Mm-hmm.

like lessons that I keep learning over and over maybe. It's so, you know, so one of the things it was like always this part of the cycle, like gets super depressing. And like, and I did it was like a month ago, was like, like, what's happening with with crypto right now. And then I went back and I looked at like, well, what was the Ethereum price on that day?

Nifty (38:30)

We all do.

Stephen (38:50)

four years ago. And it was like $400 or something like that, right? So this is like, okay, well, we're just exactly where we were. We always we always get more depressed than we think the bear markets always feel like they like are never going to end. And then so much happens in a bull that

like that nine months to a year feels like two years. And so like you always think it's going to go on longer than it actually does when you kind of like in it. So those are two things that I kind of have learned over and over again. And

The other big thing for me, which is just like what's worked really well for me and as kind of part of my personality too, is I just have like a longer time horizon. you know, so I haven't really sold any of that crypto that I bought in 2016 and I didn't trade too much and I just kind of like, you know, bought stuff, didn't do a lot, held on, was patient. And I think it's like, that's a bit of a superpower in a way in the, in the crypto space, you know, like you can, it's much less stressful.

You don't have to like freak out the whole time and you're much less likely to lose everything that you kind of put into it so those for me is a young like stick to your personality type for me that's long term and then young bear markets always feel worse than they are bull markets never last as long as you think that they will

Nifty (40:20)

So through really good ones, I love them. And especially with ETH, NFTs that feeling like they are lagging, sometimes it's good to remember that it's always similar.

Stephen (40:33)

Ethereum has outperformed Sol and Bitcoin over the last seven days. So there's hope.

Nifty (40:39)

Okay, okay. We celebrate what we can. Where do you think we are on the cycle?

Stephen (40:44)

Yep.

I think we've just started the proper kind of end of the kind of bull run, you know, liquidity, global liquidity is turning. I think the regulatory clarity that should be coming out of the US is going to be very big for the space. It would be interesting to see if

Like DeFi and utility tokens make a resurgence, you know, because if it all of a sudden it actually becomes legal to give utility to your token, you know, does that pull some of the wind out of the meme coin sales? You know, or does that happen only in the next cycle? I'm not sure. So that would be interesting to see. But, but yeah, you know, I, you know, my view is that we're in for very bullish time for the kind of next.

12 or maybe make it nine to 12 months, something like that.

Nifty (41:49)

And what are some top signals in your opinion?

Stephen (41:55)

The most important one is just the rate of change of global liquidity. basically, as global liquidity starts slowing down, crypto starts topping. that's for me, and it's happened basically every cycle. crypto is macro, as there's more liquidity, crypto is really good for risk assets, it's very good for crypto.

And then the regular clarity that we're getting now, I think, is kind of an extra tailwind.

Nifty (42:30)

booster, and you've mentioned that you haven't sold anything, do you have a price to sell this cycle?

Stephen (42:38)

I mean, I have sold a little bit and like I traded my sold some crypto punks kind of I think I sold them at an 80, 80, 80, floor something like that. So I, yeah, so I timed that well. But I don't

I'll probably ladder out a little bit and a little more kind of looking at the kind of liquidity indicators. but probably start kind of taking some profits as we start reaching all time highs for Ethereum. Same, I've got some Solana as well. So I'll probably start like laddering out a little bit, taking profits over the course of probably from February-ish onwards for the rest of the year. So slowly kind of take a little bit profit.

Nifty (43:21)

Makes sense. like similar approach. I like to get into the market DCA and do the reverse DCA to get out because I'm aware that I'm not gonna pick the bottom and the top. So I just try to put during the bear.

Stephen (43:27)

Yes.

Exactly. Exactly. And who knows, especially kind of with how the world is right now, there's so much like political and geopolitical, like uncertainty, you know, you just like you never know, you know, something could happen at any point in time.

Nifty (43:51)

You have really cool pieces in your collection. You have a hoodie Mivit that you minted. You have memories of chilling, an Autoglyph, a Slinky 7571. What is your favorite NFT?

Stephen (43:54)

Mm-hmm.

that meebit is a little bit special for me. so that one I minted as part of the, cause I had some punks. so I minted four, four or five of them. but my, Wife went into labor on the last day that you could mint. And so basically we went to the hospital, I had my laptop and my hardware wallet with me. She gave birth, we went back to the room. She was asleep in the room next to my newborn son. And then I minted those Meebits then kind of like an hour to spare before I couldn't do it anymore.

So yeah, so that's like, you know, it's like a, that's one of my forever ones I'll keep forever. especially that hoodie one. It's also got the lava lab sneakers. and it's like a really nice looking one. So, I'll always keep that one. I really love the memories actually as a, think it's like really pretty. So, you know, that's the something I'm gonna have up in my house. and then, and then I kind of have a soft spot for like,

That founder CryptoKitty, you know, it's like the 72nd EOC 721 minted, right? Like that's, that's a, that's pretty cool. So, I mean, it cost me a lot. Yeah. Yeah. Yeah. So I don't know if it'll ever be worth anything again, but it's like nice owning a little bit of history.

Nifty (45:26)

and our GPS.

any grail that got away and the story behind it.

Stephen (45:44)

basically like all of Kato Golod's stuff. like, you know, just didn't have, you know, was, yeah, just didn't have any capital at the time. when kind of he was popping off. I always loved his stuff. It just got too expensive too quickly for me to justify the price. but, but yeah, I'm always watching it and looking for ones that are, that are becoming more affordable.

Then yeah, for Danza's too, you know, like I almost bought one for like, you know, very early on. I like I love the look of them. I think they're Yeah, like they're one of the aesthetically most appealing the generative art pieces for me. So yeah, those ones and then yeah, pump that like the eternal pump. also was this close to buying one, you know, and very early on, but they got away.

But I've also got a bunch of day one art blocks that I'm happy with. I've got a couple of genesis construction tokens.

Nifty (46:47)

Fidenza is beautiful. love the founder of Shopify. He has one on his living room and it's really a piece of art that looks amazing.

Stephen (47:00)

Yeah, no, no, they're very beautiful. Yeah, those are definitely I know. Yeah, I'd like the kettle stuff like especially I don't know if you've seen some of his like an edition of 10 of it's not like a art blocks project. It's like a smaller edition of 10.

Beautiful, beautiful stuff there, but they also just very expensive. and the other thing that I, like, it's not that I missed because they were already very expensive, but deaf beef, you know, that like, would love to have some deaf beef. But yeah, I that one also can't justify 50. I think I've got 50 ether floors still on those ones.

Nifty (47:40)

You've seen the NFT market from the very beginning. How do you see the NFT space right now?

Stephen (47:45)

Hmm.

Yeah, so I think we're kind of in the middle of like a transition phase where we're kind of starting to see new use cases, but they haven't really fully taken off yet. So, yeah, so very interested to see things like tokenized real real world collectibles. I'm really interested in seeing things that produce yield being represented as NFTs, I think that will be a big game changer. So once you kind of have real cash flows that are coming from an NFT, I think that kind of changes a lot what you can do finance-wise with those assets. So, we've seen a few things like that. We've seen like payment streams represented as NFTs, Ethereum staking those represented as NFTs.

So a lot of kind of interesting things kind of percolating, but nothing has kind of had their, you know, top shots moments or something like that yet in those master classes. So, so I think that there's lots of those kinds of things cooking under the seat behind the scenes. And I'm excited to see kind of something pop off. And then for PFP and art, you know, so like I said earlier, I think the, the real kind of

Top tier assets are pretty clear. I think that there are some mid tier more affordable artists that are actually pretty good deals right now. So like the harvest in like kettle golet stuff, there's a few things like that, that I think will probably come back. so there's, think there's like a second tier crop that I think is more affordable for normal people.

and then on the PFP side, yeah, I think that's interesting to see what's going to happen there. You know, like I think that there's a few of those, those PFP brands that are probably big enough to become consumer brands, but it'll take a while. so I think some of them stick around. so I think that'll be interesting. And then, and then the other area that I think is it would be interesting is because like a lot of the meme coin things has like some elements that overlap with NFTs, but it's like more financial. And I'm wondering like, what is the, I kind of have a feeling that there's something where it's both a meme coin and an NFT like, you know, like figuring out the secret source there, like what is the crypto punks of meme coin NFTs, right? Like, I don't think we've really seen that yet.

But I think that could be quite an interesting combination. Maybe Apecoin is kind of starting to kind of go there, right? So you've got the Apecoin and you've got all of the assets that live in that ecosystem.

Nifty (50:54)

And some meme coins have done the other way, like from meme coin to launch the NFT collection.

Stephen (51:01)

Exactly. Exactly. Yeah. And so, so maybe we're kind of in this, that moment that we were in basically this time in 2020, where a lot of projects were being launched, hash masks, you know, Bored apes, all of these things were kind of being launched, and nobody really knew which one was going to be the big one. And maybe we're kind of in that phase of the meme coin NFT kind of emergence, but

But yeah, I mean, it's interesting. I just think we're to see more and more different kinds of asset classes, more and more verticals. and we like have like a lot of infrastructure being built that serves all of them. And then there's going to be a lot of more like verticalized, you know, end to end experience like Fabrica, know, Fabrica land, the tokenized real estate, you know, you can tokenize the land, get a loan, repay the loan.

all on their platform, they just integrate with the lending protocols in the backend. And I think you'll see more and more of that as you start kind of, especially going into real world collectibles and those kinds of things, you'll have much more customized experiences.

Nifty (52:09)

You've talked about Fabrica, Tokenize, Real Estate, Wines, recently Luxury watches, you announced what's next for NFTfi.

Stephen (52:15)

Mm-hmm.

Yeah, so I think working more with integration partners. for, know, like I said, like I think over the long run, the growth of this industry is going to lead to much more verticalization because like the watch market is different from the property market is different from the art market is different from the collectibles market, you need different things and use like completely different players and what matters in the watch market time to deal is super important and the art market is not right. So so there's different and, know, in the watch market, they probably have more pricing power because they've got the captive, you know, they've got the both sides of the, of the thing. Where's in Mark Beats big, like, global marketplaces, there's less pricing power. So, so we're really kind of working with partners to kind of build, you know, more and more kind of even just, smart contract level, even if it doesn't end up on our DAP, but like customized solutions for different vertical eyes, for different verticals. so that is very interesting for us over the long run.

Nifty (53:21)

Are you, I have to ask, are you considering sneakers as well or?

Stephen (53:27)

yeah, we're happy with doing any of those things, right? Like, I mean, sneakers are huge. it's just, yeah, it's just finding the lenders, right? Like that's the, like, and that's the thing with each one of these new verticals, you kind of have this kickstarting the market from scratch again. and I think watches, I think a lot of

Nifty (53:34)

Maybe too small, Yeah.

Stephen (53:50)

NFT collectors or probably watch collectors and maybe sneakers also kind of there's an overlap. So at least you have like a few of the lenders that are already operating in the space who know something about watches or know something about sneakers. I think is less so with things like real estate or diamonds or gold, you know, or like whatever else you want to do. So I think these cultural collectibles are probably going to be the easiest to kickstart a market on.

Nifty (54:17)

Watches and NFTs overlap a lot. It's really important, the rarity, the year, the condition, lots of aspects, kind of metadata for an NFT. And I think they are overlapping and those ecosystems will probably meet. Stephen.

Stephen (54:28)

Yep.

The price action overlaps too I don't know if you saw that. Like if you overlay the Rolex floor price and the Bored Ape floor price, they basically peaked at the same time dropped at the same time. So all liquidity.

Nifty (54:37)

Yeah, yeah. And Pateks.

It's super interesting. Stephen, anything else you'd like to share?

Stephen (54:52)

No, that's it. I just wanted to say thanks and thanks for everything you guys do in the ecosystem. You guys are one of the kind of steady good players who kind of have long-term best interest of the entire ecosystem at heart. So thanks for everything that you guys do.

Nifty (55:08)

Thank you so much and thank you for joining us. Really appreciate your stories, your insights. And I know our community will get a tone out of them. And we really appreciate NIFTIFI sponsoring this podcast. So thank you for that. You can follow Stephen on Twitter at Stephen underscore yo, S-T-E-P-H-E-N underscore y-o and NIFTIFI at NIFTIFI, N-F-T-F-I. Stephen, thank you so much.

Stephen (55:20)

My pleasure.

Thanks, Nifty.