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Jake Brukhman Profile picture
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21 Feb, 5 tweets, 1 min read
Some thoughts on fractionalization as a price discovery mechanism for NFTs.

1. Capital Efficiency. As a first matter, the capital efficiency of such a mechanism is high: a few participants trade a few units to create an implied valuation for the overall asset.
2. Complexity. Fractionalization is a complex mechanism. It requires an entire token supply + trading volume for each NFT it appraises. Given there are probably trillions of NFTs, this heavy machinery is likely to be applied to the most expensive ones.
3. Governance. Fractionalization is really about governance, because it creates all kinds of new questions. What happens if someone buys 51% of the shards and burns it? How does an asset defractionalize? What governance system is appropriate?
Fractionalized assets will enjoy compatibility with the DeFi ecosystem as it stands today, and it’s also arguably the fastest way to create liquidity for a nonfungible.

Solving governance will be the key to these systems.
More details on the NFT liquidity problem here: blog.coinfund.io/appraisal-game…

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More from @jbrukh

Jake Brukhman Profile picture
20 Feb
People refer to Bitcoin as a cryptocurrency and tokens as “altcoins”.

In other words, we have framed Bitcoin as money and tokens as alternative money to that.

That is an insanely skewed view of what is actually happening in blockchain.

Allow me to expand.
If anything is alternative to the broader world, it is Bitcoin. So if anything, Bitcoin is alt-money.

Tokens are broadly *not* money. They are on avg more like equity. Also they are (in general) not BTC substitutes, they are innovations in their own right in their own verticals.
Finally, Bitcoin being framed as money is also not quite correct. Bitcoin is volatile and has poor properties for being a unit of account until it achieves broad and serious stability.

That’s why it’s now framed more as a store of value or a digital gold.
Read 5 tweets
Jake Brukhman Profile picture
9 Feb
1/Rant!

I donate hours & hours of my time handholding newbies into blockchain. Prospective creators @edition1art, family, people curious about #DeFi, or non-finance/tech friends who are learning about crypto for the first time.

It's tough as it is to learn new paradigms. Image
2/When you get to explaining Ethereum transactions, it's intense. You have to explain how transactions work given a world computer, what "allowances" are for, and transaction costs.

Gas fees represent an insane barrier to entry, cognitively and economically, for new users. Image
3/Layer 2 helps, but here's the reality:

- There's virtually no L2 coverage across apps right now, just as we march into consumer adoption phase & Elon is loading up $BTC.

- We're about to create massive segmentation in L2 market with no clear consensus on L2 interop tech.
Read 8 tweets
Jake Brukhman Profile picture
28 Dec 20
Here’s what will happen when blockchain goes mainstream:

- Money will move at the speed of light

- Basic financial services will be available to everyone with a phone, globally

- Crowdfunding will become the predominant capital formation mechanism for organizations
- Cryptocurrencies will become a major asset class for inflation hedging

- Marketplaces will be disintermediated by smart contracts, creating insanely efficient facilitation

- Creators will put their work directly on global, digital markets
- Influencers will connect and monetize with audiences directly using digital assets

- Finance and market efficiency will become predominantly a matter of computer science

- Human organization, starting with corporations, will move on-chain
Read 6 tweets
Jake Brukhman Profile picture
27 Dec 20
Awesome podcast from @michael_saylor, deep diving into the corporate Bitcoin strategy for two hours.

podcasts.apple.com/us/podcast/btc…
First key take away is that inflation is really a relative measure, and poorly expressed through the CPI.

Real inflation rates are much worse than they appear & the cost of your capital is not being compensated adequately by traditional investments like bonds and real estate.
MicroStrategy found an interesting way to obtain a loan and buy Bitcoin with it in a way that takes advantage of the inflation hedge, control downside risk, and bet on the future.

“There is no 5 year timeframe in which Bitcoin underperformed.”
Read 5 tweets
Jake Brukhman Profile picture
24 Dec 20
1/The next major problem set in #DeFi is #NFTLiquidity.

It has become very clear that, like fungibles, nonfungibles are their own financial asset class.

One path to see this is to envision the future of NFTs as “liquid IP”:

blog.coinfund.io/all-digital-co…
2/Some say that NFTs “shouldn’t be” liquid, yet the innovation process continues.

Just like photography has become much easier to create in the last 100 years, liquid NFTs will surely bring down price points of tokenized digital content but will also open expansive new markets.
3/The key observation is this: #NFTLiquidity is merely a technical problem for #DeFi, and the entire set of economic mechanisms is its solution space.

👉🏻 In particular, because of tokenization, *the NFT liquidity problem reduces to the NFT price discovery problem.*
Read 11 tweets
Jake Brukhman Profile picture
1 Dec 20
Here a few observations about NFTs on Layer 2, which hint at the possibility true network effects.

These effects *only apply to nonfungibles*.

🌠🌆🎆👇
ERC721 NFTs are notoriously hard to move, you have to pay gas per asset and there is no bulk transfer.

That means once you start a collection in a particular wallet, it will be very expensive to move to a new one.
This implies that users entering the NFT world through a rollup have little incentive to move their assets to the base layer.

Moreover, moving the assets to another L2 is going to cost at least as much as bulk wallet transfers.
Read 5 tweets

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