Jun 16, 2022 · 1h 2m · capital-allocators
Stephen McKeon – NFTs and the Consumer in Web3 (EP.255, Crypto for Institutions 2, EP.02)
0:00 / 0:00
gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
In this episode of Capital Allocators' Crypto for Institutions II miniseries, host Ted Seides interviews Stephen McKeon, partner at Collab+Currency and finance professor, to examine the consumer-facing Web3 landscape. McKeon breaks down the economic foundations of NFTs, DAO governance structures, the open metaverse, composable Web3 gaming, and the wallet infrastructure paving the way for mainstream global adoption.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Ted holds 16.7% of the talking time here. How this is scored →
Ted as informed peer 2.6 Guest teaching 5.4 Guest disagreement 0.4 Ted pushing back 0.8
speaking balance: gold is Ted, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 18:55 Debunking the myth of inherent NFT value
McKeon firmly pushes back against the broad hype, emphasizing that simply wrapping digital content into an NFT confers zero value if no organic consumer demand exists.
Hardest push from Ted ▶ 39:15 Challenging value accretion without scarcityTed directly challenges McKeon's thesis of open metaverse environments by asking how capital value can accrue if infinite digital land plots can be generated.
Biggest teaching moment ▶ 10:05 The provenance breakthrough of digital assetsMcKeon delivers a masterclass on how physical provenance applies to fine art and why blockchain solves the zero-to-one problem of provable uniqueness for digital content.
Ted holds their own ▶ 14:34 Inquiring into lofty NFT valuationsTed articulates institutional investor skepticism regarding irrational valuations of profile picture NFTs, forcing McKeon to ground the concept in future ecosystem access.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Ted as informed peer | Guest teaching | Guest disagreement | Ted pushing back | Why |
|---|---|---|---|---|---|---|
| Capital Allocators Podcast Welcome | 0 | 0 | 0 | 0 | Ted provides an opening monologue introducing the podcast mini-series, the guest Stephen McKeon, and the episode's thematic focus on Web3 and consumer applications. As a monologue/intro, all host and guest interaction scores are zero. | |
| Evolution of the Security Token Thesis | 3 | 5 | 1 | 1 | Ted references their previous 2018 discussion on security tokens and asks how the thesis evolved. McKeon explains how regulatory friction stalled regulated security tokens while innovation shifted rapidly to fungible tokens and NFTs. | |
| Defining NFTs and the Economics of Provenance | 3 | 7 | 1 | 1 | Ted asks for a foundational definition of NFTs beyond art and collectibles. McKeon details digital provenance, physical-to-digital transformation, and predicts that 99% of all digital assets will eventually be formatted as NFTs. | |
| Token-Gated Access and Utility Beyond Visual Art | 3 | 6 | 1 | 2 | Ted raises the common outsider skepticism regarding why profile picture NFTs like Bored Apes command such lofty valuations. McKeon reframes them as programmable membership passes and community bootstrap mechanisms rather than just digital images. | |
| Venture Investing in NFT Infrastructure and Marketplaces | 3 | 5 | 0 | 1 | Ted inquires about the fund's investment strategy given the endless supply of potential NFTs. McKeon outlines their focus on social graph platforms and secondary-market royalty mechanisms like Art Blocks. | |
| Curation, Brand Value, and Community Dynamics | 3 | 5 | 1 | 1 | Ted asks how platforms differentiate themselves when anyone can launch an NFT marketplace. McKeon emphasizes the importance of curation, noting that over 90% of OpenSea collections have zero trades and that wrapping content in an NFT doesn't create inherent value. | |
| Decentralized Autonomous Organizations and Collective Coordination | 2 | 7 | 0 | 0 | Ted transitions to DAOs and asks for a clear definition. McKeon provides a thorough overview of internet-native coordination, comparing the friction of traditional corporate proxy voting with smart-contract voting in minutes. | |
| DAO Execution Challenges and Governance Bottlenecks | 3 | 6 | 1 | 2 | Ted asks about malicious exploit mechanisms and how people attempt to manipulate DAOs. McKeon reframes the main vulnerability from theft to organizational gridlock, explaining that achieving consensus is often the real bottleneck. | |
| Investment DAOs vs. Traditional Venture Capital | 3 | 5 | 0 | 1 | Ted asks how McKeon evaluates DAO investment opportunities. McKeon breaks down specialized DAOs across verticals like digital fashion and metaverse real estate, comparing their crowdsourced sourcing model to traditional VC firms. | |
| Co-Investing with DAOs and Network Value for Founders | 3 | 5 | 0 | 1 | Ted asks how DAOs coordinate founder assistance and source deals. McKeon explains how venture capital firms co-invest alongside DAOs, using administrators like Tribute Labs to match founder needs with community experts. | |
| Conceptualizing the Open Metaverse | 4 | 6 | 1 | 2 | Ted presses McKeon on how virtual land accrues value if digital environments lack artificial scarcity. McKeon differentiates fixed-map skeuomorphic worlds from open metaverses like Mona Gallery where value is driven purely by attention and content. | |
| Web3 Gaming Mechanics and Low-Fee Infrastructure | 2 | 6 | 0 | 0 | Ted asks about the growth in Web3 gaming. McKeon uses Axie Infinity to explain how moving to low-fee sidechains and layer twos unlocked viable play-to-earn micro-economies and asset interoperability across different games. | |
| Blockchain Interoperability and Cross-Chain Fabric Networks | 3 | 6 | 0 | 1 | Ted asks about the challenges of interoperability across fragmented layer 1s and 2s. McKeon illustrates the limits of point-to-point bridges and explains how overlay networks like Axelar act as an interoperable fabric similar to Akamai for the early internet. | |
| Digital Wallets as the Universal Interface of Web3 | 2 | 6 | 0 | 0 | Ted asks about current progress toward full interoperability. McKeon compares the adoption curve of self-custodial digital wallets to the mid-90s adoption of email addresses, citing survey data from his University of Oregon students. | |
| Macro Market Volatility, Hype Cycles, and Pure E-Commerce | 3 | 5 | 1 | 1 | Ted asks about the severe price downturn in crypto markets and historical hype cycles. McKeon frames crypto pullbacks within macro risk-off cycles while arguing NFTs operate as the purest form of frictionless e-commerce. | |
| The Cultural Paradigm Shift: From Speculation to Utility | 2 | 6 | 0 | 0 | Ted asks how Web3 will tangibly affect everyday consumers in the near term. McKeon explains the pivotal shift from purely speculative trading accounts to active utility and access passes, citing conference ticketing via NFTs. | |
| Crypto Course Curriculum and Hands-On Wallet Education | 2 | 6 | 0 | 0 | Ted asks how newcomers can effectively learn about Web3. McKeon shares the curriculum from his university crypto course, highlighting his hands-on 'Wallet Workday' and interactive quest platforms like RabbitHole. |
Statements from this episode (35)
McKeon: Crypto Innovation Has Materialized in NFTs and Tokens, Not Regulated Securities
“There's still lots of people working on bringing regulated assets on chain, but it's really been the fungible tokens, the network tokens, the NFTs, where we've actually seen most of the innovation and most of these features come to life.”
McKeon: In 2018, Only One or Two Crypto Funds Exceeded $100M
“There was one or two funds over a hundred million dollars in the entire crypto space.”
McKeon: Token Investing Forced Collab+Currency Spin-Out Over VC Exemption Rules
“By late 2019, early 20 20, it was clear that we were going to trip up something called the venture exemption. Because as a crypto fund, we invested both in equity and in tokens, as opposed to traditional venture funds, which are obviously primarily equity. So …”
McKeon: 99% of all crypto assets could be NFTs long-term
“We think there's a very plausible scenario where 99% of all crypto assets are NFTs in the longer run, especially as minting costs come down into the few cents or perhaps fraction of a cent.”
McKeon: Token-gated access might be the next generation of site authentication
“We know we're going to move past this, and we think that
Tokens and token gated access control might be one of the mechanisms which would be the next generation of authenticating into sites.”
McKeon: Profile picture NFTs are placeholders to bootstrap communities
“Board Apes and a lot of the other what we call PFP projects, so profile picture projects, I think the right way to think about them is that they are effectively placeholders. To be able to bootstrap a community, and in the long run, will be much more than a pi…”
McKeon: Yuga Labs could become the Web3 version of Disney
“You could see Yuga basically becoming a web three version of Disney, and all of it is going to trace back to these holders of the original board eight pictures.”
McKeon: 300 million people have crypto exchange accounts globally
“There's three hundred million users that have a crypto exchange account at this point. There's five billion internet connected humans on the planet.”
McKeon: Collab+Currency invests in NFT platforms rather than direct NFT assets
“Our fund historically has not taken a lot of direct NFT exposure in terms of the underlying, but we are perhaps the most active investor in the world in NFT related platforms.”
McKeon: Crypto's biggest use cases will map the social graph, not finance
“We think that actually the biggest use cases in crypto are not going to be purely financial in nature. They're actually going to be things that map the social graph.”
McKeon: Over 90% of OpenSea Collections Have Never Traded
“Something like 90% or maybe more than 90% of collections on OpenSea have never had a single trade.”
McKeon: NFTs Provide Provenance but No Inherent Value
“Taking an item and wrapping it in an NFT does not inherently make it value. There's nothing valuable about the file format inherently, other than you now can prove provenance, but of course it has to be something that people want.”
McKeon: Vast Majority of NFT Items Will Probably Go to Zero
“The vast majority of collections don't trade, and the vast majority of items are probably going to go to zero.”
McKeon: DAOs collapse governance and voting coordination costs to near zero
“The coordination around governance and voting mechanisms Has been collapsed to almost nothing when you're using these digital environments with provable ownership.”
McKeon: DAOs' Biggest Issue Is Capital Gridlock, Not Theft
“So if anything, I would say the biggest challenges around DAOs today are not that People are absconding with the money, but in fact that the money is not being spent quickly enough.”
McKeon: Wallet-to-Wallet Messaging Remains Unsolved Due to Spam Vulnerabilities
“Wallet to wallet messaging is still one of the big unsolved things in crypto. The reason it's hard is because as soon as you open up wallet to wallet messaging, you get massive amounts of spam.”
McKeon: Investment DAOs will displace a portion of traditional VC over time
“The ones we've been talking about are investment DAOs, and those really mimic a venture capital fund, and in fact, we think will displace a portion of venture capital over time.”
McKeon: Web3 founders often prefer DAO capital over traditional venture firms
“When you talk to founders, many times they prefer to take capital from DAOs as opposed to traditional venture firms.”
McKeon: The Web3 metaverse differs fundamentally through participant asset ownership
“The big difference with the way most people in crypto think about the metaverse is that the digital environments we interact in today are wholly owned by corporations and by particular platforms. Whereas the metaverse that we envision in the future is more lik…”
McKeon: Metaverse will evolve into infinite plots rather than fixed maps
“This is probably the way the metaverse looks because a fixed map is very skeuomorphic, as they say. It's kind of like if we were to imagine regular real estate in a digital environment, it would look like a fixed map. But this is cyberspace. There's no reason …”
McKeon: The Metaverse Will Act as a Base Layer for Digital Activities
“We think of a metaverse as a base layer, so it's a layer upon which many other things will be built. You can go into the metaverse and you can play a game. You'll probably be able to go into the metaverse and trade stocks. You'll probably be able to go into th…”
McKeon: Collab+Currency invested in Axie Infinity at 15k to 20k users
“We invested in Axie when they had 15 or 20,000 users probably.”
McKeon: Axie Infinity hit 1M to 2M users after migrating to Ronin
“So they ported it over to Ronin. Users went to 50,400 thousand, and a 1,000,002 million, and so the thing just took off.”
McKeon: Web3 gaming requires fast, low-fee environments to work
“All the activity is happening in these low fee environments because you need fast and cheap to make the game use case work.”
McKeon: Web3 asset ownership enables cross-game reuse for first time
“The interesting thing about Axie is it started out as a singular game, but because people own the characters and because people own the board, you can repurpose these assets into new games. This has really never been possible in gaming before.”
McKeon: Web3 interoperability will rely on transparent overlay networks
“We think something similar will happen in Web three. Where something like Axler is an overlay network on top of all of these sub-ecosystems, from the user's perspective, it's totally transparent.”
McKeon: 30% of Crypto Students Held Web3 Wallets Before Class in 2022
“This was like, 2018, 2019. 20 20, a few. And this last year, 30% of the class on day one before we'd started any of the content already had A digital wallet.”
McKeon: Digital wallets will become as ubiquitous as email addresses
“I don't know if it's five years or nine years or 13 years, but I do know that our north star at the fund is that everybody is going to have a digital wallet. They are going to be as ubiquitous as email addresses. It's gonna be the way you receive your paycheck…”
McKeon: Trust-minimized ledgers represent an irreversible technological shift
“Now that we have these trust-minimized ledgers, we're not going back to siloed databases. It's just not happening. Just like once we had the personal computer, we're not going back to typewriters. This has been a technological state change.”
McKeon: Only 1.5M people globally have ever transacted on OpenSea
“1.5 million people total ever in the world have ever executed a transaction for an NFT on OpenSea.”
McKeon: NFTs are probably crypto's least correlated asset to the S&P
“Out of all the things in crypto, NFTs are probably the most uncorrelated with things like the S&P, because they're really more like a consumer product.”
McKeon: NFTs represent the purest form of e-commerce ever conceived
“NFTs are the purest form of e-commerce ever conceived. My friend Kai Sheffield used that phrase, who's the head of crypto at Visa. There's no supply chain. There's no logistics. It's literally straight from the creator to the consumer.”
McKeon: NFTs shifted crypto's focus from speculative trading to utility
“The big difference over the last 12 to 18 months, NFTs are the ones that caused this paradigm shift. The mentality went from trading to using. That's a really important shift that probably most people who are outside the industry haven't fully grasped. The rea…”