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November 10, 2021

Quidd CEO Michael Bramlage On Digital Collectibles: The New Trend In NFT, Plus: AC Milan NFT, CryptoPunk Flash Loan, Facebook Goes Meta, And More...

NFT 62 | Digital Collectibles

The NFT space is undeniably growing in many directions: from high-end digital art to virtual real estate to digital collectibles, and more. In this episode, Michael Bramlage explains the value of the latest innovations in blockchain and how they move collectibles from cardboard into code. Michael is the CEO of Quidd, the original digital collectibles marketplace. Their platform allows you to buy, sell, and trade digital collectibles and earn real money in the process. According to him, this trend that Quidd is riding is part of an inevitable future of digitization. Tune in on his conversation with hosts Jeff Kelley, Eathan Janney, Josh Kriger to learn about this exciting new model and find out what’s hot in NFTs.

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Quidd CEO Michael Bramlage On Digital Collectibles: The New Trend In NFT, Plus: AC Milan NFT, CryptoPunk Flash Loan, Facebook Goes Meta, And More…

This episode features Michael Bramlage. He’s the Cofounder and CEO of Quidd, the Animoca Brands and Sequoia-backed marketplace for buying and selling rare digital collectibles with over $2.1 billion assets issued to date. Formerly VP of Topps Digital and Head of Product at Nokia, Michael brings a wealth of experience to his leadership of the Quidd team and the innovations he has brought and continues to bring to the Quidd marketplace. Michael, welcome to the show.

Thanks for having me. It’s great to be here.

We said it before, this is a historic moment, this is the first time all three of us have ever been in the same room together, much less doing a show together in person from New York City.

I hope you can make it to the end of the show before killing each other.

Much less into the freaking week. We’ll see.

There may be a queen bed that we are all sitting on. For the record, we all have our own beds in New York City with two different conferences, all sorts of events. We were talking shop a little bit before. it sounds like we’ll probably be at a couple of parties together. It should be fun.

I’m excited. I’ll see you there.

We connected through our friends at Animoca Brands. It’s such a cool group of folks we had yet on the show. We had Robby on the show. I love everything that they’re about. I’m glad that we could connect with you. There’s so much to Quidd, the history and what you have going on. It predates the NFT boom by far. Can you tell us where did this all begin and more about the origin story?

We’re in a space where the origin story matters. We’re dealing with collectible products whether it’s high-end artwork, fine wine or low-end trading cards both physical and digital. It tends to get more valuable as time goes on. This is the weird quirk of a space where old stuff gets more valuable as it gets older. We spent a lot of time talking about our origin story because we do think it makes us a bit unique. That’s a type of uniqueness that is especially important in these collectibles in the NFT space.

Quidd has been around for several years. We were first to market with our marketplace in 2016. The idea for Quidd predated Quidd itself. I had worked previously at Topps Digital. Around 2012 was when I and a team that I work with at the time started experimenting with digital ownership. It’s this basic notion of, could you take a JPEG? Could you make it verifiably scarce? Could you get people to want to collect, own and pay real money to have it?

What was novel is these digital objects existed outside the context of a game. We’ve all played games. We’ve all spent money on a sword that has a functional value, that helps you level up or even decorative skins to help feel cool within a social context of the game. That was well established back then.

What we were doing was even more narrowly focused and it was devoid of any broader game context. It was, “You’re a fan of this thing. Maybe a way to express your fandom is to own a limited-edition JPEG that features the brand that you love.” There wasn’t much to do with it besides barter it with somebody else or simply hold it in your digital collection that was accessible from an app on your phone.

What NFTs ultimately injected into the conversation is economic utility and that ability to sell to somebody else in a currency that is meaningful to you. Click To Tweet

We were early on in this exploration of a format shift where collectors are going to shift from buying products made of cardboard to buying products made of code. We had a bit of success there from about 2012 through 2015 so much that it started creating tailwinds for the creation of Quidd. We said, “If this is working over here, maybe it’ll work over there. Maybe over there at Quidd, we can do it even bigger and better as a VC-backed startup.” In a lot of ways, we’ve been in this space for over a decade. With Quidd, specifically, that play has now been up for several years.

There’s so much experience thinking about the space. I’m sure that influenced your thinking in many different ways in how you can evolve over time. It’s an interesting origin story.

NFTs have been part of your line of sight for a long time. We talked about how early use of NFTs was the skins in the games. You’re part of that genesis era thinking about this even before CryptoKitties. How has that impacted your strategy? In particular, when things got hot with the market, how did that impact your roadmap and your vision of Quidd?

When we initially raised money way back when for Quidd, we used comparisons to the video game market as a way to explain to investors like, “Trust us or at least look at this data. Young people that are digitally savvy and digitally native spend billions of dollars on these new game assets, $25 billion, $50 billion.” We quoted some massive numbers and that certainly got people’s attention.

One of the outputs of having been in this space for so long is you do build an appreciation for the nuance and the layers that exist. What we probably have are three categories of digital objects that exist. One is you have the in-game items. Those are probably games that are in traditional video games or free-to-play experiences that aren’t on-chain. They’re not individually serialized and scarce. They’re rare. It’s things like legendary, mythic, uncommon, common. They all carry those rarity labels. Those rarity labels don’t map exactly to a quantified count of exactly what exists.

You’ve got one category in-game virtual assets but you don’t know how many of them exist and you don’t own them. Ultimately, you’re at the whim of the game developer to effectively lease them from them. You have this middle category, which we operate now, which we’re calling non-fungible digital collectibles. They are off-chain items that are individually serialized and have a fixed supply.

When we issue items off-chain on Quidd before they hit the blockchain, they’re all individually stamped and serialized. You know and can verify as a collector that only 2,000 or 5,000 of these exists. It’s different from the world of gaming and it has to be. In the world of gaming, they have to run their economies so that if the game explodes and all of a sudden, they go from 1 million users to 100 million users, they can print more items and have enough for them to buy. In our world, it’s truly fixed supply. If there’s 5,000, there’s only 5,000 that will exist.

To the right of us, you’ve got pure-play NFTs. One of you asked about what has the boom in the NFT market done for us? It’s validated the path that we started years ago but it took it to another level. I’ll give you an instance of this. For years, Quidd existed largely off-chain and largely selling collectibles to fans and collectors that sought out that JPEG because they love the brand, the character.

They wanted the item to complete a set of 8 or 18 items. It’s this notion of completing them all. They wanted to have prestige within the social context or app. They wanted these objects for years without any notion of economic utility. They didn’t buy them to then resell them. They didn’t buy them because they thought they could sell them for 10X in five years and help pay for rent or pay off their student loans.

What NFTs uniquely ushered in starting in 2017 and with the boom is a technology that can give the peace of mind of ownership that can then be valued at price points that are real, hundreds of dollars, thousands of dollars, tens of thousands of dollars. I don’t think you can achieve those price points or that you’ll cap out if you can’t offer to that collector, to that buyer what the blockchain offers.

It is a sense of permanence, a sense of, “I own this,” and access to various marketplaces where you could buy and sell for real money. In a lot of ways, what NFTs ultimately injected into the conversation is that economic utility and that ability to sell to somebody else in a currency that is meaningful to you and that can affect your everyday life.

NFT 62 | Digital Collectibles

Digital Collectibles: What NFT is uniquely usher in is an effective technology that can give the peace of mind of ownership that can then be valued at price points that are real hundreds, thousands, tens of thousands of dollars.

What’s compelling about where we are, the state of play is we are at a point where if you like art, in my case, if you like sports trading cards, entertainment trading cards, you have a tough decision to make, “Do I buy cardboard or code?” Ultimately, the code format has caught up. You could put a list of all the things you can do with a physical trading card and put an NFT next to it and it’s pretty comparable. It checks all those boxes.

One could argue because it’s digital-only, it always starts on-chain. Technically, you can lose access to your wallet but you don’t lose the item itself. It’s interoperable and can go into various contexts. You can buy and sell on OpenSea. It’s 24/7. You can look at it and touch it without degrading the condition of it and then devaluing the object, which exists in the real world. I would argue that you put those two things side by side. We’re at a point where NFTs, as a format, win out.

Is that why you ended up doing this real-world pre-Mint market and aftermarket? Is that your bridge to the mainstream that you guys created?

A hundred percent. It’s a bit self-serving to say we had this vision years ago, that we’d had this hybrid solution. In a lot of ways, we built this thing over half a decade. We said, “This is a valuable asset.” We’ve got a community. We’ve got collectibles in circulation. We’ve got a whole lot of code to run this off-chain marketplace. We don’t want to jettison that. What we’ve been able to do is find a way to connect it to the blockchain in a way that’s complimentary and also authentic and organic to how trading cards work. You guys probably are young gentlemen, younger than I am.

Are we talking about the ’70 and ‘80s here?

Yes. I was collecting parchment paper with the Founding Fathers’ signatures on them. When I was collecting physical objects, not everything you own is super valuable and that’s okay. It’s fine to have a binder of trading cards where 90% of them are items that you’ve collected along the way to complete a set or they represent your favorite player but they’re not super valuable. There’s a portion of your collection that is the 5% or 1% that are valuable. What do you do with those?

That’s a great analogy. People talk about these NFTs that go down in value. When you buy trading cards, you expect that.

I have thousands of zero-value cards in my binders protected and sitting there.

Not all of those, in my opinion, wasn’t on-chain. This is where you enter the blockchain where our application of blockchain technology matches a usage cycle or a play pattern that you see with physical trading cards. For that 5% or that 1%, you’re going to treat them differently than you would treat random cards in a box or a binder.

In the parlance of sports trading cards, you’re going to authenticate and grade it. You’re going to send it off to another service like PSA to say, “This is indeed authentic and to give you a score out of 1 to 10. You’re going to protect it and ensure it. You’re going to put it in the slab and you’re going to get an insurance policy because it’s worth thousands of dollars, if not tens of thousands of dollars. You’re probably going to vault it. You’re not going to want to have it under your bed or in your closet if it’s that valuable.”

All of those steps, authenticating, grading, ensuring and vaulting, they’re all value-added services that physical training card collectors apply to their valuable items to protect and preserve them permanently. Things like permanently and things like preservation are all things that blockchain technology was designed to do.

What’s not cool is one NFT that sells for a million dollars. What’s cool is a million NFTs selling for one dollar. Click To Tweet

That’s where our adoption of blockchain technology comes in, not because it’s fashionable and we want to slap an NFT label on things. It’s because, in our off-chain marketplace, we have our collectors who are valuing off-chain collectibles at hundreds, if not thousands of dollars. They’re hitting price points and the sense of valuation off-chain where the owners of them are starting to wonder, “I want to give this to my kid or I want to protect this long-term.” That’s where you enter the blockchain in our minting technology to let the collector choose what from their collection should go on-chain, when it should go on-chain and to which chain it should go.

You’re probably hearing in my explanation a lot of comparisons to physical trading cards. That’s something that we won’t ever lose. It’s a unique perspective. We think of that metaphor of authenticating grading, ensuring and vaulting. It’s a good metaphor to explain why the blockchain when you’re talking to a noob, a no-coiner or somebody who maybe has heard of the label but doesn’t understand why the technology has to exist.

All of that wrapped up puts Quidd as an Animoca Brands company in a strong position to be that front door to the mainstream. You could imagine if I parsed this argument down to some marketing going to a car convention in New Jersey on a Saturday and talking about what we do would be understandable and appealing to someone who spent 30 years collecting cardboard.

I want to get a little bit into some of the metrics you got going on. We hear you’re generating a listing conversion rate of 48% over six transactions per second. Those sound like pretty good stats. I want to get a sense of how you all think about metrics. What metrics and stats you’re aiming for in the future?

We’re ending maybe one of the 1st or 2nd chapters of NFTs where attention-grabbing is the individual NFT selling for tens of millions of dollars. That’s great. The Beeple auction, all those things are proof points and bits of evidence that are necessary to send messages from the world of crypto into the mainstream to get their attention. They’re little marketing messages that go over the fence so to speak. Ultimately, does every new person that comes into NFT going to wind up with a $6 million to $9 million NFT? Probably not.

Those vanity metrics are usually all-around primary market drops. It’s usually around things like sales velocity and how quickly you sold out in five minutes. It’s usually around that aggregate revenue that’s generated from there. In the case of it focusing on the aftermarket, it’s usually one singular sale where you’re like, “Someone bought this from somebody else for millions of dollars.” You probably saw the sale for CryptoPunks.

Yes. It’s a hot topic.

It was a flash loan. The guy bought it for himself. Hopefully, that becomes a cautionary tale for the industry. As an industry, we shift to a different set of metrics. The individual one-off sale, people could start to see through that especially if you’ve had instances of it being gamed. That sexy, fast-selling sell-out, that’s also going to shift. Where we want to focus is on aftermarket liquidity for as many buyers and sellers as possible.

You talked about the listing-to-sale conversion rate. You talked about the transactions per second. What’s important for us is if a buyer wants to buy, he or she can find an owner and compel that owner to list something at a reasonable price to buy from them. If an owner wants to sell and liquidate, he or she can find a buyer and make that sale.

I would call it generalized liquidity that is equally distributed amongst your entire collector base of buyers and sellers not just five whales or not something that produces a single one-off aftermarket sale that generates millions of dollars. That can exist in isolation but not be scaled down to the rest of your buyer and seller user base. What matters to us is liquidity. We’re as concerned about liquidity for inventory that might cost $0.10, $0.50 or $1 as we are liquidity for the high-end items that are 1 of 1’s that should go for tens if not hundreds of thousands of dollars.

A sustainable ecosystem.

NFT 62 | Digital Collectibles

Digital Collectibles: We have our collectors who are valuing off-chain collectibles at hundreds, if not thousands of dollars and they’re hitting price points and they’re hitting a sense of valuation.

Our approach is we’re going to go through different boom and bust cycles. This is the technology and also this is consumer behavior, which is important. It’s not just the technology but the consumer behavior that’s here to stay. We can all envision a world of getting together at these social events in person for NFT.NYC and pulling out your phone and showing off the cool thing you own. That’s already happening. That’s going to happen a ton. That’ll go mainstream over the coming years.

We’re not in a world where we’re not necessarily chasing the massive single transaction for millions of dollars. In a world where we have a long-time horizon, what we can focus on is making product investments so that liquidity can be distributed across the big guys but also the small guys as well. Part of that economic utility argument is it’s great if you got into one of these NFT projects early and there’s an ever-increasing floor price. The floor price isn’t value. The floor price is the coordination of sellers who are incentivized to drive up that price. That’s not actual liquidity. Liquidity is bid-ask spreads.

If somebody at either end of a transaction wants to do something, they can do it and get a good outcome instantly. That’s a problem solved at scale only if you invest in technology and only if you build a next-generation version of eBay that can deal with all this digital inventory. I’m stealing this from someone far smarter than me. What’s not cool is one NFT that sells for $1 million. What’s cool is a million NFTs selling for $1. In that latter case, you got a large audience and you’re getting liquidity for that large audience of buyers and sellers.

One of the things too that come to mind for me is as we think of the evolution of NFTs, we talk a lot about going from pure collectibles with no utility to these utility-backed projects and then something else beyond that. I don’t think we’ve even come close to tapping into the value that exists in the core collectibles market. Collectibles are built around nostalgia and passion for things that are meaningful to people. A lot of folks talk about like we moved on from that or something. That’s the beginning and we barely scratched the surface.

It’s freaking early in this space. There’s no week that goes by where I’m like, “I didn’t realize it.” This is the 2nd or 3rd order of consequences for the implication of what NFTs have ushered in. There are multiple parts of the collectibles value chain that are massively disrupted and do business differently as a result of NFTs.

No one’s wondering, “Did I get my cut?”

No.

It was a significant pause.

They’re working on something with Lipton.

NFT 62 | Digital Collectibles