NFTs and Gamestop on The Future, This Week

Disclaimer We'd like to advise that the following program may contain real news, occasional philosophy and ideas that may offend some listeners.

Sandra And we're finally back.

Kai Back from break for Season 9.

Megan Woohoo!

Kai Thanks, Megan.

Sandra There's been quite a few things happening whilst we've been away. And we've really been looking forward to talking about the future again.

Kai Let's get stuck into it. We did one special episode on Facebook when it banned news from its platform here in Australia a couple of weeks back. So there's a bit of an update on that, Facebook has since negotiated with the government, there's some small changes to the bill. But more importantly, Facebook has reinstated news and has started negotiating with the big publishers to pay for news, finally.

Sandra Whilst this might seem as a victory for news in Australia, this is not as clear cut as it might seem.

Kai So much like Google negotiated with big publishers to not ultimately fall under the bill, Facebook is now doing the same. And serious questions have been asked whether this actually benefits journalism or grassroots journalism, because they're negotiating with the big news companies like Rupert Murdoch's News Corp, and Seven and Nine, who own the Sydney Morning Herald, for example. But what about smaller publishers that might be left out of this?

Sandra It also goes to a point we made previously, which has to do with media bargaining laws in general in that, even though these deals were now struck, and it might go some way to addressing the market power imbalance between the platform companies like Facebook and Google and media corporations, it does nothing to really address the side effects of the business models that these companies have, in that they remain unchanged and continue to alter the production and the consumption of news as they have done for the past decade. So news is still produced and consumed as infotainment, is now bite-sized and no longer long form. And the news industry has, in turn, shed 1000s of jobs to accommodate the format that platform businesses require.

Kai And it remains to be seen whether this will in the end benefit journalism, or whether it's just a redistribution of wealth from one group of big companies, the big tech to big news publishers. But there have been more Facebook news, one is a developing story where the Facebook Supreme Court, this oversight board is now deliberating whether banning Donald Trump from the platform was the right thing to do whether he should be reinstated. So we're waiting to hear, and this might actually turn out to be a really interesting story around platform regulation. And there's the emerging Apple versus Facebook battle, where Apple now requires any app on the platform to disclose privacy implications, and for users to be able to opt out of tracking, which obviously goes to the heart of Facebook's business model that requires tracking for targeted advertising. So that will remain interesting.

Sandra And speaking of targeted advertising, just today, Google promised to drop personalised ad tracking, and basically to not develop any new ways to track individual users and phase out some of the current ways in which it does that. But this really is a lot less dramatic than it seems considering that Google does own Chrome, which is the world's most popular web browser, and also the fact that it's basically just phasing out third party tracking cookies, which is really a move that will probably strengthen its ability to sell targeted advertising and to track people. So all of this will likely have a significant impact on the advertising market, and also on the types of practices that we've discussed at the end of the last season.

Kai Or you mean the story around X-Mode and how apps track users and sell that data. On the Google. I think the cynic in me says that, while they sell this as a privacy move, this might just be a land grab. If they do away with cookies that any advertiser can use, and they no longer have this, as you said, it leaves them in the prime position that they don't actually need cookies to track users when users use the Chrome browser, because they know everything by way of controlling the browser environment. So what they sell as a privacy move might well be a further monopolisation move.

Sandra And it also comes in the context where tracking cookies are really not the only way of personalised tracking and targeted advertising. And there have been increasingly more and more creative ways to uniquely identify users online and then track their activities. So really, this remains to be seen, I'm sure this is story we'll come back to.

Kai I mean, as we said, right, if you're already selling online ads, then you can use those ads to collect more data, as we discussed in our previous episode, which again, would benefit Google as the market leader in selling those ads.

Sandra Ok, so maybe one more big platform story, because we need to, and that would be the Supreme Court defeat that Uber has faced in the UK. That's been a battle that they have lost a while ago, but now there was a further defeat in the Supreme Court. So Uber now faces a slew of lawsuits from the 60,000 UK drivers that can now launch claims against Uber. So the Supreme Court has ruled in the UK that Uber must now classify drivers on its platform as workers, and about 20% of those 60,000 drivers have already launched claims for back pay and benefits from Uber,

Kai There was a couple of news stories around GPT-3, reminding you that this is the most advanced language model in the world, a machine learning algorithm that can do text completion, you give it a little text fragment and you tell it the kind of style you want to write in, and then it completes the text, you know, gives you what comes next.

Sandra And we will put links to previous episodes in the show notes as this is something that we have unpacked in a couple of our episodes.

Kai Yeah. And it is still evolving. There was one story which said that there's now an emerging app ecosystem that builds on GPT-3, so many see GPT-3 as a platform technology that allow building a lot of different kinds of apps. But we also saw news just recently, that shows once again how difficult it is. A chatbot for psychological services that are supposed to flag if someone is suicidal, recommended that someone kill themselves in tests of this algorithm, which goes to show the limitations again, what happens when a model doesn't really have real understanding, but just uses the large body of text off the internet, which includes all kinds of trolling, in recommending, you know, answers to text fragments.

Sandra But speaking of things that appear real, but they are not, as in the case of the text generated by GPT-3, there were a couple of really interesting stories that play into our long ongoing conversation around digital humans and avatars online. And one of them that we're sure our listeners have seen was the freakishly good deep fakes of Tom Cruise that are doing the rounds on TikTok. The movie star appears to be talking about golf and doing magic tricks and telling jokes but are all actually deep fakes of Tom Cruise on a Deep Tom Cruise account that has about 400,000 followers. These videos are not real, they're not the star in any way. But we watch them they look uncannily real.

Kai And they do things that we haven't seen like that before, like hands obscuring the face, the actor with Tom Cruise's face moving about the video. So a really natural situations that we haven't seen in that quality before. Luckily, this is not being disguised, it's very much disclosed that these are deepfakes, but it just goes to show the democratisation of that technology and how far we've come in such a short time.

Sandra And indeed, we seem to be leaping forward in terms of how democratised this technology is, and that it's now increasingly accessible to everyone. There was also another story that's cropped up in many outlets around Deep Nostalgia. And this is again an online tool that will animate any image that you might have, let's say of someone who's died a long time ago, or even historical portraits. It was used to animate Abraham Lincoln, or Charles Dickens, but also relatives who had passed away and whose pictures were uploaded to the MyHeritage website, which houses the Deep Nostalgia tool.

Kai And so before we're going to introduce you to the stories we're discussing in-depth today. We do want to put out there that we are aware of Clubhouse, which seems to be the latest social media, which is more or less like a social media ongoing live podcasting, hangout kind of space. If anyone out there could send us an invite, we'd be happy to join and cover it on the podcast and consider doing a live show on Clubhouse at some point. So any of you out there who have scored an invite to the currently invite-only platform, send us an invite, and we'll see you on Clubhouse.

Megan And just make it that little bit less exclusive.

Kai Yeah, with us on there.

Sandra So finally, speaking of exclusivity, a story that we have to discuss today is obviously the most exclusive of things out there, NFTs.

Kai CryptoKitties...

Sandra Kings of Leon new album...

Kai Grimes's strange angel art.

Sandra But the question for most people at this point is really what are NFTs? So we've spent quite a few hours going deep down the rabbit hole in this one.

Kai And while at the surface this might look like a story about crazy speculation on stuff on the internet...

Sandra It really is.

Kai It is that, but we also think that it points to a more significant development. So we'll discuss that one in more detail.

Sandra And of course, our second story will have to be GameStop. Even though the saga has been around now for a couple of months, and there have been 1000s of stories written about every aspect of GameStop you can think of, there is one hidden side that we want to unpack so stay tuned for that one.

Kai So NFT and GameStop. Let's do it.

Sandra Let's do it.

Intro From The University of Sydney Business School, this is Sydney Business Insights, an initiative that explores the future of business. And you're listening to The Future, This Week where Sandra Peter and Kai Riemer sit down every week to rethink and unlearn trends and technology and business. They discuss the news of the week, question the obvious explore the weird and the wonderful.

Sandra Our first story today comes from Rolling Stone magazine, "Kings of Leon Will Be the First Band to Release an Album as an NFT". But really, we could have done any of a number of stories that have cropped up over the last couple of weeks. Just last week, Grimes, the artist who also happens to be the partner of Elon Musk, auctioned off 10 pieces of NFT digital artwork, the "WarNymph Collection Vol.1", and made over $6 million in the process.

Kai And really, there's a whole bunch of different collectibles that are now sold as NFT's like the so-called CryptoPunks, which are 10,000 unique collectible characters, little icons, only a few pixels. They sell at a minimum of $18,000 apiece, the most expensive one has retailed for 1.3 million US dollars. And you might rightly ask, what is this all about?

Sandra This particular story is about Kings of Leon who are set to release an album this Friday in the form of non-fungible tokens, that is NFTs, becoming the first band to ever do so. And we should make it clear that the album will be released everywhere else as well. There'll be Spotify and iTunes and Apple Music and Amazon, all the regulars, but the NFT version will be available on YellowHeart and will be a product with a number of special perks. Things like moving album cover or limited clips, that will be available for sale only for about two weeks. And there will be 18 different golden tickets as part of the Kings of Leon NFT release, and each one of those will have unique art. So this begs the questions of what exactly are NFTs and why should any of us care?

Kai So NFT as you said stands for non-fungible token. And it is a way for someone to purchase a digital good and have their ownership recorded on a blockchain. And there's now a number of platforms such as Nifty Gateway, for example, that sold the Grimes artwork where people can trade in these digital goods, these digital assets and you can purchase them and resell them. Where your ownership will then be inscribed on a blockchain so that you uniquely own this particular digital good. So that's in a nutshell what it is.

Sandra So what you're basically doing, and in most cases it is the Ethereum blockchain, is that if you're an artist or a gaming company, or just a content creator, you use a token standard which ascribes provenance to a digital asset. And in a way they are a cryptocurrency. Just to make it clear, most NFTs at the moment are part of the Ethereum blockchain. Ether is a cryptocurrency a bit like Bitcoin, but the blockchain that supports it can also support these NFTs, which actually store some extra information and which makes them then work differently to a coin which is fungible, so my Bitcoin is worth the same as your Bitcoin, and we can cut it up into smaller parts and trade it.

Kai Yeah, so NFTs are non-interchangeable, one NFT is not like the other, whereas Bitcoins are all the same. And you can't divide them, so that makes them really different to a traditional currency but really suitable to store provenance of artwork and collectibles and all these entities.

Sandra And it is worth noting here that other blockchains can implement their own NFTs. And these NFTs really can be anything digital that you can imagine. drawings, music, animated cats leaving rainbow trails behind, or indeed music albums.

Kai And the reason this makes headline news is because a lot of money is going into speculating with these digital assets, depending on where you look, it's north of $200 million that has now been poured into these artworks and collectibles that live as NFTs on these blockchains. And that has doubled in the last months.

Sandra But again, let's come back to why does this matter? And it matters in two ways. One of them is that these things have now become mainstream. People might remember the CryptoKitties craze from about 2017, where people were spending crazy amount of money buying kittens and then breeding kittens on Ethereum, most of the blockchain was actually devoted to this game.

Kai And almost broke the system, it clogged up Ethereum for a while because of the craze that was going on.

Sandra Yeah, so this was pretty much a set of five Ethereum smart contracts that Axiom then had written and users interacted with it via their own Ethereum address. But back then it was really, really difficult to actually buy CryptoKitties, to trade them, you had to know a lot about what you were doing. Now this technology has really become mainstream, and anyone with a wallet or a virtual wallet can actually trade and buy these things on the Internet. NFTs also matter in another important way that we wanted to bring up on the podcast, because what they have managed to do back with CryptoKitties, but now in a more democratised way, is a new way to attach value to something that is in the digital realm. They have created a way in which you can assign ownership to a unique piece of digital content, but not only assign ownership, that ownership lives on the blockchain so that ownership is visible and transparent to everyone but also transactable.

Kai So the obvious outcome of this is that we can now create unique digital assets that can be traded on a market that can become the object of speculation, which is exactly what is happening and what has been reported on. But for us, it also points to a potential change in the way in which we think about ownership on the Internet, online in the digital space. Because what strikes us as surprising is that someone takes digital ownership of something that is actually all over the Internet. Our listeners might have seen Nyan Cat, which is an icon of a cat with a pink popsicle and the rainbow trailing behind it. So while this picture is all over the Internet, and I could make this my home screen on my phone, someone recently bought ownership of the digital artwork for $600,000.

Sandra So what someone has bought is really a digital token that proves that they are the owner of this particular one-of-a-kind edition of the artwork. So really, bragging rights. But more than that, an asset that they can then display, or that they can then sell in the hope that they will make a profit.

Kai Yeah, absolutely. And I totally get that. But the interesting difference here to digital ownership is that the way we think about digital ownership has always been that it is very hard to keep people from copying digital goods. So the whole idea of selling music online, selling, say stock footage, stock pictures online has always been that there needs to be some rights management, that when you sell something you want to prevent people from making illegal copies. This strikes me as very different because there's copies all over the place. And yet, it's not about having access to the picture and using the picture, it's really about the bragging rights of the token on the blockchain that becomes the asset. It's almost like the little cat picture is incidental to that.

Sandra See, I rather tend to disagree, because you do have a unique thing. You do not have the million copies of it on the internet. You have that unique one, which is a digital token that has a value attached to it and ownership attached to it. And in that way, it's completely unique, and not the same as all the copies of it. Same as if you had one of the CryptoKitties.

Kai Yeah, I get that that is unique because that's what you own. But in terms of the pixels on the screen, it's still the same if it's only about the visual use and the enjoyment of the art.

Sandra But it's not. the ownership in this case equates value, you are the only one who can actually monetise that picture. And that, in turn makes it a different picture. The value only accrues to the person who has bought it, who has now the sole right to trade it.

Kai And I think that's where the interesting difference lies to the way in which we previously thought about digital ownership online, because if I copy a picture of a stock footage website, and I use it in my advertising on my website without having purchased it, I can be legally sued, because I'm using the visual to have a certain effect for advertising, for marketing. So I would have to buy a license. Here, even though everyone can have the same visual icon, no one would care because the asset is something different, as you say.

Sandra So the asset indeed, is now a token. So as an artist, I can go to one of these platforms, upload my artwork, and mint one of this NFTs, and then sell it for money. As a buyer, I can support an artist or invest in artwork by purchasing one of these NFT's. And so ownership of that NFT has created value for digital content.

Kai And so the digital ownership really comes to the entry on the blockchain, which is different to how ownership of digital goods has previously been organised.

Sandra So indeed, till now, most of that digital ownership was locked into specific platforms or ecosystems. For instance, you could buy a unique sword in a computer game, but then you were, to some extent, locked into that computer game. Of course, I could record myself with the sword in the video game and then sell it on YouTube, or I could stream it on Twitch and make money outside of the ecosystem, but largely the digital assets, its value and its uniqueness was tied into the game, or indeed into a publishers platform in the case of images, or of text.

Kai Or music or video. So Netflix owns the right on a TV show. And you have to buy a subscription to then basically enjoy or participate in the ownership of these digital assets.

Sandra And if you were to post one of these images on your website, I would have no real way of knowing whether or not you had purchased that image, whether the rights were yours, where it came from, and so on and so forth.

Kai But that points to the second way in which digital ownership would previously be enforced. And that is by way of legal challenges. So if I use Disney music in my YouTube, then the long arm of the company will come down hard on me and would be taken down from YouTube, because I violate their commercial rights, their ownership of that digital asset. And the same with unlicensed use of stock footage. So it's either tied in with the platform ecosystem, or there would be a legal challenge to creating unsolicited or unlicensed copies of the digital good.

Sandra But now with NFTs, that ownership is on the blockchain, and it's an ownership that is transparent to everyone. It's no longer locked into a platform and it's no longer tied to a specific ecosystem. Even though you might have created your NFT on the Ethereum platform, practically I could end up buying it with Bitcoin.

Kai Yeah, on some platforms now just allow credit card payment, which will then be converted into cryptocurrency. And so the real interesting aspect is now that we have an open, democratized way of creating digital ownership that no longer depends on either the legal challenge or these platforms, and where it seems inconsequential that there are technically identical copies circulating on the web, because ownership can now be transparency and definitely be determined through the blockchain entry.

Sandra Everyone can see your CryptoKitty.

Kai Everyone can see my CryptoKitties, yes. So NFTs present a really interesting technological innovation, I'm sure there'll be lots more ways in which this technology can be applied across all kinds of different industries that deal in digital content.

Sandra So let's have a look at our second story, which had to be GameStop. And we really could have picked any of the 1000 news stories that have been around for the past couple of months around GameStop. Indeed, the one we've got from Reuters "GameStop surges more than 18%", and that's the 2nd of March. So the video game retailer is still climbing sometimes 32% on really no apparent news at all. But that's not what the real story is. So we thought whilst only glossing over the GameStop saga, we do bring up an interesting phenomenon that seems to have been missed by most media coverage.

Kai So the media coverage has concentrated on the astronomical surge in the stock price, which started off in a Reddit forum, a subreddit called WallStreetBets where a group of traders notice that the stock of GameStop, a struggling bricks and mortar video game retailer, was heavily shorted against. So there were large hedge funds betting against GameStop, that the share price would fall all the way down to almost zero.

Sandra So the conventional wisdom would have it that if games go digital, then anyone selling video games in a retail outlet would really struggle to keep up this business. So GameStop was shorted by all professional investors, including hedge funds, and people on the subreddit group who do describe themselves as a 'gathering place of millions of unique individuals who are tired of being run over by the big guys and are each fighting back in their own way', discussed strategies in which to exploit the fact that all the big investors were shorting GameStop. So basically betting that it would continue to decline. And just to clarify, shorting something means that investors are making a commitment to provide a certain number of GameStop shares at a specific time no matter what the price is on the market.

Kai And so a large number of small investors started buying and then holding the stock which led to a so-called squeeze in the market, the share price surged because demand outstripped supply, which has the interesting side effect then that a lot of the hedge funds who had shorted the shares had to make good on their promise, and had to then purchase the shares that they didn't own that they promised to sell, which further increased the price, in the process racking up huge losses for these hedge funds.

Sandra And we'll stop the story here because there's any number of ways that this has been sliced up from why the GameStop saga happened in the first place. Was this greed? Was this the little guy fighting against Wall Street? Was it boredom? Was it quarantine?

Kai There was a side story around the app RobinHood, which was used by many of these small traders that famously halted trades in GameStop because their business model couldn't cope.

Sandra There were funds like Melvin Capital that were almost bankrupted and had to get an infusion of funds from other hedge funds to stay in the game, there was censorship on social media with WallStreetBets being kicked off certain platforms for a short period of time. So, many different angles that you could use to look at this story.

Kai And a lot of those angles revolved around the investments aspect of the story, and whether or not this was legal, and who you would go after.

Sandra And indeed, at the time we're recording this episode, in the US the Justice Department, the Commodity Futures Trading Commission, are running investigations into the matter. The Wall Street Journal reported that the Securities and Exchange Commission is reviewing the trading frenzy that ensued around GameStop. But all of these pointed to the fact that there seems to be no simple answer as to who is to blame when something like this happens.

Kai Which is where we want to start with this.

Sandra And ours really is a simple observation, rather than an in-depth analysis. And it has to do with the one day, mayfly organisation.

Kai The way in which this phenomenon has been brought about by many people almost spontaneously working together coming together, pumping this stock, making life difficult for these hedge funds. And then as fast as the phenomenon had happened, would dissolve into, you know, many individuals again.

Sandra This being one of the reasons why traditionally, in this sort of instance, you would actually identify people or organisations who have colluded to do something illegal on the stock market. But in this instance, this new form of organisation is something that we do not recognise as an organisation at all. So not only can't we go after it legally, but we also lack the language to talk about it as an organisation in the first place.

Kai And we suggest that this is a uniquely digital phenomenon, the way in which groups of people congregate, quite opportunistically, around a common cause. They come together, engage in collective action, bring about an effect, an action that we would normally only ascribe to a powerful individual or an actual organisation that organises top down, and once the episode has passed will dissolve unrecognisably. So a truly ephemeral entity that only exists for a short period of time, which exhibits a kind of opportunistic organising.

Sandra And whilst related phenomena have long been recognised, we've seen the role that social media has played in the Arab Spring, for instance, or in organising people around other protests. Increasingly lately, we have seen people gather still around social causes, but around very specific targeted objectives.

Kai So we've discussed for example, the K-Pop initiatives, for example, around the Trump rally in Tulsa, where millions of tickets were requested and then only a few 1000 people showed up, where it turned out in the end that it was K-Pop fans who, again, spontaneously came together on TikTok and other platforms to then self-organise, requests lots of tickets to play this activist prank on the Trump campaign,

Sandra Or the facial recognition police scanner that got flooded again with pop star pictures.

Kai Yeah, exactly, to protest against the use of the app in the Black Lives Matter protest rallies.

Sandra So there are a number of ways in which this way of organising is different to what we would think of as an organisation. And first, as we've mentioned, is its ephemeral nature. But not only its ephemeral nature, but the fact that it has no traces before it happens, and it leaves no traces after. Once these things disband, they do not exist in any meaningful shape or form afterwards.

Kai So it's a really fast phenomenon and it's very unpredictable, so very opportunistic, that it can spring up. We can see that there have to be certain conditions in place, it seems that the people are fairly like-minded, they share a certain culture, either K-Pop, or a certain ethos of investing, of sticking it to the big guys, like in this case, that then come together to bring about this phenomenon.

Sandra And this is indeed a uniquely digital phenomena which will make looking at it, investigating, researching it an interesting creative task, because we don't yet clearly understand how this phenomena come up. We don't understand what the boundaries of such phenomena are. For instance, with GameStop, we have 1000s of bots that were at some point involved with promoting the message, but the role they play and how they're employed and how they come to join the cause is not yet clear.

Kai So as you say, it's a really interesting, uniquely digital phenomenon, which also offers new possibilities for potentially researching this ephemeral form of organizing, because a lot of the activities that people do the microwaves in which that phenomenon comes about, are captured as traces on these platforms. And so it would be really good if social scientists got access to the data on these platforms, so that we could do tracing studies that show how this spontaneous form of organising comes about, not only to recognise them when they happen again, but potentially to use this as a form of organising or be prepared when the shit hits the fan next time.

Sandra So clearly, that's all we have time for today, thanks for listening.

Kai Thanks for listening.

Outro This was The Future, This Week, an initiative of The University of Sydney Business School. Sandra Peter is the Director of Sydney Business Insights and Kai Riemer is Professor of Information Technology and Organisation. Connect with us on LinkedIn, Twitter and Flipboard, and subscribe, like or leave us a rating wherever you get your podcasts. If you have any weird and wonderful topics for us to discuss, send them to sbi@sydney.edu.au.