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As the frenzy fades, what value do NFTs really have?

With NFT trading volumes slumping and regulators stepping in, Vignesh Sundaresan, who paid US$69 million for a Beeple artwork, shares his views on the space.

The market for non-fungible tokens (NFTs), once propelled into frenzied popularity by the astronomical prices of “JPG files” and Facebook avatars, is now almost frozen amid the chill of a deepening crypto winter. According to CryptoSlam, NFT sales volumes on the Ethereum and Solana blockchains have dropped by over 70% in the past 30 days. In the meantime, regulators are seeking to further police the market as uncertainty grows in the crypto world.

As the frenzy cools down, Vignesh Sundaresan, a.k.a. MetaKovan, an India-born coder, entrepreneur and crypto-investor who was behind the US$69 million purchase of a Beeple artwork at a Christie’s auction in early 2021, shared his reflections on the NFT market.

A year after his purchase sent NFTs into the headlines of mainstream news media, Sundaresan sees it as more than an investment in a new form of assets.

“Now, it’s not just about the money part or the value part which drives my decisions, or what I paid. But it’s become more than that — being able to be part of the traditional networks, and those kinds of things are really hard to break if you don’t have a, how do they say, a warm/ introduction … So that’s what I see of value here.”

That warm introduction certainty thrust NFTs into the limelight. But as investors and speculation have come to dominate the NFT market, MetaKovan is nonplussed.

“I have no idea what people are buying … I don’t look at (an NFT) as an investment — I look at it as consumption. When that’s the case, it’s, like, you buy a piece of art and it’s on your wall. Maybe when you’re long gone, it might have value because it was in your home or something. But in reality, it has value because it’s art and it has to interact with the people who’re in front of it … I don’t look at it as something I can sell tomorrow. If it’s some other NFT, maybe that’s the case. It could be some piece of land in a metaverse. But all those things are very different from art itself, so that’s where you have to decouple.”

In line with his vision of NFTs, Sundaresan is the financier behind Metapurse, an NFT investment fund with a portfolio estimated to have been worth more than US$189 million in 2021 whose assets range from pieces by Beeple to virtual estates in Decentraland. 

Yet as uncertainty in the crypto space grows, regulators in India and Singapore, to name but two counties, are taking a more restrictive approach to NFTs, raising fears of a further downturn in the market.

Watch Sundaresan’s full interview with Forkast Editor-in-Chief Angie Lau to learn about regulatory trends in the two countries, how Sundaresan is navigating the ever-evolving NFT space, and where the value of NFTs lies as the momentum of the market slows.

Highlights

  • Power of NFTs: “On a core level, what I do believe about NFTs is that they have this ability to ‘quantize’ and bring together something that’s intangible. It’s like, you can lock something at a point in time, and so there are so many powerful things that come out of it. And with immutability, like, permanence, there is also this whole area of, say, archiving that comes out of it. So NFTs, I believe, have a very, very important place in terms of telling the human history and storing human history … So, more than the personal value, if NFTs actually don’t carry any weight, none of this actually would matter. ”
  • Consumption versus Investment: “When I buy something, I have a thesis, and I can be wrong. And if I’m wrong, whatever I buy goes to zero. So that’s one side. But for art items, I don’t look at it that way, so I don’t look at it as an investment — I look at it as consumption. When that’s the case, it’s, like, you buy a piece of art and it’s on your wall. Maybe when you’re long gone, it might have value because it was in your home or something. But in reality, it has value because it’s art and it has to interact with the people who’re in front of it … I don’t look at it as something I can sell tomorrow. If it’s some other NFT, maybe that’s the case. It could be some piece of land in a metaverse. But all those things are very different from art itself, so that’s where you have to decouple.”
  • Evolution of Metapurse: “When I started Metapurse, I was more focused on investing in infrastructure companies, things that make NFTs more accessible … But today I’ve slowly grown out of it, meaning I don’t think I’ll be a venture capitalist, I’ll probably be an angel investor. That’s more of my role. And I want to keep it so that the money goes towards evolving through what an NFT means, like working with artists, and in a longer term. So instead of thinking about 100 or 200 NFTs, I work on one NFT for six months and by the end of it, it evolves my thesis also … So the fund goes towards those kinds of expenses more than buying something or investing in an infrastructure company. That’s this moment in Metapurse.”
  • Necessary caution from Singapore: “It’s not just easy to do, say ICOs (initial coin offerings), anymore. It’s not just easy to become an exchange anymore. But I think this should not be easy. Like, being an exchange means you are a custodian, and I think what Singapore understands about exchanges is very appropriate. That caution is essential, because the caution is only going towards saying that, ‘Do you know what you’re getting into?’ Because this could be a (Series)-65 (financial adviser qualification). And what are you going to do? There should be this freedom to invest, but you should know what you’re getting into.”
  • Crypto suffocation in India: “I understand that from the Indian regulatory perspective, crypto looks and feels like something that’s like lottery winning or gambling. It’s like they look at it as such a runaway risk that you might become rich in it, but you might become zero in it. So if you really become rich in it, you have to pay taxes, like you would if you won the lottery. That’s the kind of approach I feel India is taking. And if that’s the approach, that means that India would completely cut off retail, but it would more importantly cut off innovation and job creation inside India. And India would again become the back end, like a VPU (vision processing unit) for a product company outside … But the hard part is, does the country want it? So it’s a larger question.”

Transcript

Angie Lau: An art piece at a Christie’s auction fetching US$69 million — no big deal. But this was no ordinary art. It was an NFT. And the record-breaking sale of Beeple’s artwork put non-fungible tokens in the limelight. And while this piece really triggered an incredible NFT industry that followed, what now, amidst the chills of a crypto winter? And how are some regarding the hypefest of NFTs, perhaps whose time has come?

Welcome to Word on the Block, the series that takes a deeper dive into blockchain and the emerging technologies that shape our world at the intersection of business, politics and economy. It’s what we cover right here on Forkast. I’m Editor-in-Chief, Angie Lau.

Well, today we’re in conversation with Vignesh Sundaresan, a.k.a. ‘MetaKovan’ — entrepreneur, coder and investor, and the buyer behind the US$69 million Beeple piece. And now what? So thanks for joining us, Vignesh. It’s really great to have you here, especially after all the buzz has died down and we’re in the thick of it, and now you’ve had time to reflect. It’s really great to have you on.

Vignesh Sundaresan: Thank you so much. 

Lau: You kind of triggered a wave that overtook popular culture, that catapulted so many people really diving into the NFT space. And now, as you kind of see what you almost triggered in that one moment in winning that auction, how do you reflect on all of this and where are we now?

Sundaresan: In a lot of ways, I really wanted that to be a way for people who are not just technologists, but people from other areas in the world who can have their skills in the global market. So it’s a very basic line, it’s almost like that native cultural export possibility for me. So, all these conversations — not the hurry into launching more NFTs, that’s not what excites me — but all these conversations, where people are still thinking about how they can use this and how they can use this consciously. That’s been the most exciting part of this journey so far.

Lau: That moment when you won that auction, did you think that would be the moment that really kind of catapulted a lot of people into the space?

Sundaresan: I would say, like, I’ve been in this space and always have looked up to artists. I always say crypto is so unidimensional — it’s a bunch of people, technologists, and we’re thinking about systems, like, on a fundamental level, higher ratio. Like, philosophically speaking, I might be good at making code, I might be good at, like, designing tokenomics, but to think about the consequences, I think it’s a very different job, and I always thought artists are very good at it, like, thinking about consequences.

And so that’s where the real differences are made. I think it all became so that people started thinking, how about themselves and what this means now. And so it became a personal moment for everyone to think about ‘What does an NFT mean to me?’ And so all these thoughts in this world today — I don’t know if you have to go back to that moment — but I had always wanted this to happen.

Lau: I think that moment defined, for a lot of people, the actual value that someone placed on a piece of digital art. So I think it was both the technology and the fascination about that. But then to have been elevated by Christie’s and then put into the auction and then reaching that price tag. Why did you think it was worth US$69 million?

Sundaresan: That moment or now? Like, how I look at money or how I personally interact with … Well, this is probably very different, compared to how businesspeople think. And I look at this moment as one of the very interesting changes in my path, like, the kind of doors and glass ceilings it opened. Maybe if there is a second NFT sale that’s, like, at US$50 million, I don’t know if they would get the same kind of doors that are open for me. But what happens is this kind of moment, that unique moment, actually triggered this, and it helped me navigate the world.

Now, it’s not just about the money part or the value part which drives my decisions, or what I paid. But it’s become more than that — being able to be part of the traditional networks, and those kinds of things are really hard to break if you don’t have a, how do they say, a warm introduction. But how do you get a warm introduction? After that moment, it’s been quite easy for me to be part of bigger conversations, so that’s what I see of value here.

Lau: You’ve become definitely part of the conversation. I think a lot of people are very interested in speaking with you and those warm introductions, no doubt there. But is that also the value for NFT collectors as they seek to make a place in their digital world? What’s your thesis, and how is that driving the NFT market?

Sundaresan: On a core level, what I do believe about NFTs is that they have this ability to ‘quantize’ and bring together something that’s intangible. It’s like, you can lock something at a point in time, and so there are so many powerful things that come out of it. And with immutability, like, permanence, there is also this whole area of, say, archiving that comes out of it. So NFTs, I believe, have a very, very important place in terms of telling the human history and storing human history, and that’s where it’s going. So, more than the personal value, if NFTs actually don’t carry any weight, none of this actually would matter. That’s what I mean.

Lau: If you take a look at the macro market, the crypto market has recently seen some gloomy days, to be sure. Trust in digital assets has been rocked by the devastating Terra crash. You combine that with Russia’s invasion of Ukraine, and investors have found themselves in a full-blown bear market. And then we’re seeing the ripple effect across crypto and NFTs. From your perspective, where do you think this will bear out? How long do you think this market is going to last? And what would it take for the crypto market to start feeling robust again?

Sundaresan: I have no short-term takes on any of this, because, for me, crypto is a tool, a technology. And to even see crypto hustle as an industry, I’ve grown to not look at it that way. And so the whole crypto industry, the way it’s evolving now, there’s going to be so much defragmentation, where it’s not this one hierarchical structure, like ‘number one coin,’ ‘number two coin,’ that kind of notion, I believe that there’ll be this multichain world, where everything that’s a traditional institution will also think about having their own chain. I’m not talking about the government, but I’m talking about everyone else, too. So, if you’re a library, maybe you need your own blockchain.

And things like that might happen in the future. And I just see this whole thing as an evolution towards getting that tech to a place where that’s possible. So that’s where I come from. So I don’t look at the market and I don’t trade. So I have no idea of all that’s going on.

Lau: What about NFT sales, though? A lot of the interest that you participated in stoking has also now plummeted. I think monthly NFT sales plummeted 65% compared to the previous month. Why do you think that happened?

Sundaresan: I have no idea what people are buying. In reality, the idea that we’re looking at it as one is what’s affecting it the most. Like, when I buy something, I have a thesis, and I can be wrong. And if I’m wrong, whatever I buy goes to zero. So that’s one side. But for art items, I don’t look at it that way, so I don’t look at it as an investment — I look at it as consumption. When that’s the case, it’s, like, you buy a piece of art and it’s on your wall. Maybe when you’re long gone, it might have value because it was in your home or something. But in reality, it has value because it’s art and it has to interact with the people who’re in front of it.

When it comes to art, I don’t look at it as something I can sell tomorrow. If it’s some other NFT, maybe that’s the case. It could be some piece of land in a metaverse. But all those things are very different from art itself, so that’s where you have to decouple.

Lau: OK, well, I want to know more about it, and I’m sure our viewers do, too … we’re going to dive a little bit deeper into MetaKovan — I’m going to use your pseudonym here — more popularly named MetaKovan, who’s got an NFT investment fund of his own called Metapurse. Vignesh Sundaresan (is) more popularly known, perhaps, for his US$69 million purchase of Beeple’s (‘The First 5000 Days’). MetaKovan — What do you prefer? Do you prefer Vignesh, or do you prefer MetaKovan? 

Sundaresan: I’m happy that they’re kind of being used one for another, so I’m happy with anything at this point. It’s okay.

Lau: It’s interchangeable.

Sundaresan: Yeah, because it’s a part, like, when you start something like this, you don’t think about that seriously. It’s just a Discord username and Instagram username. But don’t become serious.

Lau: It’s US$69 million worth of serious. But also, it’s just the beginning. I want to ask about the fund that you’ve set up of your own, called Metapurse. How big is the fund? What are you investing in and who are the investors in the fund? Tell us a little bit more about this.

Sundaresan: So, Metapurse itself is just self-funded. I’ve never taken external money. Most of the things I do are either infrastructure investments or things that are like, say, grants. It’s like getting bootstrapped in terms of the art industry — it’s not focused on making money. That’s not its first objective, so that’s one of the reasons why there are no external investors.

And because of the way NFTs work, it’s so evolving that the pieces can change in three months, six months. And then, if you actually have a thesis, and your fund is based on that thesis, it really becomes harder and harder to shift it with more stakeholders, so I’ve always kept that to myself.

Lau: This is a fund of one.

Sundaresan: Yeah.

Lau: And so I get to ask you, what is your thesis right now?

Sundaresan: So my thesis just in the last year has evolved so much. When I started Metapurse, I was more focused on investing in infrastructure companies, things that make NFTs more accessible. It could be a blockchain, it could be a wallet, it could be a marketplace like, all of these things. And it could be virtual worlds. It could be many things that we see today in the market.

But today I’ve slowly grown out of it, meaning I don’t think I’ll be a VC, I’ll probably be an angel investor. That’s more of my role. And I want to keep it so that the money goes towards evolving through what an NFT means, like working with artists, and in a longer term. So instead of thinking about 100 or 200 NFTs, I work on one NFT for six months and by the end of it, it evolves my thesis also, and I stand there. And then I work on another. And usually working on something for six months, it’s a cost. So the fund goes towards those kinds of expenses more than buying something or investing in an infrastructure company. That’s this moment in Metapurse.

Lau: Do you think it has evolved past art?

Sundaresan: I think it’s funny. It was fast-art before, and it evolved into art now.

Lau: You think it’s going to stay in art?

Sundaresan: Art has this way to take you into different places. So I’m just ready for the ride. I’m free. I’m waiting to see what art can make of me.

Lau: Well, it’s incredible to meet you at this moment. Historically. Bitcoin, cryptocurrency, all of this technology, the blockchain technology has really come up in the past 13 years. Where did the interest come, for you? When did you first get interested in NFTs, in blockchain, in this world? How did it all begin for you?

Sundaresan: So, definitely it’s technology. That’s the thing. So, when I grew up, the influences I had were understanding who Bill Gates was, and who someone like Abdul Kalam from India was. And there were contrasting characters, even though they were all in technology. One became the world’s richest person. One became the president of India, and their lives are very different. And their impact after their career is also very different. So, all of these things have made me think about what it means and what technology means.

I became curious about crypto because it was new. That’s it. It’s new and maybe it could be something. So, I started working on it, and maybe by 2014, it was maybe the peak moment in terms of the kind of people that were passing through my life. So, at some point there was (Ethereum cofounder) Vitalik (Buterin), there was (Ethereum cofounder) Gavin Wood, there were so many other people, because of the kind of work I did in 2014. So, I was building Bitcoin ATMs, and because of that I had so many connections happening — had this introduction with Ethereum, or what Ethereum was going to be after two years. So, I was really trying to understand why this is important to the people who are building it. There’s an economic angle. This is revolutionary. I was really inspired by the idea that you’re able to even think about separating state and money. It’s like the ability to think about separating church and state 400, 500 years ago. That was a courageous thought. And imagine being able to think about separating state and money. I’m not saying we’ll be able to do it. I’m not saying I’m the person doing it or anyone else. But even to be able to have such a tool which can enable you to think that way, I was totally inspired.

Lau: As we talk about, really, history unfolding, Vignesh, there are a lot of stakeholders. In the early days, it was really the developers, it was the coders. And then it evolved into, obviously, entrepreneurs and innovators and more building onto the space. And you’ve kind of outlined your personal journey there. And now we’ve got the regulators, the regulators are here and they really want to figure out how to keep people safe, and at the same time regulate the market. And there’s a wide spectrum of regulatory responses. First thoughts on Singapore. How, in your view, is the regulatory space in Singapore? Have they ceded it to other jurisdictions like Dubai? Or are they on the right path, doing the right thing, being very judicious in making sure the rails are in place so that people can participate safely? What are your thoughts?

Sundaresan: Yeah. So I’ve been in Singapore since 2018. We run a company in Singapore, and we asked, ‘If you want to be a contractor in crypto, is it possible?’ So, from this question to so many other things, to understanding staking rewards, doing everything in a very structured and systematic way, I think Singapore has been such a nice country to do this with, because they are very feedback-driven. They’re very practical. And their goal is to be business-conducive, and not to necessarily stifle innovation.

So, I do understand where the restrictions are in Singapore. Like, it’s not just easy to do, say ICOs, anymore. It’s not just easy to become an exchange anymore. But I think this should not be easy. Like, being an exchange means you are a custodian, and I think what Singapore understands about exchanges is very appropriate.

Lau: Singapore, though, has discouraged retail investors from participating.

Sundaresan: That caution is essential, because the caution is only going towards saying that, ‘Do you know what you’re getting into?’ Because this could be a (Series)-65 (financial adviser qualification). And what are you going to do? And for a person like me who understands that in fiat, it’s going to be a -65, I’m still fine with it because I learn the technology, I read it and it’s very specialized knowledge that I deploy to my investments.

So can it be a mainstream retail investment? Like, you have to be very careful. You have to understand what you’re getting into. There should be this freedom to invest, but you should know what you’re getting into.

Lau: India is another country that seems to be discouraging the participation of retail crypto investors. They imposed a 30% flat tax on all crypto. They have also planned on introducing another 1% tax on all crypto transactions above, I believe, US$129, starting at the beginning of July. And a lot of people are worried that that’s going to add a greater chill to the crypto winter, for Indian exchanges, for retail investors, for investors in general.

Sundaresan: I mean, a lot of it is that the country wants crypto, as a new technology, to evolve here and make new startups in India. That means it should have a very different attitude to what it is today. But I understand that from the Indian regulatory perspective, crypto looks and feels like something that’s like lottery winning or gambling. It’s like they look at it as such a runaway risk that you might become rich in it, but you might become zero in it. So if you really become rich in it, you have to pay taxes, like you would if you won the lottery. That’s the kind of approach I feel India is taking. And if that’s the approach, that means that India would completely cut off retail, but it would more importantly cut off innovation and job creation inside India. And India would again become the back end, like a VPU for a product company outside.

So, you cannot stop Indians or an individual from doing crypto stuff. They’ll go outside India, they’ll maybe have companies that do work for another company in another country. But the hard part is, does the country want it? So it’s a larger question.

Lau: Who knows where this technology will take us? But if there’s one thing that we know for certain it’s that it will be changing many of the things that we take for granted today, not only in Asia but around the world. Vignesh, it was a pleasure to talk with you and get a little insight as to how you view this space, why you made that investment, and where you see it all going. It was really great talking with you. Thanks for joining us on the show.

Sundaresan: Thank you, Angie.

Lau: And thank you, everyone, for joining us on this latest episode of Word on the Block. I’m Forkast Editor-in-Chief Angie Lau. Until the next time.