Alex Jenson 0:08
You’re listening to koreabizcast with the KBLA. I’m your host Alex Jensen, and it’s Friday, April 22. First let me just thank for making today’s episode possible Innovation Center Denmark Seoul, where it seeks to create innovation and business opportunities and build up relations between Korean and Danish r&d intensive companies, research institutes and universities. Well, on the theme of innovation, we’ve got serious tech to talk about today. This week, Hyundai Motor became the first auto manufacturer to issue community based NFTs allowing owners to become part of its metaverse community and therefore, go beyond the virtual luxury cars sold by the likes of Lamborghini. And on the theme of NFTs which I’ll get to in a moment, because we’re going to bring in our guests on the wider world and even explain the basics. If you’re not clear. These stands for non fungible tokens. They’ve come a long way since we first addressed them last year right at the start of our podcast journey. But there is a recent cautionary tale earlier this month, so called crypto entrepreneur, Sina Estavi, tried to sell an NFT of Twitter boss Jack Dorsey’s first ever tweet. he’d originally paid $2.9 million for it back in March 2021. He tried to sell it via the NFT marketplace, OpenSea, for an initial asking price of $48 million, or the best offer he got was just shy of $10,000. So that’s an idea of what can go wrong. There are a lot of big success stories as well, which is why so many people seem to be drawn to NFTs. And it’s not just about the money. I don’t think either. Thomas Sommer is co founder and CFO of SG Entertainment. We’ve spoken to Thomas before about the music industry here. He’s a big proponent of NFTs and is interested in entering this world on a business level as well as taking further his personal interest. Thank you very much for speaking with us.

Thomas Sommer 2:10
Hi, Alex. It’s great to be here. Again, very happy to be on the podcast.

Alex Jenson 2:15
And I got the idea of talking to you about NFTs because you and I sat down for coffee what was a few weeks ago, and you really inspired me actually. I found it really interesting and and infectious. Your passion for NFTs. Let’s just start with that though. Because there are still people who find it very difficult to mentally grasp, let alone explain what an NFT is.

Thomas Sommer 2:36
Yes, sure, I can understand that. I am. First of all, I it’s fair to say that I’m a I’m a proponent, I’m very much interested in them. I can also see their limits. I tried to get a very broad picture of what the phenomenon is about, you know, to get a better understanding of it all. But to start, I think you can explain that an NFT as you said is a non fungible token. So why non fungible means it’s non interchangeable. It’s a unit of data which is stored on the blockchain, which is the digital ledger, and it can be sold and traded. So it has it has a value and it can be bought sold to other people, then those NFTs can be associated with other things such as digital files, like photos, videos and audio and give rights to their owners to future benefits. So, you can think of as like a proof of ownership or a proof of membership. And as such, you can consider it as being a kind of security or financial security.

Alex Jenson 3:34
And what about the history of NFTs and a reminder of how they have developed alongside some of the big names of the crypto world like Bitcoin and Ethereum.

Thomas Sommer 3:46
So, the NFTs I think the first NFT appeared in 2014 and came a little bit later than the actual cryptocurrencies, than the the fungible tokens as such. And they have really taken off last year, in my opinion, with the likes of board a yacht club, which is kind of a membership fee for people to own what originally was a JPEG but then gave her gave rise to kind of a a community where you could get certain benefits as such. And today, it has gone much further than this, with NFT being president all sorts of, of different different fields and activities such as gaming, such as entertainment, such as music and film, as well as real estate.

Alex Jenson 4:41
And in terms of the way they work we heard very early on on this podcast journeys are referred to before this warning that an NFT is essentially potentially worthless no matter what you pay for it, no matter how valuable someone might say it is because they that that particular critic of NFTs was suggesting that their, their digital basis could just disappear. Now, I may be slightly misquoting there and paraphrasing inaccurately. So can I just bring you in on that particular point?

Thomas Sommer 5:16
Sure. This is a particularly this is a completely understandable, worry about about them because of what’s happened in some cases. I think that’s, as people say, you know, a promise is only binding for those who believe in them. And at the moment, as I said earlier, NFTs are securities, but at the difference from regular securities, just stocks or bonds, they’re extremely unregulated, meaning that at the moment, it is kind of a kind of very open space, kind of like the far west with the, with the gold rush, and everybody is trying to take advantage of it. So of all the projects that come up that at the moment, of course, a lot of them, because we’re so early in the process, and there’s so little regulation, and this is just the very beginning. Some of its, if not a lot of it is actually not serious, meaning that with anyone, at the moment can issue an NFT can easily you can start a project about them. And, you know, and each and and make a lot of promises about what the holders of those entities are going to going to get in the future. But as you know, it’s not always made in good faith. And a lot of those projects unfortunately don’t go through.

Alex Jenson 6:38
The other big word that we have to throw in this mix is metaverse, I refer to it before with Hyundai Motors plan. For example. Is it possible these days to separate all these terms? Like can you have a metaverse without NFTs? Can you have NFTs without metaverse? Do they work best in conjunction?

Thomas Sommer 6:55
Yeah. So as I said earlier, we’re very early in the whole process. So there’s lots of terms that are being thrown around. And there’s not necessarily one single definition that everybody agrees on to about what they mean. So Metaverse is just the kind of the idea that you can have a universe where people operate where people interact, and do a lot of the things they will do in the normal world. But they’re just they do it in the physical world. And usually associated with a 3d environment where you would just have your avatar, interact with other avatars of other people and buy things in the show things in this world. So can you have an NFT without metaverse? Yes, absolutely. I think most of the a lot of the projects that appear today are not directly linked to a metaverse project. They’re just, for instance, just a project where you would buy a JPEG associated with future benefits of of a member of a membership, for instance. But in terms of what the metaverse is about, I think, yes, you can see that there is it there, they’re very much linked. Because in order to operate in that metaverse, you need you need an avatar, you need things that belong to you. And that kind of define your identity in that world. And NFTs provide a great way to for you to own your your digital personality, your digital avatar, and your digital representation in that world. With you know, what you are, how you look like, the objects and the accessories, you own these kind of things.

Alex Jenson 8:26
So can you take us a little bit further into your own professional interest, potentially, because NFTs clearly have a lot of potential and they already are showing the actual realization of that potential in the entertainment industry.

Thomas Sommer 8:39
Yes, I think what’s very interesting about NFTs in the world of entertainment. And of course, it depends how you see entertainment, whether it’s just music, film, or you can also extend it to gaming. But when it comes to music, for instance, and FTS can be great representations of the value of a of an artist, meaning you can have an NFT which is associated to an artist. And it acts as a token of the perception of the markets of the market value of that artist and you can see how that value fluctuates over time. It’s also a way for some of the lesser known artists at the moment to raise money and to for for for their fans to invest in them, invest early and possibly reap the benefits from that artists gaining value in the future.

Alex Jenson 9:28
But let’s say that you wanted to create I don’t know like a BTS NFT. Now, normally if you were to create a T-shirt, let’s say with with BTS on it, and and you release that onto the mass market, you find yourself in trouble if you didn’t have permissions to do so as well as commercial rights to do so. But in the NFT world, you could do it or digitally you could presumably do it without even disclosing who you are. What’s really stopping you from doing that.

Thomas Sommer 9:57
Well at the moment, as I said earlier is no real regulation, but I’m sure if you use, you know, copyright which does not belong to you, you’re going to end up having some issues with the owner of that copyright. So if you if you were not hired and you issue NFTs about BTS, they’re going to probably going to see you in some way or another because you’r e not, you’re not the ones who own that IP. And at the same time, you can, you can fool some fans, but at the end of the day, people are getting also more knowledgeable about what’s going on, and they can see, you know, who the projects are coming from, if those projects are seriously the people behind those products are actually real, they are, they’re trustworthy, etcetera. So, I think, yes, as I said earlier, there’s a lot of a lot of scams, a lot of issues. But I think as, as the market matures, you can see that it’s you cannot do anything you want. And people are going to be more thorough about what they buy, and what they look at,

Alex Jenson 10:50
on a practical level, the solution that an NFT is present, does it really help in in various areas from entertainment to perhaps even real estate and other areas where people are buying up? Digital Art, for example, does it actually make life easier or more beneficial, rather than using some other more traditional, even digital form, if we can speak of tradition in the digital world?

Thomas Sommer 11:18
I think that they don’t necessarily revolutionize the whole industries, I think what they do is that they make it easier to to distribute value over time and to, for instance, for some artists or for some people with new projects to raise money, based on what they can do. So anyone can issue NFTs at the moment, because they said they’re very unregulated. It’s very easy. It’s not like a company was issue shares. And they have to be very thorough regulations proceedings in order to issue during a public offering. For instance, anyone can say, okay, I have this project, I have this team, we’re going to do that in the future, we’re going to give you proof of ownership, proof of membership of our project. And we promise for you to get this in the future if you buy our NFTs. So that makes it very easy for anyone and you know, even if yourself or others you want to issue NFTs about yourself or your brand or the podcast, you could do that. And if people believe that yourself or the podcast brand are going to gain value in the future, they can buy those NFTs and, and bet on bet on that. So I think that’s that’s a little bit what’s really motivating people at the moment is that anyone can just go out there and issue those securities to represent the value of something that they’re creating.

Alex Jenson 12:37
Is there any particular telltale way of knowing whether you’re dealing with an NFT scam or not?

Thomas Sommer 12:43
There are some red flags. But at the end of the day, you have to use your best judgment. We can we can see that. In this a lot of things have already evolved, like, a few months ago, or one year ago, you had projects with founders who were not even documenting their identities were not even revealed. They were just making some promises some vague promises for the future, and people will try them. And you know, a lot of times, you end up with so called rebels where the the will get the money and then you know, just disappear. Today, it’s no longer like this, the projects as most of them with serious projects, have all of their founders identity revealed, you know, who you’re dealing with. It’s a very clear value proposition. It’s a very, they have very clear roadmaps as to what they’re promising for the future. They’re also giving out some proofs of what they’re capable of doing before they actually get the money. So I think at the moment, yes, it’s like anything, it’s still very speculative, speculative, and you have to use your batch best judgment, you know, not to get not to get trapped.

Alex Jenson 13:43
Because here in Korea, what we’ve seen a lot of young people doing is buying up cryptocurrencies in the hope of making more money than they would be able to say through traditional stock investing, maybe because I’ve had less money to start off with and it’s seen as a shortcut to financial security, for example. And you know, those people of course, have our great sympathies. But this area of NFTs also seems to hold the potential to have a high risk, high reward associated with it. And I’ve heard of schemes for example, where you are introduced to NFTs in something like a gaming space, a gaming aspect of a metaverse type platform, where you are basically treasure hunting and it becomes like a form of gambling. Are you concerned about NFTs going too heavily in that direction?

Thomas Sommer 14:35
I think that yes, there is a lot of it right now because it’s usually in the beginning of a new phenomenon. You go for the very easy schemes of cash grabs and and going for this kind of gambling aspect. But as the industry and the activities mature, you have a kind of a difference type of projects that pop up because people get more aware of what’s going on they get more mature. And they ended up by going, putting the money in the project, they have a very serious proposition to make as for as for gaming, what we’ve seen is that there’s been quite a bit of reluctancy, from the traditional gamers towards the NFT games or the play to earn games as they’re called, because the problem is not so much that they see that this is all about the money, even though that’s, that’s that is an issue for them. It is that the gaming experience is not put first. And it’s as good for gamers, for people who want to really enjoy the games, everything is about the experience is about the emotions you experience while playing. And if they get the feeling that the game is only there about the money and that the gaming experience has been neglected, then they get very frustrated, and they reject them. So I think as we as as the industry matures, we’re going to see that the NFTs are going to be associated with the gains but are not going to be the prime. The prime elements of them is going to be more about play and earn rather than play to earn.

Alex Jenson 16:06
For people who might be interested in making NFTs as a way of making money, or buying NFTs as an investment. That example of the first ever tweet by Jack Dorsey. How much of a cautionary tale, do you think that is? I mean, not many of us would necessarily come close to thinking of spending millions of dollars right now on an NFT anyway. But, you know, let’s just say we’re spending a couple of $1,000 on an NFT that in itself might feel a bit risky, especially if it’s something like a tweet, what, in your opinion, based on your expertise of studying this area for a considerable amount of time, would you say makes the value of an NFT and best indicates its chances of holding that value?

Thomas Sommer 16:52
I think that as with everything, what makes the value of an NFT are the humans behind the project. So as I said, an NFT is a tool, it’s a it’s a security is an asset as a token of value of distributed value, you you buy an NFT with the promised rewards of the in the future. And those rewards how much you can believe in the capacity of the team behind those, those promises to actually fulfill them is your best judgment about who those people are, what they’re capable of, if they’re acting in good faith or not. And these are the most important things to assess, while trying to invest in in NFT.

Alex Jenson 17:32
The buyer of that tweet that I just referred to saw it as the Mona Lisa of the digital world. So perhaps not so much. I don’t know. We’ll see what happens with it in the future. But if I wanted to draw a little doodle, let’s say now and digitize that and put it in the NFT sphere, how would I have the best possible chance of garnering value for that? What social media platforms would I have to go to in other words to create a buzz around it? I also refer to the marketplace OpenSea before I’m sure many of us have never even used OpenSea let alone maybe even heard of it. So can you just give us a quick bird’s eye view of the NFT landscape?

Thomas Sommer 18:20
Yes, of course, because it’s just so recent. And a lot of the plat, like Coinbase just announced or released their NFT platform as well. So Coinbase is one of the one of the biggest players in the in the crypto space. OpenSea has been one of the first platforms to marketplaces for NFTs in history, so most most most of the projects are on available on open sea in order to for people to buy them to sell them to trade them. As for your doodles, I don’t want to have any judgment about your skill without having a judgement about your skills. I think great. You I think we’re at the time where people are getting much more cautious about what they’re buying and the story about Jack Dorsey’s first tweets for selling for $2.8 million, and now not getting it for the setpoint for the person was to sell it back. Not getting a bit higher than $15 does act as a cautionary tale as to you cannot just do anything in the hope of making some cash. And I think it’s good personally, because it forces people to get to get a better assessment of what, what what the reality is, and especially who are the people behind the project or it’s been the first week of Jack Dorsey being compared to Mona Lisa, you have to ask yourself, Is it really the same as Mona Lisa and what makes Mona Lisa so special? That may be Jack Dorsey’s first tweet isn’t as special as that. And it’s in my view, it has to do a lot with the humans aspect of it is the emotions the intends placed behind the behind the work. And this is something which is just not going away.

Alex Jenson 20:09
There’s also this platform Discord I hear quite a lot about. And you know, I’ve never used it I don’t even know what it looks like, is that something I should really know about if I did want to make one of my doodles famous?

Thomas Sommer 20:22
Yes, Discord is a tool that most of the NFT projects uses in order to manage their communities. So it is a kind of a social media platform, if you will, where you can manage a lot of different channels. And what’s great is you can actually link the platform to the wallets of the users meaning the platform channel knows or the server knows which NFTs you hold in your wallet and whether you are actually holding your owning the NFT. If you do own the NFT of the project of that of that server, that the project Yeah, the on that platform. And that way, you can differentiate between different users of how many your NFTs they have your projects, whether they hold them or not. And you can animate the communities. So it’s been it’s really been one of the main main tools used in that space. So far.

Alex Jenson 21:14
We already established your professional interests in NFTs. I wanted to kind of conclude as we reflect on how Korea is one of the countries that strongly engaging in this area, if there’s a business owner listening right now, who is kind of curious, but worried they’re gonna miss the boat. Maybe they saw bitcoins value saw and felt like they missed that boat. Actually, either as a business owner or just as an individual investor, what was your view on on that, at this point? Based on everything we know?

Thomas Sommer 21:45
I think that at this point, there’s a lot of hype going around still. There’s lots of so called FOMO Fear Of Missing Out and any business owner, especially with an established business and established and know how should of course, look into it, but not rush, because we’re still very early, there’s still a lot that needs to settle. There’s a lot that needs to evolve. So to to to get to a point where the industry is more stable and is most importantly, can is trustworthy. Where you you know, we talked about OpenSea, they’ve recently announced that 80% of the NFTs listed on the platform is actually a stager isn’t, so we’re not at the point right now where you can win his love trust on this, around this around this industry around this activity. So I definitely think that there is an opportunity for business owners to get into within but they have to think very thoroughly on how to do it. And nothing that they can that they they’re just missing the boat right now. It’s not like that. There’s going to be other opportunities, everything is evolving very fast. But you know, take your time and, and make sound decisions.

Alex Jenson 23:02
Oh Thomas, thank you so much for joining us and giving us this podcast opportunity to hear what you shared with me over coffee and I’m definitely looking forward to following your own personal professional NFT journey as well in the future. We’ll check back in with you. And let me wish you also a marvelous weekend ahead.

Thomas Sommer 23:20
Thank you Alex, you too.

Alex Jenson 23:22
And let me extend my weekend wishes to everybody listening. Thank you for your company today. And one more big thank you to Innovation Center Denmark Seoul for making today’s episode possible.