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Welcome to The Ask, where each week Crypto Investor interviews essential voices doing the work to make crypto 'mainstream.' Exchange lightly edited.

This week, senior reporter Stephen Stirling spoke to David Pakman, managing partner at venture capital firm Coinfund. Pakman was recently appointed managing partner after spending 13 years at Venrock Capital. He will be focused on expanding Coinfund’s growth-stage VC initiatives with a focus on NFTs.

Where do you think NFTs fit into the crypto ecosystem?

David Pakman

David Pakman

I started getting into crypto before NFTs — it was a super esoteric ecosystem using a lot of almost consumer hostile language, right? Wallets, addresses, blockchains, cryptocurrencies, tokens — all these sort of very foreign words that consumers don't understand. But there's a tremendous amount of benefit to being in a decentralized financial system.

But what really, I think, hit home to me about what could drive mainstream adoption was the idea of non-fungible tokens — tokens that could represent collectibles. And I was a collector as a kid. I'm not like some fortune teller of the future, but I tend to be a good connector of dots. And it's a little bit easier to envision a world where people are just taking existing behavior that they did offline and moving it online.

So, it's like, it wasn’t impossible to see that digital downloads of music through Mp3s and streams were going to be successful, because people already listen to music. It's just a more convenient way to listen to music. Or it wasn't a shock to find out that people would stream video instead of going to the movies ...

So, it's also not a surprise to me that people will collect digital items, just like they collect things in the physical world. So when I saw NFTs I was like “ah ha!”, this is the technology necessary to create scarce digital items, which can open up collectibles. And that has become the tipping point for mainstream adoption of crypto. Way more people, by the numbers, millions of people, I think, are active participants in the NFT ecosystem than in just crypto trading.

Do you believe NFTs will become a main entry point for people to crypto?

I think what an NFT is, just is not fully fleshed out yet, right? Like we understand them as profile pictures, and sort of digital, 8-bit art. A ticket to a community membership, and certainly moments in sports, like video clips. Those are some examples of NFTs today.

Physical collectibles don't change all that much over time. In fact, they tend to get worse, right? Like if you buy something rare and use it, it becomes less valuable. But digital collectibles can improve over time, and actually can become more valuable.

And so I think we'll start to see entities that are more dynamic improve, get better, become more rare, mutate, or evolve. And then we'll see us wanting to loan NFTs to other players, right? If NFTs are game assets, and I'm not a great gamer but I own a few of them. I sure would love a great gamer to use them. And maybe I'll split the profits with that gamer. Or maybe its provenance improves, because I loaned it to this great gamer who played with it on Twitch. So I think your question is a good one — is this the gateway to the mainstream consumer? For sure. Does this bring a lot of other people in? I think, definitely. But what is an NFT? I think we still have a long way to go before it's fully realized.

How interested is Wall Street in this space?

So, pulling way back, if we look at crypto more broadly — it's been around for 10 or 12 years now. And if you are an investor, a professional investor, and you ignored crypto over the last 10 years, you missed the single best performing asset class out of all asset classes by a large margin … And so our view is we have 10 to 100x to go from here. And a lot of institutions are starting to see that digital assets are becoming a credible investment class.

So, we have a lot of institutional and retail money coming into the space. Now, what are they going to buy? Yeah, sure, they're buying tokens and they're doing DeFi. But really, we think the mainstream consumers will participate around NFTs. And once you start buying and trading NFTs, a bunch of other services become interesting to you.

Like, let's say you buy a LeBron James Top Shot that is worth $150,000 … You got it in a pack that you paid $10 for. Do you want to sell it? Or do you want to keep it and use it in games and stuff? It has a high amount of worth, so wouldn't you like to borrow against it? Well, that's the intersection of NFTs and DeFi.

Disclosure: Stephen Stirling is a senior reporter for the Street Crypto. He is also an NFT artist that uses the platform OpenSea, and holds NFTS from NBA TopShot, Zed.Run, Robotos and the Adam Bomb Gang currently valued at more than $500 USD.

Welcome to The Ask, where each week Crypto Investor interviews essential voices doing the work to make crypto 'mainstream.' Exchange lightly edited.

This week, senior reporter Stephen Stirling spoke to David Pakman, managing partner at venture capital firm Coinfund. Pakman was recently appointed managing partner after spending 13 years at Venrock Capital. He will be focused on expanding Coinfund’s growth-stage VC initiatives with a focus on NFTs.

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