Tezos’ Kathleen Breitman: 3 Things in Crypto That Will ‘Age Badly’
Kathleen Breitman has been called “crypto royalty” for creating Tezos – a major blockchain and competitor to Ethereum – back in 2014, reigning as one of the earliest entrepreneurs in the space. And if you ever get a chance to talk to her, you’ll quickly see that she’s a straight shooter.
In an interview with Fortune, Breitman discussed the latest hype cycle in the crypto market – and the brutal crash that followed. And upon reflection, it became obvious how wrong some previous predictions about the crypto market had been – certain investments, certain projects. Of course, hindsight is always 20/20.
“People get attention when they start making predictions about this,” Breitman says Fortune. “But man, a lot of that stuff doesn’t age well.”
Here are some other things in the crypto world that could also “age badly,” according to Breitman — from certain non-fungible token (NFT) investments to parts of Ethereum “merging.”
No. 1: Billion-dollar VC investment in NFTs
First, many of the NFT-related venture capital investment valuations are “absolutely extreme,” she said. “Things That Will Age Badly: Being a VC Investor Explaining a $1.5B Valuation to a No. 15 NFT Marketplace.”
Although the market has since fallen, it wasn’t that long ago that NFTs were commonly sold for six- and even seven-figure price tags. One example, among countless others, is an NFT of a JPEG stone that sold for over $1 million in August 2021. Overall, last year was a big year for NFT trading, which passed $17 billion – a 21,000% increase from 2020.
While retail investors jumped on the hype – mostly due to FOMO – so did large institutional investors – Visa and KPMG among them. Alongside them, as Breitman notes, were VC funds such as Andreessen Horowitz (a16z) and Paradigm. Some VCs invested heavily in the space, dumping millions into the best NFT marketplaces and specific NFT projects.
“I think a lot of the valuations are not going to hold,” Breitman added.
Breitman sees the NFT volume and growing marketplaces on Tezos, such as objkt.com, as undervalued compared to Ethereum or other blockchains. But while they may grow, Tezos’ NFT marketplaces are still tiny compared to giants like OpenSea.
Nonetheless, Breitman generally sees many NFT-related founders as similar to “first-time entrepreneurs in Silicon Valley who just want to raise money and then feel good about themselves,” she said. “You see a lot of that in the crypto space.”
No. 2: NFT profile pictures
Next, Breitman notes the wild rise in profile picture (PFP) NFT projects.
“I think a lot of the PFP collections don’t do very well for a pretty good reason, which is that they’re almost purely speculative,” she said. “At some point, if you have a million tokens [in a collection]it becomes quite fungible again.”
Typically, people in the crypto space make their Twitter avatar a popular NFT to show that they are among a project’s community members, especially if said NFTs are expensive and coveted by celebrities, like those in the Bored Ape Yacht Club. For others, owning a PFP NFT is more about fitting in and finding common ground in a larger group.
While PFP NFTs can rise rapidly in popularity, the projects can die just as quickly.
“A lot of this stuff ages very badly, because it was very much VC-funded initially,” Breitman said. “I think we should look at how organic community growth is, because a lot of the subsidies are being worn out.”
And there is another question about how much value the assets will retain.
NFT marketplaces “are not going to do well,” she added. “I think, just looking at the valuations, looking at the volume, makes for quite a condemnation [view].”
No. 3: Some aspects of the “merger”
Finally, Breitman pointed to some of the misguided or outsized expectations that may surround the upcoming Ethereum merger.
The merger will move the influential blockchain to a proof-of-stake consensus mechanism from proof-of-work, in turn dramatically reducing its environmental impact.
While it’s “nice to see Ethereum join the rest of the industry,” Breitman said — Tezos counts itself among the long-standing proof-of-stake blockchains — “I think a lot of what’s dominated the industry is obviously the momentum and commotion in this idea of what’s going to be popular next quarter.”
For her, this includes the buzz surrounding the merger. While she understands the buzz, as Ethereum is the dominant smart contract platform, the merger “will not solve Ethereum’s fee problem.”
The gas fees she is referring to are the cost of carrying out a transaction on the Ethereum blockchain, and are considered a major pain point for Ethereum users – during periods of high demand, the fees can run into the hundreds of dollars and make the network unviable. too many.
Since the merger will not expand Ethereum’s network capacity, the upgrade will not affect the price of gas fees. But the Ethereum Foundation sees the upcoming move to proof of stake as a “critical precursor” to eventually lowering those costs.
“It’s like, ‘Oh, look, we’re finally doing this one thing.’ And actually, it doesn’t really address the reason people come to Tezos, which is the fees,” Breitman said. “This is the old ‘razzle blending’. It doesn’t actually solve the problem that drives a lot of people away from Ethereum.”
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