Innovation Heroes

TRANSCRIPT - WTF are NFTs?

July 30, 2021

Peter 

This episode is brought to you by The Hub, the new central resource for insight, thought leadership, and news from SHI. Visit blog.shi.com to learn more.

 

Costa 

If you're a young up-and-coming athlete, you need to raise money. And the way to control that, and raise money, is through NFTs. Releasing an NFT of yourself, like, taking a shot, and then if you break through to that next level-- imagine having Serena Williams' first serve as a limited NFT.

[music plays]

 

Peter 

Welcome to SHI's Innovation Heroes, a podcast exploring the people and businesses giving us hope in our drastically disrupted world. I'm your host, Peter Bean. [clip from The Today Show, 1995 plays]

 

Bryant Gumbel 

What is Internet anyway?

 

Katie Couric 

Internet is that massive computer network, the one that's becoming really big now.

 

Bryant Gumbel 

What do you mean, that's big-- what do you-- how does one, normally-- what, do you write to it like mail? [audience laughs]

[music plays]

 

Peter 

[fax modem beeping] It's wild to think that there was a time when the Internet was not as ubiquitous as it is today. I like to think that I was never that bad. Don't call me a hipster, but I've been a fan of the Internet way before it was cool.

 

Man 

Cool!

 

Peter 

I saw the value the Internet was going to have right from the start. And I have to say, my Spidey sense is tingling all over again with this new tech that's been making a lot of waves lately. [quiet click]

 

Reporter 

Artists, influencers, and the NBA are making millions with non-fungible tokens. These little bits of digital media could be anything. It's uploaded onto a blockchain platform establishing ownership, price, and preventing replication.

[music plays]

 

Peter 

I feel like NFTs are important, but I have to admit, I don't really know why. Parceling up pieces of the Internet for sale? Blockchain? I'm a little out of my element on this one. Luckily, I happen to have an inside source to help get me up to speed. Costa Kladianos is the Vice President of Innovation and Technology at Canlan Sports. I know Costa from my time almost 10 years ago working on the Canadian Baseball Network podcast, and Costa has been dedicated to sport here in Canada for many years. And most recently, I discovered his interest for NFTs, collectibles, and all things related to sports and technology through his recent posts online. So, I thought it'd be a great person to bring in today to help us understand the real world applications of where NFTs can take us. Costa, welcome to Innovation Heroes.

 

Costa 

Thanks for having me! Excited to be here, Peter.

 

Peter 

So, before we start, tell our audience a little bit about your career and background.

 

Costa 

Began my career at Maple Leaf sports long time ago, and then moved over to the Canadian Football League for a few years, ran the technology for them. Put on the Grey Cup, and the playoffs, and the draft, and some great times over there. And then moved on to Tennis Canada and the Rogers Cup, where I was lucky enough to kind of watch over and see tennis in this country explode. And that's taken me over here to Canlan Sports, a little bit different as we're part of the recreational sports industry, owning 19 facilities across Canada and the United States, mainly hockey, also with some soccer, and basketball, and other sports. We also run the world's largest recreational hockey league with 100,000 participants. So, that's kind of that professional side. And you alluded to it earlier, in my other life I ran a sports development company for young athletes in Canada, especially baseball players, so we crossed paths there. And I've been around, I've been around some great people, and I've learned a lot. I've always listened and tried to keep on top of what's out there. Because, you know, my passions are sports and tech, and, you know, what's the next thing in the industry? What's going to really blow up? And, you know, that's what really keeps me engaged, and in this space.

 

Peter 

And that's why you're in the space of innovation. It's what drives us all. Speaking of innovation, I'd like to start with a question about you and NFTs. I'd like to know, why do you care about NFTs? And what has you really excited about this technology?

 

Costa 

You know, I'd heard it in the news. It was kind of this thing, oh, NFTs here. What is it? Virtual cards? And then-- I'm a collector, I'm a sports collector, and I'm an all-around geek. So, I really enjoy, you know, collecting sports cards, and memorabilia, and I saw everybody was getting into NBA Top Shot, which was, you know, these online video clips that are NFTs that people can see, they can buy, and trade, and they're really limited. And I'm, like, well, who wants these? I collect cards. Like, why would I collect something that's a video that I can go on YouTube for free? And then I saw people were making money on it. I'm like, okay, I like money. [Peter chuckles] So I went in, I got lucky-- I was lucky enough to get a pack, and I pulled a clip of LaMelo Ball out of the pack, and the pack cost me $20 bucks or so. And I noticed that the clip that you could trade on their online space was worth $5,000.

 

Peter 

Wow. [laughs]

 

Costa 

Yeah. So, I took that, and I'm like, okay, there's definitely something here. Because in order for something to sell for $5,000, there has to be a demand for $5,000 worth, right? So, I started really looking into the technology and seeing, okay, there's something here outside of just the perceived rarity, or collecting video clips. There's a lot of crossover using the blockchain to other areas of sports technology that people aren't seeing right now. Right now, the hot thing is obviously Top Shot. You're hearing about, you know, Dogecoin, which is not an NF T, but it's on the blockchain. Cryptocurrency, they're going through the roof. I mean, whether these things will hold value-- eh. You know, they-- maybe, I've been wrong before. I don't think so. But in the end, that technology has huge benefits. And I liken it back to the time-- I lived through the dot-com boom of the late '90s, early 2000s where you had people making money off domain names, off, like, simple one-page websites, and then it all crashed. But the Internet survived. And the good-- and the, and the companies that were built on good technology, like the Amazon's, are still here and they're the biggest companies in the world. So that that's-- I've been trying to see through that, and seeing what implications there are in the sport space where I play, and how this could be the next big thing, because you always have to be thinking ahead. And a personal example I have is when I was working at MLSE, at the Air Canada Centre-- this was about 2001/2002, my boss at the time, he was telling me, "We're gonna put in Wi-Fi throughout the building, for people to come and access it." I'm like, "Well, who's gonna bring their laptop to a game?' [laughter] And he's like, "No!" He's like, "Listen, it's gonna be on the phone!" He's like-- I know we can use it for-- to scan tickets, and whatever. He's like, "Watch, it's gonna be on your phone, and you're gonna do everything on the phone, and everything's gonna be through Wi-Fi___33." I'm like, Yeah, whatever. I'm like-- I didn't say that to him because he was my boss. I'm like, "Yeah, yeah, great idea." But in my head, I'm like, what does he know? And then when I saw what happened, I'm like, okay, this kind of makes sense. Now, let's start thinking ahead.

 

Peter 

Alright. So, before we get too deep into some of the more specific questions I have about the applications for this technology and where it's going, I want to give the audience a bit of a crash course on what it actually is, how they work, how do you actually make and sell an NFT? Can you give a little background to the people who actually don't know what these things are?

 

Costa 

Yeah, for sure. So, a non-fungible token-- that's what NF T stands for-- it's a unit of data stored on a digital ledger, and the digital ledger is the blockchain. And that's what Bitcoin runs on, and it's basically a decentralized-- it's a bunch of computers together, when you when the computers read the code together it comes out with one thing. Like, a giant database is the easiest way I can put it. And the NFT is different than a cryptocurrency because it's a digital asset, and it's unique. You can put video, photos, audio, any types of digital files on them, but they are limited. So, if you put out 1,000 NFTs of, let's say, LaMelo Ball, that's it, you can't make any more again. Whereas Bitcoin, you know, you can trade them for the exact same thing. So that's kind of the difference between an NFT and a Bitcoin. I mean, it's clear as mud, because I think it's still evolving as a market. So technically-- they say you can't sell the exact same thing. But if you have someone who's, you know, nefarious, I guess you could say they could technically reissue it. And so, you have to know your source, you have to make sure they're credible. So, companies like NBA Top Shot who are licensed by the NBA, you can be sure that when something's minted for 1000, they'll never reissue that again and you have a scarce supply. And that runs the whole supply and demand concept of the NFT, and what actually creates their value.

 

Peter 

I read this tweet a couple of days ago, and it kind of resonated with me. Basically, the story was trying to explain NFTs for dummies, and it was you know, you're standing in a museum and you're looking at the Mona Lisa, and somebody walks up to you and says, "Hey, do you want to buy this?" You're like, "Oh, yeah, I'd love to buy it. Sure." So, you give them some money, and they write your name down on a piece of paper, and they go into some deep dark back closet in the back of the museum, and they pin your name up beside the Mona Lisa. And then they walk out, say thank you very much, give you your receipt, your token. And then you say, "So can I take it home?" And they're like, "No, that's not how it works." So, like, Is this just bragging rights? I mean, is that really what we're talking about here?

 

Costa 

I think there's a few ways to look at it. I like to look at it as you come in, you love the Mona Lisa, and the museum is like, you know what, we're going to give out-- and any art piece does this-- we're going to give out 1000 Mona Lisa prints, numbered, that are tied to the ownership, that are signed. And you know you can have it, it's an official Mona Lisa print. And then you take that home, and now you have the print. Just like you have a baseball card, you have a picture of the player, a piece of cardboard, and there's however many there is made of them, and you have that, and the ownership is tied to you. So, there are areas where, for example, Jack sold his first tweet as an NFT. You don't own his tweet; you own a single copy of his tweet as an NFT that can't be reproduced. So, I'll go back again to my baseball card example, you don't own the picture that the photographer took the baseball card, but you own a reproduction of that picture that is limited. So, it's a little bit different than owning the original artwork, in my opinion. Some people might think differently.

 

Peter 

Okay, I get it.

 

Costa 

The person issuing the NFT has the rights to put in benefits into the NFT if they want to, or if they don't. Like, NBA Top Shot, you just own a copy of the clip as the NFT and they're hoping that the collector in you wants them, the gambler in you who believes in the supply and demand that it's going to, you know, raise money as the player gets better, you'll flip it on their marketplace, and then they keep a percentage of the transactions. Because when you transact an NFT, when you sell it, it's actually recorded onto the blockchain and tracked. And that aspect of it is where I thought to myself-- I'm like, okay, there's proof of ownership here. There's proof of transaction. There's a lot of areas where this would work. And I understand that the Bitcoin makes sense in virtual banking, but if I look at the sports industry itself, I'm like where do you need to have proof of transaction? Where do you need to guarantee authenticity? And the first thing that came to my mind is ticketing.

 

Peter 

That was gonna be my next question. I understand the collectibles side of this, this makes sense. Dig into that, though-- how does this benefit things like ticketing?

 

Costa 

Right, and that's the number one thing that I was looking at. Because when you issue someone a ticket, tickets can be still counterfeited. It can be printed out, it could be sent in. So, they're still trying to get away from it with digital ticketing, but it's still there. With the blockchain and NFT, if you issue a ticket to someone you can track their ownership. It's identifiable to them. If they choose to sell it, you could track where it's being sold, how much it's being sold for, and if you want to get a percentage, you can absolutely get a percentage. If you don't want them to sell it-- I mean, you can technically not have them sell it. But you have full control over the ticket to your event. So, when they come in, you know, it's their ticket. It's not counterfeited. If it's been resold, you get a portion of that money back to you. You know who it is, so you get analytics on this person-- can I upsell them? If it was gifted to someone, is this a new person that I can bring into my network and sell them, you know, merchandise, upgrade their tickets? You know, it provides a lot of analytics to teams.

 

Peter 

Now that I've been schooled on what NFTs are, I want to know what this means for the Internet at large, and where is this tech taking us in the future? But before Costa can continue our lesson, first a word from our sponsor.

[music plays]

 

Peter  

This episode is brought to you by The Hub, the new central resource for insight, thought leadership, and news from SHI. Visit blog.shi.com to learn more.

[music plays]

 

If you're a fan of Innovation Heroes, then you're probably already familiar with all the great resources that SHI offers. But wouldn't it be great if there was an all-in-one portal where you could get easier access to news and insights from SHI leadership and subject matter experts? What if you could also listen to the latest Innovation Heroes episode in the same place that you could find the SHI blogs, one-pagers, e-books, e-guides, opinion pieces, and more? Well, pinch yourself, because you're not dreaming. Introducing the new SHI Hub, your go-to spot for industry news, technology updates, and thought leadership content from SHI. The Hub helps organize and categorize different pieces of expert-driven content from SHI, and our strategic partner network. With new content published daily, there's always a reason to come back to The Hub. just browsing? Scroll through the popular and featured content. Looking for something specific? The search and filter options can point you to what you're looking for. Case studies, tweets, videos-- everything SHI, you can find it at the Hub. See The Hub for yourself! Discover SHI's latest and greatest thought leadership today, at blog.shi.com.

[music fades out]

 

I'm curious, you know, you mentioned how teams have been struggling to drive revenue during the pandemic, right, without face-to-face, in-person live events. I've been talking to a lot of our guests about how their industries have changed because of what's gone on in the last year and a half. Did you think that NFTs would have risen now? I mean, I think it's obvious they would have taken off at some point. But do you think the take-off has a lot to do with the financial strain on many of these industries that are looking to it as a way to drive additional revenue? Or do you think the timing was inevitable, and it just would have happened now regardless, because of the tech.

 

Costa 

I think you're right, eventually it would have happened. What the pandemic did was accelerate this. What happened during the pandemic was a lot of people were at home there, they were bored, and a lot of people had a lot of extra money to spend because they weren't going out-- the ones lucky enough to still have their jobs, they had all this money to spend. And they had no sports to watch, nothing to gamble on. So, what happened was the trading card industry exploded, and then Top Shot came out. And Top Shot exploded because people were like, "Oh, this is kind of cool. I can make some money on this. I can collect on this." So, it drove people to it, which accelerated the growth, and then it got eyeballs on it.

 

Peter 

So, I've been thinking a lot about this, right? Is this flash-in-the-pan, is this sustainable, is this going to change the Internet at large? Do you believe that NFTs are going to shake up the way the internet works long-term, or that this is something that is exploding now into many different places, but will ultimately settle into a couple-- like you said, collectibles, tickets, you know, digital coin, that sort of thing?

 

Costa 

The Internet's always evolving. And what you see when a new technology comes out, you see a lot of this excitement, a lot of speculation. And everyone goes up, it goes great. And then, you know, it kind of crashes, and people move on to the next thing. But what happens is that the good technology and the uses, they'll take a lot of that money, they'll take a lot of that excitement, and they'll start building things that work. And there is room on the Internet for a decentralized Internet, which is what the blockchain is. It's decentralized, it can survive. And you're not relying on Amazon, you're not relying on Microsoft, you're relying on the Internet as a whole to run this technology. Which is great because now you have control over what you want. There are a lot of things that need to be overcome first. One of the big things is the blockchain is super slow. It's maybe up to about 100 transactions per second. And if you think about how many transactions can be possible per second, 100 is not even close to being enough. But there are next-level technologies, next-level blockchains coming out that will be able to do millions, or eventually hundreds of millions of transactions per second, which will get that leapfrog into that next level of innovation. The other issue is, it's not very green. It takes a lot of energy to run and mine on the blockchain. And there are server farms up in Alaska and in Siberia just using up a lot of energy. So, there are technologies in the work to reduce that, and reduce the carbon footprint because as the uses grow, the more energy will be used. And you know, that's not going to work in the long term. So, once they figure that out, I think that you'll see the innovation on the blockchain really accelerate, and adoption really accelerate beyond just, you know, the collectibles and the speculative stuff to more of the things that businesses could use.

 

Peter 

Speaking of businesses, what are some of the other applications that exist today outside of sports and collectibles? What other industries are doing a good job of taking advantage of this right now?

 

Costa 

I see real estate as one industry that-- they're not taking advantage of it yet, but they will be, just because of the smart contracts. If you write a contract onto the Ethereum blockchain, it cannot be changed. It can be tracked. You know, it's as good as gold. So, think about a real estate contract. It's there, it can't be changed, it can't be counterfeited. So, any industry where you have contracts involved, like law, it would definitely make sense. And then you look at banking. Banking is the-- I mean, you see Bitcoin, and you see everything, that's the new financial currency, but everyone's like, "Oh, this is gonna be the downfall of big banks." I'm like, "No, the big banks have a lot of money. They're not stupid. They're just going to build their own blockchains, and digital currency, and they're going to use that technology and they're going to take advantage of it because they're backed by countries, and they're backed by billions of dollars." And that will be the biggest industry to change.

 

Peter 

What about the music industry, I recently heard that a band released one of their albums recently as an NFT. Do you think there's any application there that makes sense?

 

Costa 

Yeah, for sure. Because you know, music is art. So, you can download your audio clips onto there. So, if you, as an artist, want to release your music to an exclusive 2,000 people who will have that NFT, that creates that supply, that creates that demand, and creates some extra revenue for them. And then as an artist, when you're touring and you're eventually back again with the concerts-- I mean, if you're a big artist, you know, you have your deals with Live Nation and whatnot, and you keep all the good money. But if you're the 99% out there that are just trying to, you know, make a regular living, through NFTs, and back again to NFT ticketing that's called event financing, decentralized financing, DeFi, where you can actually pre-sell your tickets on the blockchain and raise money for your concerts and concert tours while you're selling the tickets through that protocol. Because in the past, you would have to put that money up before you had it, and it was a lot of money. But if you couldn't get that before and pay out for your tour before without taking that risk, because the tickets have been sold-- you're making your money through the blockchain, you're allowing yourself to make a living through that as an artist and being seen. So, you can control your art, you can pay for your touring, and you can do this without the big players kind of controlling you. So, it'll be interesting to see how it'll affect that industry.

 

Peter 

Wow, that really does open the door for a lot more people to actually fund their life through their passion. So, if I want to buy an NF T, I want to get involved-- I've been listening to this show, and I'm like, "Okay, I gotta get into this," what do I need to do? Where do I start? Get our listeners who are now excited to try this out on the right track.

 

Costa 

So, the easiest thing to do-- if you're a basketball fan, go to nbatopshot.com, buy a pack and get going. It's really easy, you can use your credit card in there and have some fun. If you're kind of in the art world there's-- it's called OpenSea, Google it-- that's an open marketplace for artists to put up their digital NFTs that you can buy and have for yourself. And then just really research, research, research. I would encourage people to go out there and research a lot before you actually dip your toe into it, just like anything. Because if you just go out there and start buying, you're gonna lose a lot of money unless you get super lucky. Know what you're getting into. Just like gambling, just like-- just like anything, research your marketplace, understand what you're doing. And then slowly but surely dip your toe in there and have fun with it. If you're going in there and you're not having fun with it, then what's the point? I mean, there's a million other things you could be doing.

 

Peter 

Yeah, it does sound like fun, though. So, do you have an insider stock tip equivalent for NFT buyers? Something that's not as popular as Top Shot yet, but you feel like this is going to be big and this would be a great time to get in on this particular offer?

 

Costa 

I guess research next level blockchains that are being built with faster transaction times. Like, I don't want to get one in particular because there's a lot coming out there. But if you do your research and pick one that you think people will invest in, buy that-- buy that kind of stock, or buy that coin. You can even buy the-- so, what NBA Top Shot is built on is something called the Flow blockchain. It works faster than Ethereum. You can actually go online and buy cryptocurrency in it, which is kind of like a stock. So, if you believe the Flow blockchain is something for the future, and I think it is because Top Shot's on there, the UFC is coming out on there, and it seems to be sport-specific for the technologies being built out. So that-- I mean, that's one to watch out for. But really, I think it's a bit of a bubble right now. So, I mean, you got to be careful. Everything's really high because I think the future value is built in already. Like, you've seen how much Bitcoin's worth, you've seen how much Ethereum is worth. But it's definitely an exciting industry, for sure. And as long as you stay away from the pure speculation stuff and you stick to what technologies you think have lasting power, and have more than just the current bubble power, as they call it, then you'll still be safe. Just like just like any investment, go for the long term.

 

Peter 

All right, last question for you: as someone who's paid a lot of attention to this technology since it started, where do you think this is going that no one else is talking about yet? Like, let's play futurist for a minute here and throw out your wildest prediction for where this is headed, and what this all might look like in, I don't know, 10, 20 years, take your pick.

 

Costa 

Ugh, I never look 10 years, because technology-- that's too crazy for me. 2 years ahead in technology is like 10 years ahead in the real world. And I think the biggest opportunity here is for people in underserved sports. If I think of-- you know, if you're outside of the top 100 in tennis you're not-- you're paying to be at a lot of these tournaments. If you're an Olympic athlete, you know, no one gives you money outside every four years, unless you're in one of the big show sports. If you're a young up-and-coming athlete who doesn't have the backing from your provincial or national organization, you need to raise money. And the way to control that and raise money is through NFTs, releasing an NFT of yourself doing-- having a serve, or taking a shot. And if you're a promising athlete, or if you're an athlete in one of these niche sports, you can convince 1,000 people to own that moment. And then if you break through to that next level, imagine having Serena Williams' first serve when she was 16 years old as a limited NFT. So-- and you look at right now women's sports, they're, you know, super popular but they're not-- they don't get, I think, the respect they deserve from, you know, the major sponsors. So, this is a chance for them to go right to the people that watch them, right to the people want to support them, and give them a chance to stand on their own. And, you know, not have to worry about, you know, what's Nike doing today, or how can I get with them, right? It's, "I control my destiny."

 

Peter 

That's fascinating. I mean, I love that idea. Well, I want to thank you for being on the show, this has been great. I knew you'd be a great guest to talk through this, you really brought it down to a level that I think most people can understand, and I thank you for that, because I know myself when I was trying to wrap my head around it-- it wasn't easy, you know. And I still have a lot of questions, and you did a fantastic job of really clarifying this whole new world for our audience today. So, thank you so much for being on the show.

 

Costa 

Great. Yeah, no, thanks so much. It's fun. I always love talking this stuff, so it was a good time.

[music plays]

 

Peter 

It can be hard to anticipate and even accept big technological changes. But eventually, all these life changing innovations shift from being revolutionary to the new normal. I foresee NFTs continuing to make waves in the way that we use the Internet. But whether or not they change the world of sports forever, we'll have to wait and see. For now, I'll take my Blue Jays however I can get them.

[music plays]

 

Peter 

As some of you may already know, I'm moving on from SHI, and this will be my final episode as the host of Innovation Heroes. This journey we've been on for the past two seasons has been one of the most enriching of my life. I've had the opportunity to work with incredible people to make this show, and I'd like to take a moment to recognize and thank them. To Ronny, Jane, Ed, Jessica, Stacey, and Brittany, thank you for your commitment and passion to making this show great. To Tobin, thank you for your creative vision and for making me sound so good. Every time I received a compliment for this show, I always responded with, "It's all Tobin, I'm just the voice." And to Angela, thank you for trusting me to be your host for Innovation Heroes. I've never had more fun at work in my life, and I'll always remember this experience as one of the best-- and I have you to thank for that wonderful memory. To all of our amazing guests, thank you for being the heroes you are, and sharing your stories with our community. And finally, to all of you, our listeners. Thank you for coming along with me on this journey these past two seasons. We've all been through a lot in the last year and a half, and my hope is that our show is giving you some inspiration, or even just a little break from the challenges of life in this drastically disrupted world we're living in. You're the reason we make this show-- and we'll continue to do so. Innovation Heroes isn't going anywhere and will be returning for season three in the fall of 2021 with a new host, and an incredible lineup of heroes changing the world for the better. As I sign off for the last time, I want to leave you with one final thought: in all of the examples throughout the first two seasons of this show, there was one thing that stood out to me more than anything else. All the heroes we talked to were part of a collective of people striving to make the world better in their own special way. No one person alone can be an innovation hero. Innovation heroes are groups of people with a shared passion and willingness to go out there and make something better. So, if you want to change the world, step one is to go out there and find or build your collective. Once you have, be bold together, take risks together, break things together. And never ever stop challenging each other to be incredible. For nothing great has ever achieved alone. Thank you for listening to Innovation Heroes. I'm Peter Bean, and it's been my honor to be your host. Innovation Heroes is an SHI podcast, with new episodes streaming every second Thursday on Apple, Spotify, Google, and everywhere else. If you like this episode and you want to be our hero, leave us a 5-star review on your podcast listening app of choice. [music fades out]

 

Peter 

This episode is brought to you by The Hub, the new central resource for insight, thought leadership, and news from SHI. Visit The Hub at blog.shi.com today.

Podbean App

Play this podcast on Podbean App