DAOs Aren’t A Fad — They’re A Platform

Tribute Labs CEO Aaron Wright and COO Priyanka Desai (above) at a Williamsburg, Brooklyn, mural of a popular nonfungible token (NFT). Their DAO service operation created Flamingo DAO, which turned a $10 million investment into a $1 billion NFT collection. Photograph by Jamel Toppin for Forbes.

The leaderless investing collectives known as decentralized autonomous organizations are generating a lot of eyerolls. Thanks to high flexibility and low regulation, they’ll also soon generate a lot of profits.

By Jeff Kauflin with Isabel Contreras

“This is an incredibly risky move. I don’t know if I agree with this.’’ Erick Calderon, the founder of a company named Art Blocks in a risk-oblivious field, nonfungible tokens, was nonetheless concerned. It was February 2021, and Calderon was one of 59 investors who had banded together to potentially buy a rare set of 150 popular NFTs, CryptoPunks, directly from their producer, Larva Labs. 

The group, a decentralized autonomous organization (DAO) called Flamingo, had pooled $10 million and met weekly via Zoom (audio-only to protect those wanting anonymity) to figure out what to do with it. The CryptoPunk opportunity, at about four ether ($7,200 at the time) per punk, would eat 10% of that, which is partly why Calderon aired his concerns on the group’s Discord channel.

The tension got thicker when members discovered one of their own—someone going by the pseudonym “Pranksy”—had tried to front-run the deal, opening a back channel with Larva Labs to buy 150 punks for himself. In the end, Flamingo members voted to spring for the punks, which were recently valued at $30 million. As for Pranksy, he left the DAO “by mutual agreement,” telling Forbes he was “somewhat naïve [about] the DAO process.” 

Most of America is. Sure, you’re probably familiar with the concept: leaderless collectives in which groups democratically make investment decisions, such as when 17,000 members of a DAO tried to buy one of 13 surviving original copies of the U.S. Constitution last year. Aaron Wright, CEO and cofounder of Tribute Labs, which set up Flamingo, calls a DAO “a sub-reddit with a bank account.” But while the headlines tend toward the splashy or the silly, a new model is emerging that has real legs as an alternative investment vehicle. 

A quarter-century ago, an Illinois “investment club” run out of a church basement, the Beardstown Ladies, spawned a slew of bestsellers and imitators as stock-picking groups proliferated. DAOs have modernized and digitized the concept, incorporating many of the traits that make the blockchain so potent. 

By using tokens, DAOs can efficiently allow votes, empower profit sharing and, crucially, supply liquidity, as tokens can be bought and sold—though for now, trading in tokens is not something the Securities and Exchange Commission is ready to bless. 

By limiting membership to 100 people or fewer, some DAOs are also able to skirt SEC rules, since they fall under a quaint 82-year-old “investment club” exemption—so long as the participants are all involved in managing their kitty and don’t publicly offer their securities. 

And while the leaderless model can be called, by another definition, anarchy, it also lets those interested in alternative assets play without having to outrun the 20% profit share that hedge fund, venture capital and private equity managers regularly charge for what too often is average performance. Syndicate, which makes DAO-in-a-box software, partners with another startup that can help you do all the legal and tax paperwork for $2,000 a year, while Tribute charges 2% a year of the DAO’s original investment to do all that paperwork and incorporate things like coordinating group calls (not coincidentally, the same upfront vig that funds charge). The difference here is that the profits are all yours. 

Combine all that, and you have something that can’t be judged by all the dumb headlines. Instead, think of DAOs as a legal platform, much as nimble LLCs emerged decades ago as an easier way to incorporate than the lawyer-laden C Corp. The early adopters might seem silly. The second wave will make it mainstream. 

Exhibit A: Kinjal Shah is a partner at VC firm Blockchain Capital, in San Francisco, which has a traditional fee structure on $1.8 billion under management. Nevertheless, Shah cofounded a DAO called the Komorebi Collective, which has 35 female investors, $400,000 in capital and a goal of investing in crypto startups with female and nonbinary founders. In creating an investment vehicle (leveraging Syndicate services) that isn’t weighed down by institutional investors or high hurdle fees, Shah says the DAO can “have a lot more experimentation and flexibility.” And those are two terms that tend to portend exponential growth. 

The early days of DAOs did the model no favors. In 2016, early adopters of ethereum formed “The DAO” to back crypto projects, quickly attracted $150 million—and then lost one-third of that to a hacker before making a single investment. While the attacker was denied most of his spoils after developers controversially “forked” (reissued) ethereum, the point had been made: The DAO disbanded, and all DAOs carried a stink akin to that of early dark web marketplace Silk Road. 

Nevertheless, the concept gradually spread. By 2018, roughly 10 DAOs had been formed. By 2020, there were nearly 200 of various types, according to DeepDAO. Yes, embarrassing incidents continued, including numerous “rug pulls”—scammers collect money for a DAO crypto offering and then abscond with the loot, a digital version of The Music Man. Just this January, BadgerDAO, a 24,000-member organization that lets people earn interest on their bitcoin, lost $120 million in a cyberattack. 

But the sheriffs are flooding into this Wild West. Today, more than 50 companies offer blockchain security auditing, according to OpenZeppelin. And the number of DAOs keeps surging—it currently sits at more than 4,000, with over $8 billion in their treasuries. 

Yes, the populist teams and populist themes attract the headlines. PleasrDAO, which has about $100 million in assets and a mission, according to its “chief pleasing officer,” Jamis Johnson, that varies between doing “dope shit” and building “a portfolio of assets that represent internet culture,” shelled out $4 million for the Wu-Tang Clan’s one-of-a-kind album Once Upon a Time in Shaolin (buying it from the feds, who seized it from Martin Shkreli, the jailed “Pharma Bro”). It also spent $5.5 million for the “Stay Free” NFT minted by fugitive National Security Agency whistleblower Edward Snowden and $4 million for an NFT of the original “Doge” image—the mascot of the cryptocurrency Elon Musk promotes in tweets. But look closer, and you’ll see that this isn’t the “stonks” crowd—investors include the platinum-chip venture firm Andreessen Horowitz (firms, as well as individuals, can invest). 

A quarter-century ago, an Illinois “Investment Club” run out of a church basement, the beardstown ladies, spawned a slew of bestsellers and imitators as stock-picking groups proliferated. DAOS have modernized and digitized the concept, incorporating many of the traits that make the blockchain so potent.

While fans may have fantasized through the decades about banding together to buy their hometown sports teams, the Krause House DAO provides a legitimate group with a far more serious path to that unlikely goal, incorporating former players and superfans in a campaign to buy an NBA team. 

A lot of this increasing legitimacy can be credited to Wright, the 41-year-old Tribute Labs cofounder and law professor, who has been obsessing over DAOs since the start. After graduating from Cardozo Law School in 2005, he vacillated between entrepreneurship, cofounding sports discussion site Armchair GM, which was sold to Wikipedia’s for-profit arm for $2 million in 2006, and New York corporate law, even representing Jay-Z in an intellectual property dispute. 

In 2014, seeking more intellectual freedom and better hours, Wright began teaching law at his alma mater and combined his two careers, founding a legal clinic for tech startups and expounding on crypto and blockchain. In 2015, he advised the cofounders of ethereum on their first “crowd sale”—they sold ether for 30 cents that now trades around $2,500—and later offered his thoughts on The DAO. Wright didn’t invest in The DAO, he says, because “it wasn’t 100% clear what you were purchasing, what the structure would look like and whether that would work.” Vindicating his concern, in a postmortem, the SEC concluded the tokens The DAO issued were securities that should have been registered. 

In 2017, Wright cofounded what would become Tribute Labs with Swiss software engineer David Roon to advise companies on how to embed legal contracts into the blockchain, adding new Cardozo grad Priyanka Desai as chief operating officer. In essence, he was selling the pans in the gold rush, but he couldn’t help but prospect too—he’s one of the key figures behind Flamingo. 

While Tribute’s DAOs are funded with ether and operate on the blockchain with certain key protections written into their code, they’re organized as Delaware limited liability companies, with investors holding their equity interest in units, not crypto tokens. To further keep SEC watchdogs and reporting requirements at bay, they’re open only to accredited investors—investment funds and individuals with income above $200,000 or investable net worth above $1 million. No investor can own more than 9%, and Wright limits his own holdings to 1% of each DAO. 

The Tribute DAOs’ bylaws require only a majority of those voting on any deal (not a majority of all members) to approve a purchase and provide for a mechanism for disaffected participants to get their money out—or, as it’s known in the DAO world, to “rage quit.” Despite all their interaction, members can choose to remain anonymous from one another. Tribute Labs, with 12 lawyers, engineers and financial types all working remotely, vets all participants, fulfilling federal “know your customer” requirements and issuing annual K-1 tax reports required by the IRS. Flamingo participants hail from New York, California, Puerto Rico (a crypto investor tax haven) and Australia, among other places. 

Wright points out that the U.S. legal system is more DAO-hospitable than those in Europe, since in the U.S. you can create member-managed companies that don’t designate a single manager or CEO. He helped write a new Wyoming law that allows for LLC DAOs but says the Dela-ware law is just as flexible. 

Additional Tribute-fueled DAOs have sprouted almost organically. Last October, Neon DAO raised $20 million in just 45 minutes to invest in the metaverse and has already bought undeveloped virtual land. Two months later, Noise DAO, focused on music NFTs, closed in 30 minutes and raised $7 million. Red DAO raised $12 million in September to focus on digital fashion (both NFTs representing ownership of a physical piece of clothing and outfits in the metaverse). One member is already advising fashion brands on NFT strategy—not unusual, as DAO members often see themselves as players and not just passive investors. Flamingo, for example, commissioned NFTs by unknown artists who have gone on to digital fame—in part via the credibility conveyed by Flamingo.

How big could investing DAOs get? The global money management industry now tends more than $100 trillion in assets, and Syndicate cofounder and CEO Ian Lee predicts DAOs will hold at least 2% of that in 10 years, increasingly moving into big money pools like stocks and real estate. A former VC and head of crypto at Citigroup, Lee has some big-name backers for Syndicate, including Andreessen Horowitz, Coinbase Ventures, Snoop Dogg, Ashton Kutcher and Reddit cofounder Alexis Ohanian. 

The ecosystem matures quickly. In a house 90 minutes from Vancouver, British Columbia, 39-year-old Jess Sloss is a leader (or, as he calls it, “instigator”) of Seed Club, which aims to be the Y Combinator of DAOs, running eight-week startup workshops for cohorts of 15 that win acceptance into the program. It gives them advice on topics like marketing and how to launch a token. 

Sloss got into digital marketing, then went to work for crypto startups. Along the way, he joined the ranks of those frustrated by the power of the big web companies. “The value that we were creating for these networks was massive, and our ability to have a say in those networks, or have an ownership stake, was minimal or zero,’’ Sloss says. “Are we just going to be living with these feudal overlords and farming for them?” 

Feudal overlords? Sloss isn’t quite as out-there as he sounds. Last year he raised $2 million from dozens of angel investors including a Tribute Labs DAO; Union Square Ventures partner Nick Grossman is a backer. Plus, Seed Club is just one of many DAOs animated by a determination to make sure creators and those who come up with ideas—as well as investors—keep a fair share of the wealth. DAOs, says the 50-something Frank Rotman, a managing partner of fintech venture capital firm QED who has recently started studying DAOs, are “playing to an ethos and a zeitgeist that has hit the next generation.” 

The global money management industry now tends more than $100 trillion in assets, and Syndicate cofounder and CEO Ian Lee predicts DAOs will hold at least 2% of that in 10 years, increasingly moving into big money pools like stocks and real estate.

Out in Silicon Valley, Syndicate is looking to scale up the DAO model far faster, with a service that allows up to 99 investors to instantly turn an ethereum wallet into a DAO—a “Web 3 Investment Club’’ that votes and tracks its holdings on the blockchain. The basic setup is under $300; the service launched in late January, and in under a week, 200 DAOs had signed up. 

Pitfalls abound. Scammers continue their pestilence. If assets do swell into the trillions, it’s hard to see the SEC adhering to rules designed for the financial equivalent of knitting circles. The regulators already consider tokens to be securities if they can be bought and sold—as opposed to merely used for voting and then burned (destroyed) when an investor withdraws. And an entire decentralized trading exchange, Uniswap, already exists. “It really is mass civil disobedience,’’ Rotman muses. 

Finally, there’s the matter of performance. If the wisdom of the crowds better mimics the meme-stock bozos than the enlightened ideals of Aristotle, DAOs will have a short shelf life. After their bestseller drew scrutiny, those Beardstown ladies were ultimately revealed to be market underperformers, rather than Buffetts in the basement. Then again, the faceless hordes behind Flamingo have done far better than just CryptoPunk NFTs—their ahead-of-the-curve calls have helped them turn $10 million into nearly $1 billion in 15 months. A 1% stake in Flamingo, which originally cost $23,000, now goes for 3,000 ether—about $8 million. And new members are screened for the knowledge and influence they can add—not unlike a blue-chip VC or hedge fund seeking partners, but without the crazy fee structure.  


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The 10 Fastest-Growing Cryptocurrency Ecosystems In 2021

Two years ago, bitcoin dominated the cryptocurrency market, gobbling up 70% of its market value. But as crypto has ballooned to exceed $2 trillion in assets, the industry has fragmented. Today, bitcoin’s share sits below 40%, and new crypto networks are popping up every day. One way to sift through the clutter and see where the industry is going is to follow the software developers who build and maintain crypto networks. 

“Developers tend to be pretty rational. If there’s something they can play with that has real utility, developers have this ability to go find that thing,” says Avichal Garg, a managing partner at crypto-focused venture firm Electric Capital. He views the number of developers who are working on a crypto network “as a leading indicator of where value will be created and accrue over the next 10 years.” 

Garg co-authored a report with Electric Capital partner Maria Shen that reveals which cryptocurrency platforms attracted the most developers in 2021. They used data from GitHub, the go-to online repository where developers store their code, to estimate how many engineers work on each platform. Their data underestimates the total number of developers, since it doesn’t capture code that’s written privately or the many engineers that work at companies like Coinbase. 

Their research says 18,000 active developers (including both full and part time contributors) are working on cryptocurrency platforms, up from roughly 10,000 a year ago. Garg sees that surge as a validation of the industry’s growth and longevity. Kinjal Shah, an investor at Blockchain Capital, agrees: “When people are voting with their feet and their time, it’s a strong signal that there is something they’re building for the long term,” she says. 

Electric Capital’s research analyzed nearly 500,000 sets of code and 160 million code updates. It compared December 2020 to December 2021 to calculate growth. For the list below, it counted a developer as full time if he or she made at least 10 software updates in a month. 

The fastest-growing platforms are all competitors to Ethereum, the second-largest crypto network launched in 2015 that has 1,300 full time developers creating applications on it. Ethereum acts as a decentralized computer that applications can be built on, and it’s maintained by more than 5,000 “nodes” or computers that help validate transactions. One downside of being so widely distributed is that Ethereum can only process about 15 transactions a second (the Nasdaq stock market averages about 20,000 transactions per second), and a single transaction fee can sometimes exceed $100.

All of these fast-growing crypto networks take different approaches than Ethereum to decentralization and “consensus,” the algorithmic process of validating a transaction. They settle transactions faster and have lower fees, and most aren’t as widely decentralized as Ethereum. 

Korea-based Terra was founded by entrepreneur Do Kwon, 30, and launched four years ago. Its UST “stable coin”—a cryptocurrency pegged to the value of a U.S. dollar–has grown quickly to reach a market value of $10 billion, putting it in the top five stable coins in the world, according to crypto data site Messari. San Francisco-based Solana surprised many crypto insiders over the past year as it attracted hundreds of developers and vocal support from crypto billionaire Sam Bankman-Fried. A variety of applications built on Solana, ranging from crypto trading exchanges and lending products to music apps, have become very popular. Solana’s SOL token went from $1.85 in January 2021 to $170 by the end of the year, hitting a market value of $53 billion. 

Near, a protocol founded in the Bay Area in 2017, was launched by Alexander Skidanov and Illia Polosukhin, two engineers who worked previously on the highly regarded MemSQL distributed database system and Google’s TensorFlow machine learning platform. Both Solana and Near were built in Rust, a popular programming language that’s more widely used than Solidity, which Ethereum is based on. Solana and Near have also been aggressive about offering grants to software developers if they agree to build applications on their respective systems. Near announced a $800 million grant program in October, and former Circle CMO Marieke Flament became the Near Foundation’s CEO this year. 

One platform that lost a significant number of developers was EOS, which dropped from about 125 total active developers (including full and part time) in December 2020 to 80 a year later. In 2018, EOS famously ran a $4 billion “initial coin offering” fundraise and was later fined $24 million by the SEC for running an unregistered security offering. The company didn’t admit or deny wrongdoing.  

In addition to the fastest-growing networks, Electric Capital’s research shows which have the largest number of total developers. Ethereum has long retained the top spot, and about one in every four new crypto developers who entered the industry over the last year chose to build on Ethereum. 


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Top 10 Tips For Crypto And Blockchain Startups And Vendors Pitching To Corporates In A Hybrid World

Over the past 15 years, I’ve been fortunate to work for a global bank, a blockchain and crypto startup, and been a management consultant. I’ve been on different sides of the boardroom table when it comes to sales pitches. Based on lessons learned, I wanted to share my top ten tips for blockchain and crypto startups and vendors when pitching to corporates:

1. Objective / Outcome

When reaching out to prospective clients via email or LinkedIn, be polite, brief, and clear about why you want to meet and how your product or service might benefit the potential customer. Multiple lengthy paragraphs will result in parts not being read or the whole message ignored. The adage ‘If I had more time, I would have written a shorter letter‘ comes to mind. 

Top Tip: Personalisation

  • Address the person you are messaging by their name and make an effort to show you are sending a tailored note and not just a mass email.

2. Agenda

A simple but essential thing to do. When a potential client/customer agrees to meet, share a sample agenda to ensure you will cover what is important for them, not just you. Remember, this is about their business needs and how your product or service will help them.


Top Tip: Check In

  • Drop a note to the primary client point of contact the day before to ensure the meeting is going ahead; share the agenda again and the attendees on your side.

3. Videoconferencing Platform

Do your homework. Find out what videoconferencing platform the company uses and send out a meeting invite using that platform. For example, many large corporates use Microsoft Teams and not Zoom or Google Hangouts. Sending out an invite to the wrong platform may mean the meeting starts late (as folks have to move from one platform to another, and or one device to another), or worst case, it may mean the meeting will have to be rescheduled. 

Top Tip: Firm up on details in advance of the meeting

  • If in doubt, when confirming the agenda, ask which is their preferred video conferencing platform.

4. Punctuality & Introductions

Join the call 5 minutes before and keep introductions short. You most likely have 30 minutes to get your message across to secure a follow-up meeting and focus on telling your product’s story, not your story. You can share your bios and LinkedIn profiles after the call if needs be. I was once on the receiving end of a 30-minute pitch, and the introductions went on for 20 minutes. Needless to say, I did not get a good understanding of the product; there was almost no time for Q&A, and as a result, there was no follow-up meeting.

Top Tip: Timebox

  • Introductions on both sides should not take more than 5 minutes. Send your bios in a deck before the meeting or as part of the follow-up.

5. Camera & Appearance

Turn your camera on. In the virtual/hybrid world we live in, do everything you can to engage with the folks at the other end of the camera. Have a clean background, and if in doubt, use a filter or blurred background. 

Top Tips: Dress to impress & Quick Tech check

  • If you were pitching in person, more than likely, you would be dressed somewhat formally. Perhaps not a bad idea to adopt a similar approach. I’m not talking a suit and tie, but a collared shirt is never a bad look.
  • Before the session goes live, ensure you can see your head and shoulders
  • Check the light is okay
  • Ensure your mic and speakers are working

6. Slides

Keep your first meeting pitch deck short, clean and simple. You can always share a more detailed deck after the meeting and hopefully as part of a follow-up meeting. Also, have a plan in place in case someone on the team experiences connectivity issues

Top Tip: Areas to cover: 

– Problem (what are you trying to solve)

– Solution (what is your unique and value-add solution)

– High-level architecture (how does your solution work)

– Investors & Funding (helps to build credibility)

– Credentials (who have you worked with in the past)

– Team (what is the experience and background of the team)

7. Integration

Large corporates typically have complex IT landscapes. One of the considerations corporates will consider is, “how can I integrate this?“. SaaS/cloud is the preferred choice for startups but is not always the preferred choice for corporates. 

Top Tip: Put yourself in their shoes

  • Be prepared to share how your SaaS model works, focusing on easy install and risk management and your thinking about on-prem solutions (if possible).

8. Focus On Your Ask & Provide Insights

The overall purpose of the meeting is for you to share an overview of your product or service and land key messages. Please don’t lose sight of that, and steer the conversation back to the problems your product solves and the value it creates. Where possible, avoid rabbit holes and take everyone on the same solution journey. For example, if there are technical people on the call, not everyone may be technical. Tech conversations can alienate part of the group. 

Top Tip: Offer specific deep-dive sessions

  • As a meaningful follow-up, offer separate dive sessions (tech, risk, legal) and/or share documentation (e.g. API info) after the call as part of the follow-up.

Top Tip: Share insights

  • Clients always want to know what is going on in the market, what the trends are and what other companies are doing. Make a list of three key themes (on an anonymous basis) and share what those points are.

9. Say ‘Thank You’ & Share A Brief Actions Recap

At the end of the meeting, thank attendees for their time and do a quick recap of any actions. This sixty-second activity demonstrates that you are organised, listen to the client, and are keen to progress the conversation.

Top Tip: Thank people individually

  • If it is not a large group, take the time to thank each person individually, and say their name while doing so

10. Follow Up & Feedback

The goal of the meeting should be to have another meeting. Corporates meet with lots of startups every day. It’s up to you to follow up, but don’t become annoying to the client. If they are not interested, look to get a few quick bullets as to why they are not interested. This data is invaluable and should move to your product backlog.

Top Tip: Create a tracker

  • Create a tracker in a sheet or use free versions of HubSpot or Salesforce to track who you have met with and where they are along your pipeline.

*Other points to consider:

  • Good internet connectivity
  • Limited background noise (preferably none)


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What Every Crypto Buyer Should Know About OpenSea, The King Of The NFT Market

Startups are supposed to specialize, but OpenSea’s founders thrived by building a wide-open market for creating and trading all manner of NFTs, whether art, music or gaming. Now that they’re centimillionaires and poised to become billionaires, they have other worries: competitors, fraudsters and the next crypto crash. 

In March 2020, as Covid-19 began to spread, OpenSea founders Devin Finzer and Alex Atallah held a gut-check phone call. Their five-person startup had built a platform on which users could create, buy and sell all sorts of nonfungible tokens (NFTs)—computer files used to track ownership of unique digital assets like art and music on a ledger known as a blockchain. Yet 26 months after going live, they had just 4,000 active users doing $1.1 million in transactions a month, which translated (given OpenSea’s 2.5% sales commission) to a paltry $28,000 in monthly revenue. The NFT market had a “dead feeling,” recalls CTO Atallah, who conducted his side of the call from the basement of his parents’ Colorado home, where he had gone to work as New York locked down. Ominously, Rare Bits, a direct and better-funded competitor, had just announced it was folding. The pair set a do-or-die goal of doubling business by the end of the year—and met it in September. 

Finally, in February 2021, the NFT market roused from hibernation—and went crazy. In July, OpenSea processed $350 million in NFT trades. That same month, in a round led by Andreessen Horowitz, it raised $100 million in venture capital at a $1.5 billion valuation. In August, as NFT hype (and FOMO) reached a fever pitch, volume spiked tenfold to $3.4 billion—an $85 million commission windfall for OpenSea in a month when it likely burned less than $5 million on expenses. Although transactions have since retreated to around $2 billion a month, the platform now has 1.8 million active users and a dominant share of the market. It’s up to 70 employees and is scouting for dozens more, including much-needed customer service reps. 

Recently, there’s been talk of another round of venture investment at a valuation that could reach $10 billion. With a 19% ownership stake each, CEO Finzer, 31, and Atallah, 29, are centimillionaires on the cusp of becoming crypto’s newest billionaires. 

Yet Atallah was humble as he chatted in November at a restaurant in New York’s kitschy new Margaritaville Resort Times Square, sitting near its 32-foot Statue of Liberty replica, which hoists a cocktail instead of a torch. He was there for the third annual NFT.NYC convention, which boas­ted 5,500 registrants with 3,000 on the waiting list. Young enthusiasts prowled the hotel wearing Bored Ape Yacht Club sweatshirts—a tribute to a collection of 10,000 simian NFTs whose owners treat it as a social club as much as a collectible or investment. 

You might say humility was at the heart of Finzer and Atallah’s successful strategy. Some advisors had urged them to specialize in an NFT niche—say, art, gaming or music. But they opted to build a category-agnostic platform because they didn’t think they were prescient enough to predict which NFT types would catch on. 

Beyond casting a wide net, Finzer says, OpenSea has thrived simply by “being in the right place at the right time” and listening to users about what they want. The platform tracks NFTs on ethereum and other blockchains, and all purchases are made in crypto. Sellers can opt for a fixed-price or auction format. Artists can reserve a percentage of each resale price. Ultimately, Finzer sees the NFT ownership verification model working for anything from concert tickets to real estate—he’s just not sure what will succeed when. “I’ve always had a pretty gray view of the future,” he says. 

Despite its sudden success, OpenSea faces big and varied risks—from fraud and another NFT market bust to new competition. In October, Coinbase, the nation’s largest crypto exchange and an original investor in OpenSea, announced it will launch its own NFT peer-to-peer marketplace. Within weeks, Coinbase had 2.5 million sign-ups for its waiting list, and CEO Brian Armstrong was predicting the new business “could be as big or bigger” than its core crypto trading business. 

OpenSea’s open-market approach heightens the risk of counterfeits, scams and fraud—just ask Amazon or eBay. For example, a scammer can copy an image of someone else’s art and sell it as an NFT on OpenSea. Finzer says the site is working on an automated way to spot fakes and has moderators who investigate suspicious offerings. Still, people can present problems too. In September, Finzer requested the resignation of OpenSea’s head of product after Twitter users discovered a crypto wallet linked to that executive was buying NFTs shortly before they appeared on the price-moving OpenSea home­page—in other words, he was allegedly frontrunning his own employer’s decisions. 

While they come across as humble, OpenSea’s founders are hardly low on ambition. Raised in the Bay Area by a physician mom and a software engineer dad, Finzer says he was “devastated” to be rejected by Harvard, Stanford, Princeton and Yale. (He settled for Brown.) After a short stint as a Pinterest software engineer, he cofounded his first startup, Claimdog, in 2015 and sold it to Credit Karma a year later. 

As a kid, Atallah, the Colorado-born son of Iranian immigrants, made spreadsheets to compare the attributes of everything from birds to brow­sers. After graduating from Stanford, he worked as a programmer before teaming up with Finzer. In January 2018 they entered the Y Combinator startup accelerator with an idea for paying users crypto to share their Wi-Fi hotspots. But at that point, CryptoKitties—the cartoonish virtual cats whose ownership records were digitally inscribed on the ethereum blockchain—had captured the public imagination. “It was the first time people who didn’t really care about crypto were suddenly getting interested in it for reasons other than flipping a coin. I thought that was really powerful,” Atallah says. They quickly pivoted to OpenSea and later moved their operation to New York City. 

Much like Beanie Babies, their cloth-and-stuffing ancestors, CryptoKitties turned out to be duds as investment-grade collectibles—the supply was too great to make most of them worth much. After spiking in early 2018, interest in both crypto and NFTs went into hibernation. 

What awakened the market in early 2021 wasn’t OpenSea’s doing. Instead, platforms like the billionaire Winklevoss twins’ Nifty Gateway captured attention with curated, high-quality art. Last March, Christie’s auctioned the NFT for digital artist Beeple’s “Everydays: The First 5000 Days” for $69 million, the third-highest price ever paid for work by a living artist. 

As NFTs fetched eye-popping prices, more and more ordinary folks decided they too wanted to become creators, collectors or speculators—and turned to OpenSea, with its anyone-can-be-an-artist ethos, built-in secondary market and handy features. For instance, the site has an advanced filtering system so users can find NFTs with the rarest—and theoretically most valuable—attributes. (Only 46 Bored Apes have solid-gold fur, and they command a hefty premium.) When a new NFT is created and recorded on ethereum, the site automatically spawns a webpage displaying it—a nice feature as NFTs became a status symbol, with people sharing their OpenSea pages and changing their Twitter profile pictures to an NFT they own. “It became this circular feedback loop, driven by envy and desire. And OpenSea really captured that market,” observes Richard Chen, a partner at VC firm 1Confirmation and an early OpenSea investor. 

Dani, 27, a former fashion designer living in Georgia, has turned a $17,000 investment in NFTs like the World of Women into a portfolio worth $715,000. AJ, a 37-year-old former gaming company CEO from North Carolina, put less than $10,000 into NFTs and now values his digital assets at $1.3 million. He recently convinced his gastroenterologist brother to start buying NFTs. The brother, in turn, hooked his own buddies. “They’re pretty much doing colonoscopies and then checking their phones for new NFT drops,” AJ says. 

Sounds like a bubble, all right, raising the question of how OpenSea will fare when it bursts. Responds Finzer: “We have a large amount of padding in case we need to weather a winter.”  


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These Two Kids Are Making $30,000 A Month Mining Bitcoin

Ishaan Thakur, 14, and his sister, Aanya, 9, earn $30,000 each month by mining bitcoin, a lucrative business scaled up during the summer.

Fourteen-year-old Ishaan Thakur and his sister, 9-year-old Aanya, have spent the past few months setting up a lucrative mining operation. What started with a single computer in a room desk is now an entire business that has found a home in a rented, air-conditioned data center in downtown Dallas, Texas. Each month, the two siblings earn over $30,000 mining bitcoin and two other cryptocurrencies.

Aanya, nine years old, and Ishaan, 14 years old. Source

Aanya, nine years old, and Ishaan, 14 years old. Source

“We started because we wanted to learn something new about technology – and also make some money along the way,” Ishaan told CNBC. “We could have spent the entire summer playing video games, but instead we used our spare time to learn about technology.”

The two siblings started with curiosity. Ishaan started watching many YouTube videos and scraping the internet for resources on mining and the associated technologies, diving deep into the technicalities necessary for setting up a successive mining business.

But it wasn’t until their father, Manish Raj, took out a loan to purchase dedicated equipment that the venture, Flifer Technologies, really took off. The company now has Antminers housed in a rented, air-conditioned data center in Dallas, built specifically for the mining operations. Raj told CNBC they expect to make around $36,000 in September with all the additional equipment that is yet to arrive.

The siblings said they use “100% renewable energy for our mining” because “we want to be environmentally friendly.” Their electric bill costs just below $3,000 in total for both their home and data center, Ishaan said.

“We moved from my desk to the garage, since the house was getting too much heat and noise. [We] outgrew the garage, since heat and noise was too much for the garage too,” Ishaan told CNBC. “We now use the garage only for building and testing mining rigs. When they are ready, we move them to a professional, air-conditioned data center in downtown Dallas.”

Ishaan and Aanya said they plan to reinvest most of the profit back in the company, but they hope that profits from the mining operations will also help pay for their college fees in the future. Both siblings want to go to Medical School; Ishaan hopes to attend the University of Pennsylvania, whereas Aanya wants to attend New York University.


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Top blockchain mentors join forces to advise on ‘groundbreaking’ Solana projects

Solverse, a Solana-focused accelerator program, has tapped 21 subject matter experts to advise on up-and-coming Solana projects, setting the stage for further development of the high-performance blockchain network. 

Representatives from 21 companies were selected to join the Solverse mentorship program. The mentors themselves come from diverse backgrounds, including global investment banking, blockchain infrastructure and media. Representatives from Alameda Research, Axia8 Ventures, Bitscale, Lemniscape and many others will make up the mentorship panel.

The infrastructure provided by Solana will bring De-Fi capacity and sophistication to the next level,” said Wayne Lin, founder of Axia8 Ventures. “Our goal with Solverse is to create a brain trust with the top minds in the industry and to aggregate resources for products and services that will elevate the on-chain world.”

The projects selected for Solverse Accelerator will receive advisory support from the mentors, as well as a go-to-market strategy. The accelerator program also provides resources and grants to aid entrepreneurs in bringing their products to market.

The Solana ecosystem has become a hotbed of activity for developers of late, with Metaplex becoming the first nonfungible token platform to launch on the network. Since launching in March, the Solana ecosystem has facilitated over 50 market-ready projects by last count. Decentralized finance, or DeFi, continues to be the biggest use case for the network.

Solana Foundation, the grants program underpinning the network, announced earlier this year that it had raised $40 million in strategic investments from cryptocurrency exchanges OKEx and MXC. The cash injection will help accelerate the development of several projects set to launch on the Solana network.