Into the Depths of the $WHALE
"Never, ever, think about something else when you should be thinking about the power of incentives.” Charlie Munger
"The idea that the passage of the magical threshold is a transit into a sphere of rebirth is symbolized in the worldwide womb image of the belly of the whale. The hero, instead of conquering or conciliating the power of the threshold, is swallowed into the unknown, and would appear to have died.... But here, instead of passing outward, beyond the confines of the visible world, the hero goes inward, to be born again." ~Joseph Campbell, "The Belly of the Whale", a chapter from “The Hero with a Thousand Faces”
Over the course of my professional career, the notion that life is zero-sum had been firmly imprinted into my psyche. Starting as a derivatives/bankruptcy lawyer in the throes of the 2007-08 financial crisis, one of the first things I did was to analyze the legal consequences of one of our clients (a major investment bank) issuing the Early Termination Notice under the ISDA Master Agreement against another major investment bank. Suffice to say that the world looked bleak for all involved, where even a zero-sum outcome was aspirational given the deathly combination of illiquidity and insolvency. Thankfully, that fateful default notice was never issued, largely because nobody could wrap their heads around the financial Armageddon that was sure to follow. Over the following years, as I grappled with the consequences of the Dodd-Frank Wall Street Reform and Consumer Protection Act, I was never sure who the "winners" and "losers" of all this regulation really were, but I was pretty sure no value was created from it at the end of the day. And by the end of the next six years, after my stint as COO of J.P. Morgan and Goldman's Global FX and Emerging Markets trading franchises, I found myself desperately in search for a life that was about something more than the never-ending struggle for fractional pips.
Luckily for me, things changed. In 2018, I was incredibly fortunate to join my partner Sam Englebardt at Galaxy Interactive with the mission of backing the teams creating fun, meaning and possibility in the “virtual world” to bring us one step closer together in the “real world”. Over the last 12 months, we've become the most active gaming investor in the world (source: Pitchbook). At our core, we are fueled by a shared vision in our emerging digital realities.
We believe ...
in the power of play to foster a healthy sense of community, place and purpose;
in the power of digital playgrounds to provide means of enablement, not merely escape;
that the ubiquity of virtual communities, marketplaces and experiences will cause us to revisit long-held assumptions around the meaning of “real”, from the content we consume, to the objects we own;
that entirely new livelihoods will be created in the purely digital realm; and
that the paradigm will shift from exploiting user data to enabling user intent, empowering us to shape our unified identity and persona.
Guided by these core beliefs, in recent months, I have been surveying the DeFi landscape in search of how the "money games" responsible for DeFi going from $1b locked in smart contracts to $10b+ might be leveraged to create something more meaningful: the incentive layer powering community formation, engagement and retention at scale. As I previously wrote in a Defi stream of consciousness, I wished the novel experimentation around decentralized autonomous organizations (DAOs), liquidity provisioning, and governance tokens were applied less to farming and fermentation and more to the generation of positive-sum creative collectives.
And that is how I stumbled into the belly of the $WHALE...
"The disappearance corresponds to the passing of a worshiper into a temple—where he is to be quickened by the recollection of who and what he is, namely dust and ashes unless immortal. The temple interior, the belly of the whale, and the heavenly land beyond, above, and below the confines of the world, are one and the same. That is why the approaches and entrances to temples are flanked and defended by colossal gargoyles: dragons, lions, devil-slayers with drawn swords, resentful dwarfs, winged bulls. These are the threshold guardians to ward away all incapable of encountering the higher silences within. They are preliminary embodiments of the dangerous aspect of the presence, corresponding to the mythological ogres that bound the conventional world, or to the two rows of teeth of the whale. They illustrate the fact that the devotee at the moment of entry into a temple undergoes a metamorphosis. His secular character remains without; he sheds it, as a snake its slough."
$WHALE is a social token created by the anon "WhaleShark", who bootstrapped the community by contributing a portfolio of thousands of non-fungible tokens (think, digital art and collectibles embedding provable scarcity) now worth over $1m. There will be a maximum of 10m $WHALE tokens created, and the $WHALE community has a fully diluted market cap of ~$100m at the time of this writing.
What attracted me to the community was the "why" behind its founding story. From WhaleShark:
My experience is founded in a successful track record across a variety of industries, functions and companies, that also includes being one of the most successful individual investors in the Crypto space (since 2012). I have a strong educational background from two of the most premier institutions in the world that includes 3 bachelor degrees (one is Econometrics) and an MBA. Over the course of the last 17 years, I have helped build, lead, acquire and sell companies across the world, and today, own several successful companies in the Artificial Intelligence, Retail, Traditional Finance and Brand Management industries. NFTs form a relatively small portion of my wealth portfolio and the primary driver for the development of $WHALE is to Give Back and Move Forward.
Give Back: Not everyone has been as lucky as I have in this space. The old adage that Money begets money is true, as those with access to capital have greater access to better and more profitable opportunities. By creating $WHALE, anyone and everyone can be apart of this exciting financial journey as NFTs become mainstream and disrupt the traditional "Collector" industries.
Move Forward: Through $WHALE we can create a virtuous and infinite cycle of incremental value. With the increase in the relative value of $WHALE, and its expansion in utility, larger market making sales will result in more liquidity for NFT investment. We can move faster, stronger and more profitably together.
Nobility of founding story aside, alarm bells are inevitably going to be triggered for anyone outside of "crypto funny money land": how does the DCF of a community token possibly justify a $100m valuation? Knowing this, I won't spend much time dwelling on the token mechanics or opining on whether the spread between the $1m underlying collateral value and the $100m market cap is justified. There have been lots of good writeups and podcasts covering this topic already. If what you’re looking for is understanding, I’d say stop "judging" and start "doing", starting by reviewing the Wiki, joining the Discord, engaging with the community, purchasing some digital art using $WHALE, and winning that $WHALE back in one of the twice weekly poker tournaments or the numerous other community-driven competitions. Suffice to say that I am long, and that is 100% because of the strength of this community.
Some time soon, I’m going to expand on this notion of how community/social token “lego bricks” can drive value creation out of “thin air”. But that requires a broader deep dive behind what's happening at the intersection of DeFi, Social/Community Tokens, NFTs and Gaming that I'll save for Part Two. Suffice to say for now that I believe in a couple of years, people will look back on the $WHALE community as the social experiment that triggered a broader revolution in creators and curators distributing value back to their communities. And for all the talk about the "passion economy", it is shocking to me that almost nobody is focused on how community can benefit from this all. Just look at SignalFire's excellent and comprehensive market map on the three waves of the creator economy. If Layer 1 was foundational media platforms that help creators get discovered, Layer 2 was the ability to monetize influencer reach, and Layer 3 was the idea of creators as businesses (content, merch, access, services), then where is Layer 4: the idea of creators as cult-leaders who distribute value back to their fans as their communities grow?
I've never loved the term UGC (user-generated content). It's so broadly used now that it seems to have lost all meaning. I wish I could appropriate those three letters and use them to describe something more meaningful, like "user-governed communities". Maybe I'll settle for the lowercase version (ugc), a nod to how small contributions can add up to big things.
The distinction I'm drawing here strikes at the fundamental role of the user vis-a-vis the community. When you look at the largest UGC platforms today -- think Roblox, Minecraft, GTA Online, YouTube, TikTok, Instagram -- the user is a mere participant with finite moves in a predefined sample space (UGC). What if there were a better way, one in which the user becomes a co-creator of an emergent collective?
What does that actually mean? Not sure, still trying to figure it all out. But I can tell you how it feels. It's like steering an unfinished ship through unchartered territory while trying to define the physics of the universe, all while knowing nothing about science or engineering, knowing that the only thing holding it all together is an overarching belief in where you're heading and who you're heading there with -- that is, until they jump off, knowing you don't want to be the last one onboard.
There’s a lot to unpack here. But until next time…
"Once inside he may be said to have died to time and returned to the World Womb, the World Navel, the Earthly Paradise. The mere fact that anyone can physically walk past the temple guardians does not invalidate their significance; for if the intruder is incapable of encompassing the sanctuary, then he has effectually remained without. Anyone unable to understand a god sees it as a devil and is thus defended from the approach. Allegorically, then, the passage into a temple and the hero-dive through the jaws of the whale are identical adventures, both denoting, in picture language, the life-centering, life-renewing act."