Digital Assets Explained: Blockchain, Barbie and Baseball Cards

hello everybody and welcome I'm Alan Rickshaw and I chair the digital assets Forum at the Wilson Center and we are very honored today to have our first guest for our Wilson Center podcast talking about digital assets and today with us is Jordan waldasser who's the director of legal and business Affairs at Mattel and many of you might ask why we're having somebody from Mattel come and talk about digital assets and so I'm going to open this with letting Jordan tell you a little bit about what he's been doing at Mattel with regards to digital assets and I'll tell a little bit of a story as a background before um Jordan takes over and tell you that my experience in the nft marketplace is I've been watching the growth of nfts and the subsequent contraction of the nft marketplace um I bought some nfts I bought some nfts that look like baseball players I bought some that looked like mutant various animals and there was a very uh big movement around nfts last year where people were using them to collect to make money to do all sorts of things to play games that they had to have utility some of the excitement has come out of the market and in that Evolution from this exciting Market where people thought this was a place to make millions of dollars people are seeing that there's a new market for Collectibles and that's why I asked Jordan to be with us today to talk a little bit about where the status is of what was the nft marketplace what was digital assets that you've heard of the headlines of the mutant apes and and all other sorts of famous ones and maybe Jordan can fill us in a little bit about what people are looking at in the corporate sector at this growing nft Marketplace Jordan turn it over to you sure yeah well you hit on a lot of really important topics that are relevant for today and for why a company like Mattel is getting involved in this space and in fact led the way in this space um and I'll start with Collectibles uh that's a major portion of what makes digital assets and nft non-fungible tokens so interesting is the collectibility so you may not immediately think about a toy company being on The Cutting Edge or bleeding edge of Technology but if you were to go back and and look at the toy industry you would be surprised to see that they are often at the Forefront of a lot of very interesting technological advancements sometimes we're too early uh sometimes we're a little late and sometimes we're right on the money and we hit it when um everything is is going very well so um nfts digital assets are I think maybe the next Evolution or the next extension of a collectible that doesn't just exist in physical space it exists in the digital space and that comes with its own problems uh its own features its own benefits and its own disadvantages and Mattel is really looking into this space to see what we can do ultimately toys are about having fun uh toys are about education they're about play they're about experience but digital assets and and what we're trying to do should be fun should be interesting so there's a couple different projects that we've worked on and then there's a whole lot more projects that we are working on currently uh around digital assets but also the metaverse web3 whatever buzzword you want to use but I think it's a it's a really interesting maybe uh it's a really interesting area to be utilizing this technology because of some of the functionality that it offers and what does the idea of nfts or Collectibles as you're calling them have to do with the blockchain how does how are these two things connected and um is it necessary to do a digital collectible on the blockchain or could it be done off a blockchain what is that the evolution that technology have to do with what what your company is doing um in terms of Collectibles see that's a really great question and you know if I had to coin my entire philosophy in the space I think I'm a blockchain skeptic Optimist all three of those things are are put together because there's some really interesting facets about the blockchain which I'll get into that make it unique from anything else that we've had before so to go back on your question when we think about Collectibles and and we can go through the history of of Collectibles um but I'll start with one that I think is near and dear to all of us and that is baseball cards okay that's maybe not the original but but certainly a prevalent physical collectible and those are things that you can trade there are things that you can buy sell display you can fold them and put them in your bicycle tires whatever you want to do and uh and and presumably they provide some enjoyment to the user if not some value uh because there are people out there that that want to collect those things toys of course are in that space too people have been collecting uh Barbie and Hot Wheels uh matchbox for decades um because it's a it's a passion it's a hobby there's something that calls out to them from these objects and uh and they want to build their own collection or trade them and buy them they think there's something interesting there when it comes to digital assets and when it comes to the blockchain it's allowing us as a company to do something that we've never really been able to do and that is take a digital asset whether it is a an image or piece of art or perhaps even some functionality that we want to basically make digitally tradable and and put that on the internet in a way where people can trade it with some confidence that it has uh you know a proper uh and valid origin it has good provenance that it has trades that can be monitored in a database and what and you brought up one interesting point Alan that I want to touch on and that was you know we have blockchain but we also have just regular databases so you could and can and do have things that are collectible digitally that's stored in a centralized database okay one company owns it one company controls it you can access it you can change ownership whether that's through apis or other methods but that is all stored in one place uh it may be pseudo public maybe you can see all the transactions that have occurred maybe you can't it depends how the the database is set up for blockchain what's really interesting about this is that that database can be distributed so it's not just one company that controls it it's not one company that sets the rules it can be a Consortium it can be none at all it can be this idea that this database is going to persevere and Outlast any changes that occur at a single company any changes in technology someone forgetting and unplugging the server uh something like that so it's a completely new and an Innovative technology that can be leveraged a bit differently than what would be like a traditional database and with with the evolution of blockchain Technology um how is that playing into this idea of a metaverse that's on the blockchain and and how do you fit these components of Collectibles within this idea of a metaverse yeah so so that's really is really really interesting and something that Mattel in particular is looking into I mean we've already had Collectibles that we've offered uh through nfts and with uh some interesting features and things that that I can talk about later uh but then there's this idea of the metaverse so there's always an analogy I think to the physical world so we can collect things physically and fashion is a great representation of that I can go and I can I can buy you know this year's or last year's or 30 years ago um a bag from Gucci I could buy loafers I could buy um a marshmallow jacket you name it shoes anything whatever it is and I can have them physically I can wear them about I can I can wear them to the grocery store I can sell them I can lend them to friends to enjoy at a party whatever it might be that's what we understand in the physical space but as time goes on and we're spending more time in the digital space there's this idea that we want to be able to do the same thing that we do physically in the digital space so from a Collectibles perspective this idea that you can have Collectibles uh that maybe you've purchased or you've taken ownership of in a different context applied to another context and and that is both the the beauty but also the difficulty I think of having collectibles in the metaverse because whatever party whatever company whatever platform you have that is is presenting a metaverse to you whether that's Roblox or um fortnite or or something even in the future that platform has to be ready to represent those collectibles in that space and that's not something at the moment that is automatically done maybe in the future uh but it's not something that's happening today so I'm going to drill down a little bit more about on the metaverse and I want to hear about some of the innovations that Mattel's doing in particular and some of the fun stuff but um I want to talk about some of the more Global issues first of all is there some sensitivity to encouraging um overuse of Technology over physical world stuff for kids I mean my children always want to be on their phones and that's I think that that's not a great thing and I'm wondering what the sensitivity is to that if we're making Collectibles something that exists in a virtual world how much are we sensitive to the fact that we're steering children away from The Real World yeah that's it's something that I know as a company Mattel thinks about quite often um uh I Look to our Fisher Price brand and Fisher Price is the number one uh known toy company throughout the entire world okay it's it's the most trusted and they do a tremendous amount of research every year both on physical products but also on on digital products as well because the age where children are starting to interact with digital products whether or not that's a phone or video games or otherwise is becoming younger and younger and younger every year and there is huge value in imaginative play in in role play in physical play um so much that we learn inherently comes from play and with toys and even if that's something as simple as playing with a ball uh on the playground or water or sand uh anything or building blocks any materials like this we learn so much intuitively about physics about um you know our own bodies how we can react how fast or not so fast we can react to certain things or what's difficult or not difficult um and and there's certainly value there so it's something that we consider as a company we know that our customers are there and are interested in that but we also want to and in some cases want to blend the two together and we call that connected play so that may be things that exist in a physical space but are augmented digitally and uh and we've got some great examples of of that if I can indulge you for a second there's a product that is in development now that Mattel has partnered with a company called velen Studios and the idea is being able to take a remote control race car that exists in physical space but then augment uh what you see that race track that you create around the living room with a phone with a a digital representation so that when you're driving the the vehicle um whether it's augmented reality or or whatever term you want to use you can actually see a digital overlay on top of that so maybe you're you're collecting coins or going through Gates and those Gates don't exist in the physical space they exist in the digital space but we've married the two together uh in a way that is on top of each other so um it's it's something that we we think about both as opportunity but certainly as as risk too because physical play will always be very important and and when you create these Collectibles if there becomes a market for them how how are you navigating the lack of regulatory Clarity on this stuff because there's some question if an if a an nft I'm sorry to use the word nf2 I know you like to use the word collectible sure nft is a security or what it is exactly and I'm wondering how you're thinking about that from the legal perspective because you so where both hats from the legal side and the and the business side how are you thinking about that in trying to plan a future for a company not just Mattel but any company how they should be thinking about getting into this space um when there is some regular some a large degree of regulatory uncertainty and you know with the president's executive order and Congress taking this up how are you thinking about and how how are other your colleagues thinking about the regulatory landscape right now yeah it's uh it's something that we spend a lot of time and energy looking into and and ultimately there was a risk assessment that we had to make about what are these digital Collectibles these nfts going to be categorized now I feel very strongly that um the the Collectibles that that Mattel sells aren't uh Securities you know they're um you know if anything they're they're really a token and it's not intended for monetary use it's not something that uh um we encourage spec we don't encourage speculation we don't encourage people to use it as an asset that um you know is going to make them money to buy sell trade things like that you know we we are very clear that these are digital Collectibles they are fun um and what we've tried to do from an analysis standpoint is look at uh what has occurred in the past and stick with those analogies um and that's especially important not just when it comes from a regulatory from a Securities Law perspective but from an intellectual property perspective there's I think a dearth of uh maybe misinformation maybe disinformation and certainly confusion about what ownership rights a holder of a digital collectible house and thankfully the flexibility that we have in our current law and our current regulations I think is sufficient enough to to cover most of the uses that are occurring now and and I'm going to exclude for a moment um you know more of the fintech side of things that's a little bit different and those have different concerns this is just purely digital Collectibles but I think the existing infrastructure the existing framework Works fairly well and uh and the analogy that we use again going back to my earlier example is that digital Collectibles are much akin to digital baseball cards it's the same kind of concept you can you know you may be able to use them in different ways depending on the whether it's the platform functionality or whatever that might be but at the end of the day the IP rights act just like they do for baseball cards the Securities the regulations are just like baseball cards so we're always very careful about marketing we're always very careful about data collection especially if children are involved and for all of our um our nft or digital Collectibles offerings uh that we've publicly announced they're all uh aiming to the direction of of older markets so you know that may change uh but but it's something that we we think a lot about and uh and we always try to stay on top of it and that's why you know I'm talking to you Alan is is to make sure that uh we're able to have a voice and a seat at the table to um really form what those regulations and and what those laws look like in the future has is the old game of nfts over you know where you have people would go into the Discord which is a platform for discussing stuff and hype up a or discuss their their community in their Community a specific nft and people would go in and buy it and they'd find some perhaps real world utility for it you got to go to a party if you owned one of these nfts is that game over because that was something where if you drew a picture and made a 10 000 variations on it you could make 10 million dollars overnight and I'm just wondering is is that is has that come to an end and is that because of the regulator if it has is that because of the regulatory side or is it something else in evolution in the actual thinking about what nfts should be used for yeah great question I think um I think and I hope that that phase is over I think um and and certainly from what I saw there were coordinated efforts there were people that were using digital Collectibles nfts as a method of speculation you know they were going out onto discords they were hyping they were pumping up the value of certain nfts when there really wasn't any value there at all and I think that's the key the the key to the value for a digital collectible is its functionality and I think um it wasn't anything Regulatory and I don't think there was any government action or anything really that affected this well I'll call it a bubble because I think that's what it was it wasn't anything government related that that popped that bubble or is causing a retraction in the market I think it was just the free market properly valuing these digital collectibles uh and and some examples of that when you have a digital collectible that refers to a piece of artwork uh and maybe there's 10 000 copies the the issue with that and there's ownership issues aside by the way because chances are even though you purchased an nft that linked to a piece of artwork that you didn't own that artwork uh the digital nature uh of the internet means and this has become a meme um and sort of the the counter call to nfts and digital Collectibles is that you can just right click copy and paste and look I stole your nft gross oversimplification of what's Happening legally but a practical reality as well so you know what did someone own when when they just have a basically a hyperlink to an image that exists out on the internet there's not much value to that I think where the value resides in digital Collectibles is how and to overuse the word how digitally speaking those tokens can be used and you hinted at that Alan you hinted at the idea that ah if I am possessing a token an nft a digital collectible that it's going to unlock something perhaps in the physical world access to a party okay uh you know access to a group uh or maybe even something as banal as changing or allowing it to be displayed as a profile picture in social media those are potential functionalities that have value um Mattel did this okay there was some drops or offerings of digital Collectibles that we had that were purely uh art so it was the um you know the excitement of being able to own a digital collectible that was verifiably from Mattel and that linked to Unique Mattel art some of the other things and where we're starting to go with this to add value to those digital Collectibles is unlocking functionality so we did some really fun things with our Hot Wheels nft garage which instead of auctioning or or buying specific nfts we created again the digital baseball card pack where you would purchase you know a user would purchase a card pack that has three nfts in it you don't know what they are until you open it when you open it you know there's different Rarities uh you know Common rare very rare and then what we call treasure hunt cards and some of these nfts some of these digital Collectibles had uh you know a feature built into it that at a certain point in time 60 days 90 days 120 days after the launch whoever was the holder of that token would be entitled to receive a very limited edition Hot Wheels car so now all of a sudden that digital collectible had verifiable value the and people wanted to trade it and and because at the end you know whenever that time Horizon hit whoever held it would actually get this physical thing and that's a very simple example there's other examples out there and other things that Mattel is developing where ownership of these tokens May unlock certain functionalities whether it's in in games or metaverse experiences or being ported into this or that there's certainly things that we're we're looking into to add and create value to those collectibles do you see the blockchain as as its utility to being creating Collectibles or do you see it you know everyone talks about the blockchain being web 3.0 and the next evolution of humanity in some sense you know that we're we're going from where we were with the web where you have a centralized organization of the web and centralized organization of information to his decentralized organization but it seems like the most utility has come from Collectibles or before that nfts in the form of the bubble that you described and I'm wondering do you see uses for the blockchain outside of the collectible space because that seems to be the greatest use case for the the blockchain technology aside from cryptocurrencies and and the Defy is that really the real world real world opportunity in blockchain is in Collectibles or do you see it as much broader than that uh I think it's broader than that so initially initially speaking I think it's it's great for Collectibles it's it's great for other things to uh certainly supply chain has some really interesting applications um the risk is and this is why I'm a bit skeptical is that many if not most of the solutions that blockchain is purported to bring are really Solutions in search of a problem so going back to what I originally said about what is unique about blockchain um it's not that it's a database it's not that it's publicly facing we can make private databases like that anytime Mattel could have done that Mattel could have um issued digital Collectibles uh whose you know information was stored in a private database that Mattel held the differences and and I think this is the key point is that the database is no longer owned and controlled by one entity so it's almost like taking a step back and this is going to take cooperation in an industry it's going to take widespread adoption it's it's going to be um really what I'm talking about is kind of boring it's the protocols so I could see potentially uh in the future where you have a blockchain that is designed and agreed to by a whole number of collectible companies or toy companies or baseball card or whatever it may be you know signatures it would be the standard that you would use and what's beneficial about that is if one company goes out of business or is purchased or or spun off you don't have to worry about the longevity of that digital database because it exists amongst an entire group and it should in theory never go away and the rules by which that blockchain operates remain static or if anything if they do change they have to be changed by a majority of the groups involved so I think that's the power so that applies to Collectibles certainly but I think the blockchain can be used for so many other things and and the key to me in my mind is those uses that span outside of a single company so um I think you know and and this is what's great is that there's a million opportunities out there that I just don't know about uh and and that are going to be able to use this technology whether it's Medical Technology where we don't really have a centralized database or one company doesn't have access to everything having a blockchain that's able to somehow store medical information could be really useful um supply chain like I mentioned before where uh you know getting getting a toy from point A to point B is is not as easy as loading it on a ship and and having it magically appear a few months later there's so many databases and and uh numbers and Logistics that go into that and those are all on separate systems all in separate databases so it's a really interesting idea to you know have a Consortium have a group of of companies uh vertically or horizontally say hey let's all use this and then we don't have to worry about someone losing access to this or monopolizing data or um or making edits to data that they shouldn't so I think those are where we're going to see a lot of innovation and a lot of solutions because of blockchain so so join in some because uh um we're we're limiting our podcast although I would like to talk to you for about two hours or more about this and the opportunity to talk to somebody who works at a toy company I can't imagine anything I'd rather do than that than talk spend spend a day with you maybe you'll invite me to to come see the the come see Santa's Workshop one day but um but uh what what do you see as the prospects for this Marketplace in terms of the regulations if you were going to advise The Regulators because a lot of regulators listen to our podcasts Regulators are involved other corporate leaders are involved in the Wilson Center and and participate and and hear the information that we share what would you say to them is the prospects for this industry for the blockchain for digital assets for them that The Regulators might want to encourage that they might want to be careful of um the the pitfalls in it if you were going to summarize for regulators and for corporate Executives what message could you give them about the evolution of blockchain and digital asset technology right now yeah I think to The Regulators um and and this is my opinion of course but I think the quickest way to kill the potential for this technology would be to regulate it and and to have a heavy hand on regulation um specifically for blockchain and what I mean by that is there are so many opportunities that we need our inventors and entrepreneurs to to tackle without having to worry about the administrative burden of figuring out what a governmental agency meant by some dictat or something that they've you know some guidance that they've issued or rules that they propose to enforce because it's you know it would be like regulating the internet at the very early stage and that was probably one of the the most insightful in my opinion um pieces or reasons for the success of the internet was the very loose regulation that came with it at the beginning and in fact even enshrining uh some protections under like the section 230 of the CDA uh to allow people to experiment without the the fear of liability um so I I think there are serious concerns about what people can and and shouldn't do with the blockchain but I think those concerns can be handled by regulation that we already have on the books so if it's HIPAA if it's uh you know Healthcare information personally identifiable information if it is um uh you know you name it Controlled Substances whatever that is going to be attached to this blockchain technology those regulations exist and can be used there and this is especially important in the fintech space and if there was any space that needed I'm not going to say regulation but needed monitoring and enforcement of existing regulations it's probably in the fintech space because that I think there's an opportunity and perhaps a danger to um that blockchain would enable fraudulent uh activity or or um you know activity that we wouldn't want to encourage so so I think from regulation standpoint hands-off is probably better and to use the existing tools that we have to go after Bad actors or to make sure that that rights and privacies are are being upheld um from from the corporate side of things I think uh you know this is where I'm optimistic I think there's going to be great opportunities for for using blockchain uh the key is going to be strategy uh showing up at a board meeting and saying oh we're going on the blockchain is not a good strategy and that's that's a terrible strategy I think there needs to be a problem that blockchain solves instead of the solution that you're trying to fit in um you know that a blockchain solution that you're just trying to fit in because it sounds cool or because your investors might like it or it looks great on a deck I I think there needs to be strategy there and um you know and a lot of critical thinking about whether it's needed because right now maybe it's not needed uh for a lot of different assets of the business but there's going to be a bridge in the future that we'll all have to cross about whether we want that private information that private database whatever it might be to um to move to the blockchain and I think that's something that businesses should start thinking about um you know 5 10 15 years down the line Jordan I want to thank you so much for being here Jordan wallbessler from uh from Mattel um of course everything that Jordan shared with us today are his views not the views of the Wilson Center maybe not even necessarily the views of Mattel um but we are very happy to have you here to have shared your views on our on our Premiere podcast we're going to have a Wilson Center digital assets podcast once a month as everybody knows we have the digital assets forum and digital assets Lab at the Wilson Center I'm I'm I'm blessed to be able to chair that effort um but people like you Jordan and and other uh uh leaders in the industry and leaders in the regulatory space and and from the executive branch who've helped us grow this within Wilson allows us to bring really bring information to people and I I really appreciate this opportunity to help keeping people in the know and that's what we're going to do with this Wilson Center podcast and we want to thank you very much for being here today Jordan well thank you and it's a pleasure and I look forward to working with all of you in the future terrific thank you Jordan we'll see you again soon okay bye now bye [Music]

2022-12-13 19:37

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