Written by: John "JAYEL"

The first full week of 2022 is officially in the books. I hope everyone has been making some progress towards the things they want to accomplish in this new year. If not, it's not too late to get started! There is no perfect time, there is only now.

This week's letter has some interesting topics that I've been really excited to write about. We're gonna be getting into music NFTs, investing in China, and crypto app valuations.

Finally, there are a bunch of new subscribers who are getting their first letter right now, so I would like to say thank you and welcome! I hope you enjoy your first letter and stick around for many more to come; Don't forget to share with some of your friends or family, too!

Let's begin 🏃‍♂️

💽 Nas selling streaming royalty equity via NFTs

In case you don't know who Nas is, he is one of biggest rappers to ever come out of New York City. His music career reached its pinnacle in the 90s and early 2000s, with music hits such as N.Y. State of Mind and If I Ruled the World.

Since his music career, Nas has been an active businessman and investor. Nas was one of the earliest investors in the crypto exchange giant, Coinbase. Nas' investment firm, QueensBridge Venture Partners, became an investor in the company's Series B round. It is estimated that the firm owns between 100,000 and 500,000 shares of Coinbase, which would give them up to $174 million worth of shares in the company.

With all of that being said, Nas clearly knows his way around crypto and the innovation that is happening in the space. So, it's no surprise that the rapper is getting involved in one of the most innovative moments in NFT and music history. Nas is launching a NFT project which tokenizes 50% of the streaming royalties ownership for two of his songs: Ultra Black and Rare. Streaming royalties are the money that musicians and their business partners make from each stream and play of their music on platforms such as YouTube, Spotify, Apple Music, etc..

The offering is taking place on the Royal platform, a NFT marketplace that was made specifically for this part of the music industry. Royal was created by 3LAU, the music DJ who has doubled as a NFT influencer for most of 2021. Besides running this same kind of project for one of his own song's, this Nas project is the first and biggest moment for 3LAU and his company, Royal.

Offering details:

Ultra Black: 760 ownership tokens available at 1 PM EST on January 20th

- 500 Gold tier tokens: 0.0143% streaming royalty ownership for $50

- 250 Platinum tier tokens: 0.0857% streaming royalty ownership for $250

- 10 Diamond tier tokens: 2.14% streaming royalty ownership for $4,999

Rare: 1,110 ownership tokens available at 9 PM EST on January 20th

- 700 Gold tier tokens: 0.0113% streaming royalty ownership for $99

- 400 Platinum tier tokens: 0.0658% streaming royalty ownership for $499

- 10 Diamond tier tokens: 1.5789% streaming royalty ownership for $9,999

The above ownership percentages actually need to be split in half, since they only represent 50% of the total streaming revenue for each song. This is because the tokenized ownership is only 50% of the song's total streaming royalty. So, 1 Diamond tier token of the song Rare, only represents about 0.79% of the song's total streaming royalty ownership (not 1.5789%).

Streaming royalties within the music industry are complicated enough without tokenized ownership. Therefore, it's very difficult to tell what your returns and payout consistency will be--since the music industry is very convoluted in this area to begin with. However, from my rough calculations, we can at least make the following assumptions about the songs' ad revenue from YouTube.

The Ultra Black song has about 5.1 million views between its audio-only and music video on YouTube. It is estimated that eligible channels can make $4.18 per 1,000 views on YouTube.

( 5,100,000 / 1,000 ) * $4.18 = $21,318

Ultra Black would have received about $21,318 in ad revenue in only one year of existence on YouTube. If you purchased one of the Diamond tier tokens for this song, which would have granted you 1.07% ownership of the streaming royalties, this would have netted you $228 in one year. At this rate, it would take you about 22 years to make your money back. However, that number doesn't include any of the other streaming platforms that are included in the streaming royalties.

With some of this background, you are probably starting to understand how complicated this side of the music industry can be and why people like Nas and Royal are trying to disrupt it. Despite assuming good intentions, we always need to look into the details and research opportunities as much as possible.

While researching some of the details for the Nas offering, I discovered a few concerning things. Firstly, Royal has not released any legal documentation for the offering, and as of this writing, there are less than 48 hours until the sale.

I was at least able to find the legal documentation for 3LAU and Royal's first NFT offering, the streaming royalty ownership for 3LAU's own song, Worst Case. Royal had it listed in their Discord server, the song's Assignment of Sound Recording Royalties document can be viewed here.

To save you some time from reading through the whole thing: The document doesn't tell you much of anything. It didn't say anything about what streaming platforms that royalties are collecting from or how often you can expect to be paid your dividend or royalty income. Considering how these two things are probably the most important things about this investment, it's concerning to not have any verbiage in the legal document about it. The document also spends lots of page space by eliminating the main parties (Royal and 3LAU) from any legal action against them--also concerning.

January 15th,2022 Update: The drop for this project has been pushed back from January 11th to January 20th. Legal documentation has been uploaded as well, it is viewable below at the following links: Ultra Black and Rare

A Coinbase engineer and NFT community member did his own research on the subject and found some equally concerning things about this Nas release.

They described it in a Twitter thread 👇

Yuga.eth points out that Royal's smart contract addresses, which are set to receive the funds from the sale, are not actually contracts--they are simply wallet addresses. For many projects, the smart contract address is where the logic and rules are set for the exchange of tokens and their existence. However, Royal is using it as if someone was to simply send 1 ETH to a friend's wallet address.

Unfortunately, in this case, one of the biggest things that seems to be loved and believed in by all within the NFT community, is already being ignored and "faked": Decentralized truth. There is no decentralized truth in having a wallet address pretend to be your smart contract. The only fix to that issue is displaying the new legal document(s) for this offering--and they have not even been released yet. I don't even want to use the legal document for Worst Case as reference because that one was disturbing enough, and I'd like to hope they improve upon that one--greatly.

To conclude, this is a very exciting music NFT that is getting released, with a lot of risk involved. On the flip side, it is understandable that Royal, 3LAU, and Nas are probably looking to save themself from legal troubles and look out for themselves. They are launching a pioneer of a project that has not been done at this scale. So, it's up for you to decide if the risk is worth it. Maybe the royalties will pay out annually or bi-annually and you get a beautiful form of passive income sent to you. Maybe the project will get so much popularity after it's sellout that you make 2x or 5x your investment by flipping the NFT. Or, maybe, you don't see any royalty revenue for 2 years and it's not what you thought it would be. Fortune favors the brave; How do you feel on this one?

When I first saw the news about this project, I was certain I would be buying into it. But, now, after doing my research, I'm honestly not sure. What will or would you do? Respond to this email and let me know!

💴 Munger doubles down on Alibaba stock

Charlie Munger just doubled his and the Daily Journal Corporation's stock ownership in the Chinese mega-company, Alibaba. Charlie Munger is a lifelong friend and partner of Warren Buffett, as well as the Vice Chairman of his company, Berkshire Hathaway.

Alibaba can be viewed as the Amazon of China, but with an even bigger international supply chain. The company's stock has been on an utter downfall over the past year, losing almost half of its value (-42.91%) as of this writing, and just bouncing off its lowest stock price in over five years ($111).

Alibaba and other Chinese companies have been losing stock value during these times because of the government. The Government of China has been cracking down on its biggest companies and enforcing them to abide by new business laws. Besides that, the real estate loan default occurring in China is also not making it appealing to invest in the region. To put a cherry on top of it all, there is a serious fear from investors that some big named Chinese companies (Alibaba the biggest) could be delisted from the New York Stock Exchange and moved to Shanghai's.

Despite these macroeconomic situations playing out negatively for Alibaba, Munger and his Daily Journal Corporation decided to expand their admiration for the company as a long-term investment.

Charlie and Daily Journal have been invested in Alibaba since the stock was in the $200s. So, during this past year, their holding has taken an absolute beating by losses. However, this is a great moment for us investors who are learning, because Charlie is practicing what he and Warren have preached for so long. That is, having vindication for the companies that you own. If you own shares of a company that you believe in because they do business well and will continue to do business well into the future, it doesn't matter if the stock price goes down. As long as you still feel confident about the company as a real-world performer, any time the price goes down, you should see it as a buying opportunity.

Charlie saw an opportunity at these incredible lows and still believes in this company's future. Alibaba now makes up almost 30% of Charlie's Daily Journal portfolio.

Would you invest in Alibaba right now?

🌊 OpenSea valuation soars to $13 billion

The most popular NFT marketplace, OpenSea, just finished its $300 million Series C round. This new investment put the company's valuation up to $13.3 billion; OpenSea was valued at $1.5 billion just six months ago.

For some perspective, Instagram was purchased by Facebook for $1 billion in 2012. For some more perspective, goPuff is currently valued at $15 billion (lol what).

This is an exciting headline to see as the space continues to develop at rapid pace. The also money comes at a good time for OpenSea, as the NFT marketplace competition is growing more and more by the day. New marketplaces led by crypto exchanges such as Coinbase and FTX are thought by many to be a big push for the next wave of NFT adopters. Personally, I don't know if it will have as big of an impact as everyone is thinking. I think if someone wants to be involved in NFTs and working with a digital wallet, they will do it and figure it out with OpenSea and Metamask. I don't think as many new users will enter the space just because their crypto exchange is now offering the experience specifically to their own users.

What do you think about more marketplaces coming into the scene and the impact it will have?

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🎶 Music makes the world go 'round

Hopefully this is the last week that I highlight Vintage Culture, but it's hard to find anything better right now! I have never seen this guy live but I can't wait for that day to come.

This set is a two hour b2b performance with Vintage Culture and Bruno Be at the So Track Boa Festival of 2019 in Curitiba, Brazil. Works beautifully with all vibes: work, play, chill, or relax. And if you've been a reader of these letters--yes, you already know it's house 😉

¡aproveite meus amigos!

👋 Peace from the lease

Thanks for reading and please share this newsletter with a friend if you know someone who would find them interesting!

To Brandon and Patrick, I'm still planning on doing the video but this letter took a lot longer than I expected to write lol.

Hopefully I have some of the video content to share before or at next week's letter.

Be good this week 💪
Your friend,
JAYEL

P.S. ROLL TIDE WOOOOOOOOO!!!!!!!!!!!!

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