Luca Netz: Trove’s $11.5 million token sale highlights flaws in ICO structure, liquidity issues threaten NFT market, and the rise of echo groups over traditional VC

Trove’s token sale raised $11.5 million, focusing on real-world assets like collectible cards. The ICO process for Trove was oversubscribed, leading to incomplete refunds for investors. The token sale process lacks the structure needed for success, highlighting a gap in support for token founders.

Key Takeaways

Trove’s token sale raised $11.5 million, focusing on real-world assets like collectible cards.
The ICO process for Trove was oversubscribed, leading to incomplete refunds for investors.
The token sale process lacks the structure needed for success, highlighting a gap in support for token founders.
The physical collectible market faces liquidity issues, presenting opportunities for innovation.
Perpetual contracts on illiquid assets face significant challenges due to liquidity constraints.
NFT floor prices are susceptible to manipulation because of low liquidity.
Many problems in the crypto space are challenging but solvable with innovation.
Combining popular narratives to attract investment can lead to scams in the crypto market.
Trust indicators in the crypto landscape are often manipulated, complicating the discernment of intentions.
Oversubscribed projects pose financial risks, driven by fear of missing out (FOMO).
A consensus among key opinion leaders may indicate market manipulation through paid campaigns.
The new generation is moving away from traditional venture capital models.
Echo groups have emerged as alternatives to venture capital, driven by adverse selection.
Having experienced advisors on a cap table is crucial for successful project launches.
The drastic drop in value of certain tokens highlights misalignment between market expectations and reality.

Guest intro

Luca Netz serves as CEO of Pudgy Penguins. He acquired the struggling NFT project and transformed it into a global billion-dollar brand with Walmart deals, an ETF launch, and the Pengu token. As host of Unchained’s Uneasy Money series, he analyzes crypto’s persistent ICO challenges and decentralized social media trends.

The significance of Trove’s token sale

Trove raised $11.5 million in a public token sale, focusing on real-world assets like collectible cards.
Trove markets they raised 11,500,000.0 in a public token sale… they’re basically like rwa market for like pokemon cards and things like that.

— Luca Netz
Trove’s focus on real-world assets positions it uniquely in the crypto and collectibles space.
The contrasting perceptions of Trove and Infinix highlight market volatility and differing reputations.
It was quite funny to look at like the different take on trove on the timeline it was like super positive on trove… and infinix was a giant scam.

— Luca Netz
Understanding Trove’s market positioning is crucial for assessing its long-term potential.
The oversubscription of Trove’s ICO led to incomplete refunds for investors.
They did their ico they did the token sale and it was oversubscribed and then they like didn’t refund people or didn’t fully refund people.

— Luca Netz

Challenges in the token sale process

The current token sale process is fundamentally flawed and lacks necessary structure.
If you’re actually if you’re a token founder right there’s no jpmorgan or goldman sachs you either you either have the right investors or the right people in your corner telling you how to do it or you don’t and if you don’t you get smoked every time like 99.99 of times.

— Luca Netz
Token founders face significant challenges without traditional financial institution support.
The situation with Trove is perceived as worse than a meme coin.
It seems we like that’s like worse than a meme coin so the whole thing is is pretty wild.

— Luca Netz
The lack of structure in token sales affects investor trust and market behavior.
The physical collectible market is poised for innovation due to liquidity issues and archaic systems.
The idea I think has huge potential for pmf… the physical collectible market is a huge one $500,000,000,000 growing like 5% year over year and they have huge liquidity issues it’s a very archaic system.

— Luca Netz

NFT market dynamics

Creating perpetual contracts on illiquid or fragmented assets is extremely challenging.
There are so many challenges with making perps on a liquid assets it’s just not an easy thing especially illiquid fragmented assets.

— Luca Netz
The floor price of NFTs can be easily manipulated due to low liquidity.
I could go right now and put a couple 100 eth into the floor price of pudgies and probably raise the entire… floor price by like I don’t know 20% 2025%.

— Luca Netz
Liquidity issues in the NFT market lead to price manipulation vulnerabilities.
Many challenges in the crypto space are difficult but not impossible to solve.
My hot take on that is like a lot of these problems are nonintractable right like they’re hard problems they’re not intractable and you know you can kind of iterate your way towards like some kind of solution to them.

— Luca Netz
Innovation is still possible despite the challenges in the NFT space.

Market manipulation and investor behavior

Current trends often involve combining popular narratives to attract investment, leading to scams.
If you kinda zoom out and you’re like i wanna scam a bunch of people with money what is what is two narratives together.

— Luca Netz
Trust indicators in the crypto landscape are often manipulated, complicating the discernment of intentions.
I think it’s just really genuinely hard to like unpack the intentions of people these days because just like the conversation is all over the place the sort of like the trust indicators the things that you have are all manipulated.

— Luca Netz
Oversubscribed projects can lead to significant financial risks for investors.
Remember megaeath had 1,200,000,000.0 in bids… it is possible to create enough fomo that people will put 1,200,000,000.0 into a contract.

— Luca Netz
A consensus among key opinion leaders can indicate a manipulated market.
If 95% of the kols are in agreement about something and there’s like no dissent yeah that is a crazy paid campaign that is being run on you right now where people are throwing money…

— Luca Netz

The rejection of traditional venture capital

The new generation is rejecting traditional venture capital models.
Some of this is like the new generation’s like rejection of vcs and like anything that’s even slightly professional ish…

— Luca Netz
Echo groups have emerged as alternatives to venture capital, driven by adverse selection.
It was kind of an ico it wasn’t exactly an ico because it was early stage there was no liquidity but it was like we can replace vcs with this approach.

— Luca Netz
The popularity of certain echo groups is driven by adverse selection, favoring less desirable deals.
This is adverse selection to a massive extent… the most popular group because they had the most deals they always sold out.

— Luca Netz
Empirical data shows that having 200 degens is not better than traditional angel investors.
We have empirical data it is not better it is definitely not better right so it’s a challenging problem.

— Luca Netz

Social media dynamics and innovation

The existing social networks will not dominate in the next ten to twenty years.
There is no way in the world that the existing social networks that we have today will be the one that are dominant in like ten twenty years.

— Luca Netz
Investing in new social networks with different incentive structures is a worthwhile endeavor.
I think there is something to be said for continuing to try to build new social networks with different incentive structures.

— Luca Netz
Lowering the barriers to entry is crucial for fostering innovation in social networks.
Lowering the barriers to entry is the most efficient way to get better innovation right if it costs a $150,000,000 every single time we try to reinvent social we’re gonna do it like three times and be like we don’t have any more money left.

— Luca Netz
Small teams leveraging AI have the potential to create viral social apps that can compete with larger investments.
I do think that we are in a place where something like a farcaster built by like you know two people using ai or whatever instead of like a 150 mil from andreessen has the potential to go viral and actually build up some traction.

— Luca Netz

Security and technological advancements

AI and improved tooling are enhancing the ability to conduct complex code audits.
I think the tooling and like the knowledge and maybe the ai they’re able to like hold things in their head and put together much more totally complex like attack flows that probably was like way less effort.

— Luca Netz
The security posture and knowledge in the auditing and builder side have improved significantly.
I think just like the security posture and like knowledge has improved on like the auditing and the builder side.

— Luca Netz
Transparent ledgers can inadvertently facilitate spam transactions.
You actually just destroy every legitimate user because there’s no legitimate user on earth who’s just gonna send $10 randomly around because there’s no reason to right the only ones that do that are the spammers.

— Luca Netz
Using zero-knowledge technology can help obscure test transactions from public view.
One of the things is like not having a transparent ledger using some kind of zero knowledge moon map tech so that they can’t see you do the transaction.

— Luca Netz

Blockchain ecosystems and developer challenges

Cosmos is losing builders and is in a state of stagnation.
Cosmos is losing builders cosmos to me feels like it’s in the horrible horrible uncanny valley trough of despair of being like just real enough but not used enough that like it’s hated by everyone.

— Luca Netz
Building on EVM-compatible chains is significantly easier due to better tooling and infrastructure.
It feels like a massive uphill battle even when you’re doing zk stuff… you still get so much of the EVM… it’s hard EVM but it’s still EVM, so you get a bunch of things right.

— Luca Netz
The NEAR ecosystem has strong technology but faces challenges in attracting users due to fragmentation.
The more i’ve looked into the near ecosystem the more i’m like actually i think like he was right like it is the best tech but it’s so hard to be your own virtual machine living on an island and trying to attract people there.

— Luca Netz
User adoption is hindered by the proliferation of wallets and chains, leading to increased switching costs.
The applications the existing user base the existing infrastructure the switching costs like all of that adds up i do not want another freaking wallet.

— Luca Netz

Philosophical and practical considerations in blockchain

Pragmatically, I prefer code not to be law because I need flexibility to build effectively.
Philosophically code is law pragmatically I would prefer code to not be law because I need to build stuff and so I kinda need some like proxy contracts and like non immutable stuff in there.

— Luca Netz
99% of projects are not truly immutable or decentralized.
The reality is like 99% of the stuff is is somewhere is somewhere between a vibe coded database and like a multisig.

— Luca Netz
Disconnection from users and product reality hinders the ability to build valuable solutions.
You’re never going to build and ship anything of value if you if you’re that disconnected from like your people and your product.

— Luca Netz
Choosing not to fix a mistake in a project, even for philosophical reasons, is a significant red flag.
If you can and you choose not to and you do all these mental gymnastics to like basically morally justify you not taking an obviously good action… you’re avoiding you’re not good at building… it’s just such a unique case and I think that anyone that again assuming that you can right assuming that there’s a case where you can do something that like fixes it and choosing not to and especially choosing not to for philosophical reasons… it’s like the biggest red flag for me today.

— Luca Netz