Grayscale Consumer and Culture Crypto Sector Summary

Research Team
Last Update 11/03/2023

Examples provided for illustrative purposes. Allocations are subject to change.

The Grayscale Consumer and Culture Crypto Sector includes crypto applications that span creative industries such as entertainment, music, media, collectibles, sports, and art. These applications enable new levels of ownership over the platforms on which consumers devote their time and money.

At the heart of this sector’s value proposition are Non-Fungible Tokens (“NFTs”)—digital assets stored on a blockchain that represent ownership over a distinct, unique item. Because the blockchain is transparent, NFTs can guarantee the authenticity of a specific item. This might take the form of a rare collectible, a trading card, or piece of art. The blockchain also allows for traceability of an NFT’s provenance, or history of ownership. NFTs are redrawing the boundaries of ownership and user in gaming and digital art.

When it comes to gaming, players traditionally can buy in-game items like “character skins” and work to achieve progress in a particular game, only for the gaming company to reveal a new title where the user loses all their progress. NFTs reverse this dynamic by enabling users to actually own the underlying in-game assets themselves—skins, experience points, a particular character—rather than the game’s developer.

In the art world, centralized intermediaries often facilitate auction processes. In most cases, the artist that created a particular piece of artwork doesn’t get to participate in the economics of any secondary marketplace trades of their art. Instead, only the seller and the auction house profit. However, in crypto, royalties can be programmed into digital NFT artwork, enabling artists to take a small share of each trade of the art into perpetuity. In the future, this model may become particularly relevant for other creative industries beyond digital art, such as music.

Figure 1 and 2 Source: FTSE Russell, Grayscale Investment. Data as of October 24th, 2023. Allocations are subject to change.

This sector also covers governance tokens, which empower users to vote on decisions affecting protocols or applications. For example, an owner of the APE token can vote on matters such as who to hire as a developer on certain projects and the future roadmap of the ApeCoin brand. Other examples of token governance include Arkive, a digital community that proposes and votes on physical pieces of artwork to purchase for a user-owned museum and LinksDAO, a digital community that voted to acquire a golf course in Scotland. Finally, the Grayscale Consumer and Culture Crypto Sector also includes tokens that reflect a phenomenon unique to internet culture. While tokens such as Dogecoin and Shiba do not necessarily reflect a unit of account or store of value, they are more closely associated with memes, comedy, and digital entertainment. 

The Grayscale Consumer and Culture Crypto Sector—at only ~2% of the total crypto market cap—is nascent but we believe may have substantial opportunity. For one, we believe significant investments into metaverse projects from centralized tech companies (e.g. Meta Reality Labs and Apple Vision Pro) may prove to be tailwinds for this sector. Additionally, several highly funded crypto gaming projects such as Otherside (built by Yuga labs) and Futureverse have yet to release games. Ultimately, we believe the dominant participants in this sector should be well positioned to capture mainstream users as NFT platforms attempt to digitize the $372bn collectibles market and gaming and metaverse decentralized applications (“dApps”) attempt to bring individual ownership to the $227bn video game market

Examples provided for illustrative purposes only.


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