Generative-AI Videos, Apple's Bet on Mixed Reality, and the Cosmos Ecosystem
Hartmann Capital Bi-Weekly, Tuesday December 14th, 2023
If you are attending CES or iConnections in January and would like to book a 1-1 allocator meeting to learn more about our funds, please send us a message by replying to this email.
In this issue
AI: Is this the Breakout Moment for AI Videos? by Daniel Derzic
METAVERSE: How Apple is Changing Mixed Reality’s (MR) Public Perception by JP Minetos
CRYPTO: The Cosmos Ecosystem Faces Pivotal Changes by Jonas Luckhardt
Is This the Breakout Moment for AI Videos?
Written by AI & Metaverse Associate Daniel Derzic; Edited by Felix Hartmann
Do you remember Midjourney’s outputs from a year ago? The transformation is incredible. Here you can see Midjourney's output in March 2022 to its substantially more polished output in March 2023:
Just as image generation advanced quickly from providing basic, unclear textures to producing very realistic, high-resolution images, we are experiencing a similar shift in video generation.
The rising tide of AI video tools
Pika Labs, for example, released version 1.0 with a video that went viral on social media.
The company quickly garnered popularity for its high-quality CGI animation and longer clip lengths and announced an impressive $55 million investment round. Yet Pika Labs is not the only player in this field. Until recently, Runway was leading the way with its Gen-2 model. This model can generate video from text, images, or a combination. Additionally, it provides precise controls and the option to specify which parts of the video should be animated.
Runway TV, which debuted barely a week ago, demonstrates the vast potential of AI-generated entertainment. You can find original Runway Studios material and community-created films.
StabilityAI has also joined the race and just developed Stable Video Diffusion.
And Meta has revealed Emu Video, which can generate short videos given a text prompt, and Emu Edit, which can edit images with text-based instructions.
But what is missing?
The short film "Absolve" by Jacques is a notable example of AI's use in video production. The artist generated about 80 VFX shots utilizing various techniques, including Stable Diffusion Image 2 Image processing, Runway's machine learning rotoscope, frame interpolation, and Gen-2, as well as Luma Labs' 3D NeRF captures.
This shows that there are still several challenges to solve: First and foremost, having a team of AI and video production professionals is still essential. Second, generative AI must evolve to preserve temporal consistency, particularly in representing characters and their movement. Alibaba Group researchers have identified one feasible solution:
Animate-Anyone: A new Image-to-Video synthesis for character/person animation.
Last but not least, we need beginner friendly platforms that make high-quality video production more accessible to a wider spectrum of creators. Adobe's acquisition of Rephrase.ai, its first investment in this market, is a step in the right direction, and underlines the rising desire for more efficient, AI-powered video production workflows.
While completely AI-generated movies remain an exciting but unsolved challenge, the rapid development and integration of AI in video production, as seen by Adobe's acquisition, shows that we are approaching a tipping point for AI films.
How Apple Changes MR Perception
Written by XR & Gaming Analyst JP Minetos; Edited by Felix Hartmann
Walking through any city in America, you’ll notice an array of different characteristics of the people in town. Different backgrounds, styles, activities and so on. A perspicacious eye will catch a similarity between almost everyone - the ubiquitous presence of iPhones, and likely AirPods… and maybe even Apple Watches.
Apple’s reign globally, and even more dominantly in the US is hard to ignore. Apple’s control over tech has surpassed most other brands, and has become not only the gold standard, but the Sherpa for what is an acceptable relationship between technology and humans.
Apple has done this with copious tech mediums, and their next target requires no guess work: Mixed Reality.
Innovation Has Bred Dominance
“There’s no chance that the iPhone is going to get any significant market share. No Chance” - Steve Ballmer, Former CEO of Microsoft, 2007
At the genesis of the iPhone, tech experts and leaders were skeptical about the iPhone, and the way that Apple strongly innovated and differentiated from the crowd. Ultimately, Apple has swept away the North American market and has created the highly defensible Apple Ecosystem.
Following in the path of the iPhone, Apple has given the same treatment to SmartWatches and Bluetooth Headphones (combined generated $28B in revenue in 2022); both of which existed before Apple came into market, but weren’t validated as anything more than esoteric technology until Apple launched their first generation devices.
Moat Protection
Apple is the standard for the idea that intra-device interoperability breeds moats. When the fluidity of function across all devices works so well, it becomes a consumer sacrifice to give it up for any other technology. Anecdotally, there are many people who simply refuse to use other brands because their interoperability standard is Apple only.
In the Apple Vision Pro demo, interoperability was highlighted as a core feature - that this is simply another tool to add to your Apple toolkit.
Design, Quality and differentiation
Apple's reputation for design excellence and user-centric innovation is expected to extend into the realm of Mixed Reality. The sleek and intuitive design philosophy that has defined Apple products, already shaping the physical appearance and more importantly the user interface of Mixed Reality devices. This emphasis on aesthetics and usability could potentially set Apple apart in a market where user experience is paramount.
A common complaint on current MR devices are the friction to usage, and the primary UI navigation that lacks the intuitive nature that makes an Apple Product so easy to use. Apple has made the bold decision to not use controllers, a staple feature of MR headsets to date, instead opting for hand gesturing only. While there is warranted skepticism, it is likely analogous to the fear of the iPhone lacking a physical keyboard - a decision contrarian to consensus yet intuitive in design.
Where Apple Will Likely Stand in the Market
Apple plans on producing 400,000 units of the AVP to start with in Q1/2 ‘24, costing $3500 each - a significant markup to other headsets for sale.
Similar to how a gamer will always choose a PC over a Mac, the AVP is unlikely to dominate the gaming sphere out of the gate. The AVP will work as the everything MR device for those who have had skepticism about MR until now. Media, entertainment, connectivity, and productivity are all core use cases that Apple can lead with that other device makers have failed to gain traction with.
Time will tell how Apple will shape the market. It will not be leading immediately, but it will open up the opportunity for Apple-native customers to experience MR and open the cultural zeitgeist to accepting MR as a tech medium that is here to stay.
Cosmos Ecosystem Faces Pivotal Changes
Written by Crypto & Macro Analyst Jonas Luckhardt; Edited by Felix Hartmann
The Cosmos Ecosystem, known for its diversity of independent blockchains and the groundbreaking Inter-Blockchain Communication Protocol (IBC), is undergoing significant developments. These changes include the launch of the Cross-Chain Transfer Protocol (CCTP) by Circle and a significant fork of the Cosmos Hub, which could influence the long-term role and significance of the ATOM token in the ecosystem.
Introduction of the CCTP
The recent launch of the Cross-Chain Transfer Protocol (CCTP) by Circle marks a groundbreaking step for the Cosmos Ecosystem. Previously, the lack of native USDC and USDT on most chains in the Cosmos Ecosystem was a significant barrier, affecting both the flexibility and user-friendliness of the system. The introduction of the CCTP overcomes this bottleneck. This innovative protocol enables the use of USDC on the Noble blockchain within the Cosmos Ecosystem and facilitates the efficient and secure transfer of USDC from well-known blockchains like Ethereum, Avalanche, Polygon, Arbitrum, and Optimism.
This innovation significantly simplifies the transfer of assets into the Cosmos Ecosystem, enabling seamless, cross-border financial transactions and increasing liquidity across the entire network, and marks a strategic step that accelerates the ecosystem’s growth through improved interoperability and user experience.
Cosmos Hub Fork and Its Implications
A critical vote in the Cosmos Network on November 25, 2023, led to the adoption of a proposal that envisages reducing ATOM inflation from 14% to 10%. This decision initiated a fork of the Cosmos Hub, launching the AtomOne project. This project aims at an alternative governance structure to heal the division within the community, which will exist alongside the ATOM token.
Future Perspectives and Challenges in the Cosmos Ecosystem
The introduction of the CCTP and the upcoming Cosmos Hub fork could reduce the dependence of the individual chains on the Cosmos Hub and strengthen their autonomy. However, how these developments will affect the value and role of the ATOM token remains to be seen.
Particularly, the contrast in the performance of ATOM, with a year-to-date (YTD) performance of around 0%, compared to other digital assets like Bitcoin, with a YTD performance of about 130%, is stark. Whether the recent developments in the Cosmos Ecosystem will be sufficient to reverse the current trend of ATOM's underperformance, is yet to be seen.
Potential Advantage for Other Tokens in the Cosmos Ecosystem
Performance alone suggests, that tokens building on Cosmos might benefit more from the innovations than ATOM itself. For example, DyDx and Osmosis, boast YTD performances north of 100%, These tokens have already shown strong market dynamics and could be further strengthened by the new developments.
The Cosmos Ecosystem stands at a crossroads, grappling with challenges and opportunities alike. Central to this is the growing focus on user engagement, especially concerning the myriad applications within the ecosystem. As technology advances and the market shifts, there's an expectation for the supporting infrastructure to increasingly fade into the backdrop. Users are more invested in the functionality and value these applications deliver, rather than the mechanics beneath.
This shift mandates infrastructure providers to evolve and tailor their services to meet the evolving needs and expectations of users. Crafting a business model that not only works effectively but also ensures sustainable profitability is becoming paramount. Infrastructure providers who lag in this adaptation may see a relative decline in their valuation compared to application providers. This situation highlights the critical need for these providers to spearhead technological innovation and adopt economically sound strategies.
The community and investor reactions to these developments will be pivotal in shaping the ecosystem's trajectory and success in the rapidly evolving blockchain sphere. Watching how the Cosmos Ecosystem navigates these changes and the new opportunities that emerge will be a journey worth following.
Disclaimers:
This is not an offering. This is not financial advice. Always do your own research.
Our discussion may include predictions, estimates or other information that might be considered forward-looking. While these forward-looking statements represent our current judgment on what the future holds, they are subject to risks and uncertainties that could cause actual results to differ materially. You are cautioned not to place undue reliance on these forward-looking statements, which reflect our opinions only as of the date of this presentation. Please keep in mind that we are not obligating ourselves to revise or publicly release the results of any revision to these forward-looking statements in light of new information or future events.
 | A guest post by
|