Epicenter - Learn about Crypto, Blockchain, Ethereum, Bitcoin and Distributed Technologies - Alex Salnikov: Rarible – The NFT Transformation

Episode Date: March 11, 2021

NFTs are a new paradigm that opens possibilities for new types of interactions. In digital art, it has caught on like wildfire and is transforming how people think of ownership. Alex Salnikov has been immersed in the crypto world for many years and recognized the potential of NFTs. He created Rarible, an NFT marketplace that has seen rapid growth. But the vision of Rarible is to be more an open transaction protocol for NFTs and serve many different markets.He joined us to discuss the different NFT use cases and how NFTs can scale and function in a multi-chain world. It's a great conversation at the unfolding of a new paradigm.Topics covered in this episode:Alex's background and how he got into cryptoHow Rarible was created and why they decided to focus on NFTsWhat are NFTs and how are they different to other cryptocurrenciesWhat’s driving the massive growth of NFTs right now?The link between owning an NFT and legal ownershipHow does Alex see NFTs and Rarible evolving in the futureHow NFTs work on a technical level, storing metadata securely, and the costs of minting NFTsThe roadmap of Rarible as a marketplace and the challenges associated with itEpisode links: RaribleRarible on MediumRarible on OpenSeaRarible on Twitter Alex on Twitter This episode is hosted by Brian Fabian Crain & Sunny Aggarwal. Show notes and listening options: epicenter.tv/382

Hi and welcome to Episner. This is episode 382. My name is Brian Crane and I'm here with Sonny Agarwal. Today we're speaking with Alex Salmi Koff from the NFT marketplace and protocol Rarable. Let's get to the episode. So we're here today with Alex Salonikov and we're going to speak about Rarable and we're going to speak about NFTs. You know, in the preparation for this episode, I was really kind of diving in, trying out Rarable. a few NFTEs and it was just like really cool experience and really enjoyed it. Also, the listening to Alex on another interview. So I'm really excited to have this conversation about you know, NFTE and also wearable and where this space is going. So thanks so much for joining us, Alex. Thank you guys. Thank you for having me today. So maybe you can start at the beginning.

So how did you get interested in in the crypto space and what has your journey been since you got involved. Oh, that's a really nice question. So my journey into the crypto space began in 2012. That was quite early. I think we didn't have anything except for Bitcoin back then. And I am a technical person. I studied computer science and later data science

in one of the best economics universities here in the country. So my book first. is purely technical and when they understood how it all works on the background, this powerful idea of blockchain and ultimate ownership that I as an IT person would be able to digitally sign a transaction and without it, it would never move. I was just hooked on that idea. I know it promised to change the world. It promised to change the financial system, how we have it today, the monetary system

of Bitcoin was amazing. I was just dragged all over my head to the space. And since then, I actually haven't been building anything else. I'm a completely cryptinative person that started his career in the blockchain space and still in the blockchain space. Were you working on anything before you started Rarable? Yes, yes, of course. We've done numerous stuff. So the first project was trading robot. We've assembled the trading robot, the market, the market, the market. it was completely inefficient. It still is not efficient as we wanted it to be. But back then, the simple like EMA strategy would give you the massive returns. And we assembled the trading robot that was trading crypto and it felt amazing. Then we moved to build a fiat on ramp and

off ramp to the crypto to Bitcoin again from from local bank and card providers. We We even had the bank that wanted to allow us to process credit cards, what is only available now on the market. They didn't fully understand what they were doing with this thing, but they were curious to try. And at some point, Central Bank advised the banks not to deal with cryptocurrency. And that was it for on-ramp. and we decided to build an exchange, a centralized exchange, with short sales, leverages,

futures, again, a little bit ahead of the market and below our own capabilities, I would say. We've built a nice exchange that supported one million trades per second on the matching engine that was built in memory, a really beautiful piece of software. We struggled with liquidity, the large exchanges, the large exchanges, the large exchanges were quite ahead of us in that sense. All over that journey, we assembled such a great team that is still working with us on wearable. We have our head of design from Russian big tech company, Yandex, and I know if our listeners know that one.

We have our CTO who represented a country on the world physics contest. we have the talented team and that's the main resource that we assembled on working in this in this space because it requires team with quite unique mindset and skill set so yeah that's that's our journey in the cryptos phase that's really fascinating so how how big is that team you know that has kind of persisted through these years. And can you tell a little bit about like what has allowed you guys to work together, you know, so well and kind of like grow together over these years? We have allowed us to work together.

I think that's the shared mission. We started working with our designer. We asked them to draw us, to create a logotype for us. And we, I remember this evening when we sat on the roof of some building. and we're discussing blockchain and just unboarded him to this world, shared this idea of how that can work eventually with all the things built from scratch in this new ideology of a free market and he was hooked as well. Sometimes I think that blockchain attracted that many great minds because it's literally the financial

system building code. So it's something that gives engineers so much power, so much, so much potential to rewrite something that's working, that works now imperfectly and that was built by people. And we are usually quite technocratic, I would say. So yeah, I think blockchain just empowered engineers with this ability to rebuild something from scratch in code that was built by people and is not as efficient as we wanted to be. So that's really touching to anybody who has this technical mind. And so what brought you to NFTs? So you know, like you mentioned that you're mostly on the technical side. So was it an artist friend or something? How did you learn about this even market as a whole?

Being that long in the blockchain space, you probably know all the great things happening out there. And basically, we, of course, we knew about NFTs, with Cryptokitis launching and all that. We definitely knew about the market from the very beginning. I think the beginning was in 2017. And we started building wearable in 2019. And I know that was this moment when we decided that we need to build something more, more fun, more emotional, more close to the user than, because like all the previous projects were financial and technical and we wanted something more fresh, something new.

We just went out to the market. We decided to create several NFTs and just try them out. And there wasn't there wasn't even a place to create NFTs out there or maybe some. some small pages that allowed you to do that. And we minted a couple NFTs and we flipped them inside the teams. So I told one to designer. He minted this visual skate deck with AR symbol. And that just felt right. I had this feeling that we can give all the users the same sense of ownership that we all

had since the beginning. being in that cryptocurrency market. We all knew that our money is definitely our money, that nobody would be able to move them except for us making these transactions. And this idea is so powerful, it's so rewarding in a sense that you feel safe. And we wanted to give that same sense of ownership

to everybody out there, not even the financially, not even to the only financial use cases, but more broadly. NFTs felt just perfect in that regard. They are visual. They have an image attached. They have a name. They have a description. They are digestible.

You can understand what is it. It's tangible. It's almost like an item. You can almost touch it and feel it that it is in your wallet. It's just the direct analogy of a digital item. that you have in your pocket. It's almost literally you can feel it in your pocket when you have it on your wallet and your mobile.

That was so amazing that explanation. When I heard your podcast on the Zero Knowledge podcast, that was the thing that I also remembered the most vividly was when you talked about this idea of ownership and I think you said that you think ownership is an emotion and I had never heard anybody, I think, say it like that. And it's in now it's also interesting how you talk about these nfts is this tangible thing you can own. So I'm wondering like why is there is there something different about like nfts and sort of

the sense of ownership you can have there versus you know, Bitcoin and cryptocurrencies? Well, the technical idea is the same but but the perception of that idea is much more. vivid. I think as I said that ownership is an emotion because basically an emotion is something that is wired down inside the human. We tend to own things. We love to possess things, especially scars. We want this instinct of collectibles. It's wired deep down the human nature. And that's why it's so touching. And when you add the picture, it crosses to the second like instinct. It has much more like this attachment, psychological attachment to the thing. That's why I imported a lot of people to blockchain and almost any one of them wanted to have at least one Bitcoin. And it doesn't

really matter how many bitcoins you have 0.1 or 0.2 or 1.5, but they all wanted to have just one just because it's this psychologically gay and behavioral, a completely irrational thought that you want to have this thing and you want it to be yours as a whole. And NFT gives you this idea that it's so digestible. This digital item is yours, period. It's so simple. You know, the first time I felt that like ownership as a motion thing, I have a friend, lives in Kentucky and he like has like a like 2,000 acre ranch or something there. I was asking him like, you know, what's the point of having all this land? Like you don't even use it for anything.

It's mostly just like wooded and everything. He's like, you know, I hear you. But like sometimes when I'm just like riding my thing, my golf cart through the land, it's like, you know, that tree, that I, that's my tree. That deer that's living there. That's my deer. And it's like really interesting to see that as we are going to move now more of like this like virtual digital world, like that sense of ownership of like physical land and the objects on it is going to like translate to like,

you know, especially if we look at things like the central land and things like this, where it's like, you know, digital land and digital objects that are living in these like virtual worlds that we're going to start to inhabit. Exactly. This feeling is so ancient. And besides, you never truly own anything right right now on the internet in the current model. I know, probably the most reliably owned thing right now on the internet is the main name. You literally own it with a lot of legal support. All the other things, your Facebook page, your Spotify, music library, they all are kind of not yours. You're renting them from these platforms and they have too much control over it. Not that it's a really bad thing, but I know, can you move your library from Spotify to Apple Music?

So, you know, you had this vision of NFTs for like, you know, since you started VARABO, which is like over a year ago now. But then suddenly in the last like three to four months, it seems a whole world has caught on to the vision. And so what's driving this massive adoption of NFTs and like especially using the VARable platform today? Well, I think a lot of things came to that point. And I'd love to go back to the Rarable story a little bit to make sure that it's all online. Because when we first started Rarable, we knew that NFTs are great, but we didn't know which part of them is great. That's why we wanted to give our users ability to experiment on what will be the hot thing inside NFTs.

We created this platform where there is no hint of what you are expected to create. And people started creating anything, some art objects or tickets, some charity collectibles. So there was a lot of ideas. And this cryptomedia, crypto art segment with music and videos and pictures really spiked. just because there is no such place on the internet right now to sell your digital content for this way so that the new owner would be able to resell it. So basically, NFT world basically created this level of ownership

for the all digital content out there. And this was so rewarding. And the platform was open, people started to mint, They started referring their friends. We've put a lot of efforts into making it so easy to use. And I think that's the same idea that's driving that option right now. How about now every piece of content would have its owner, not just creator, and that ownership to be transferable and soldable?

We added at some point we added multiple editions, we added royalty support. You can set up arbitrary number from zero, zero to 100% of the subsequent sales that would be downstream to you as a creator. This whole idea was so powerful. And pandemic definitely accelerated the situation. People started to look over the new concepts of how they can, how can they engage with the audience. And I think from inside, it feels kind of, it's not that space started to boom,

for the last three months. It was growing constantly on the behind, like exponentially, two X months to months at least. And that feels slow from the beginning. It's like one, two, five, ten, one hundred. And then at some point there is an inflection point and everybody's, and this process comes from the undercover to be open and people and people are, are all over it suddenly. I think NBA Top Shot definitely played a big role in bringing that space forward. The team behind the first NFTs ever, the first most popular NFTs ever, Cryptokitis. They created this game with credit card support, with this large IP rights holder NBA that just unleashed this mass adoption.

So I'm wondering if you could go in a little bit this idea of like ownership in the NFT context. Because you know, you said one thing I'm curious about here. Like, you know, because you said, oh, you can like truly own an NFT. But then on the variable platforms, there's also this thing about, right, if you have like resales, maybe some percentage goes back to the original creator. So I'm wondering, like, how can you. actually enforce that. And if kind of people really control it, you know, they can transfer ownership.

How do you know what they paid or? It's a great question. So the way it works. Right now, when you create an NFT, this percentage of royalties is backed in the asset. And it looks like just a number inside the asset. And basically, any platform can decide whether to respect that royalty stream or not. Obviously, you can't enforce royalties payout on the transfer level. If I just transfer this item from one of my wallets to another, I don't originate the sale and I don't pay anything and I don't stream this royalty stream to anyone. So it's not really that enforceable because you can always make this OTC trade by just taking somebody else's money and sending them this token directly.

But in reality, a lot of platforms respect this royalty field and working together on respecting in more. People are by coding platforms that say we won't do that. So there is like this self-regulation in the market, everybody understands that empowering the creators, that they created the item in the first place is important for the public space for everybody. here in the NFT and the NFT market.

Just be able to on that, that's really fascinating. And I guess it almost is then more sort of a statement, right, that's like made by the artist when they create the NFT, that's like intrinsically part of the NFT is like, oh, I would, you know, I sort of demand or ask for on these resales that like, you know, each time I get 10% or 25%. But would it be possible and have it. guys considered, you know, like the link between that and the actual legal right?

Yes, that's just right question, I would say. So I think the closest analogy out there for the NFT market is that you're trading IP rights to something. You're saying that this digital item belongs to you. And digital item is mostly just an intellectual property over something. So, and when we see how the market works, we can almost feel that it recreates this IP market patterns. So sometimes people sell an NFT and they are totally okay with the new owner doing anything with it. They are okay, now you own this thing, you can print it, you can burn it, you can use the image or audio on the video or the video,

however you want, I know, print it on the t-shirt and make some money over it, and they're completely free about it. On the other hand, there are artists that are saying, you know, I want you to have non-exclusive right to that item, and you're free to use it the way you want, but I will be using it as well. And by the way, I don't want you to make any money out of using that image, except for reselling the NFT itself. So you can't use it in any website or any commercial enterprise. So it really just a license, several types of licenses that inherently are built in into that world.

It's not yet public and explicit about the licenses. But I strongly believe that the market would adopt these licenses and you would see that this NFT gives you specific requirements. rights over the content, according with this big document, saying every part of what you receive and what you don't receive. And we're working internally on one of those features to make sure that you will be able to do that. But I'm pretty sure that if you just say in the description, what are the rights that would be respected by legal authorities if there was ever a dispute. Ownership as a motion, I think that's something I've started to get a little bit recently,

but I also always just felt that ownership usually implies like certain capabilities, right? As the owner of it of something, I can do something that other people cannot. This is why like a lot of the earlier NFT art, I was like, but I don't, I'm not, I don't fully get it, right? Like I don't, I can see the GIF even if I'm not the owner. But then I think what, what changed it for me was hash masks. Because hash masks came along and said, hey, as the owner, you can name this artwork. And to me, that was like a big, like, oh, wow, okay, this is like ownership implies certain capabilities that non-owners do not have. And it's like, then you're going to be part of this

living artwork where it's like, you know, it's this character that has this like history of names and stuff. And so what are new types of capabilities that you see coming where art can become more, NFTR can become even more interactive and interact with its owners than traditional art? We pioneered the space with introducing something that's called for. We hide an arbitrary piece from only the own would be to access that. People instantly found a ton of use cases. They started to sell an instruction how to obtain the physical item or Mark Cuban did this NFT that allowed the owner to have a telephone call with him.

That's just the pioneering of this and people are experimenting. I'm pretty sure that the big part of NFTs would be tied to this. A nice example of that can be using NFTs as a key to something. For example, a key to the essential end party that you cannot visit otherwise. Or just the subscription key to interact with some smart contract on Ethereum blockchain that you cannot interact until you own that key that can work almost as a subscription to something that does not have this transactional fees, some free service that you can access only if you have this key. So part of the NFTs as the experience is definitely on the horizon.

On the creative side of the question, we have the platforms like async art that allow you to create this dynamic NFTs built in. several layers where you can sell each layer separately and the owner of that layer has the capability to move that layer on the master canvas or to change the color of that layer on the master canvas and then you you own the part of this collective artwork that that can be changed with the owners tweaking it sideways that's only at the beginning How does some of these things work technically? So, for example, like the hidden data, like, how do you actually accomplish that?

If all the data on the chain is fully public, how do we make it so some data is only accessible by the owner? That's a very extremely important question. So right now, this data is serving by us. It's served by us. It's not on chain. It's not public. We make sure that the owner of NFT gives us a signature. confirming his wallet ownership and then we stream that data to the person.

So there is no a great solution to that yet. So the best probably idea is something that New Cypher tried to introduce or introduced. I'm not really sure is proxy re-incryption when you can re-incrept the data. I was talking with my co-founder just last night about this exact thing. Because we saw the Newseifer and keep merger and we're like, hey, wait, New Seifer. Like we could do that with NFT. It's like, that's really cool. Yeah.

So I'm big fan, my personal dream. I know at some point I have this. I know, let's try to explore. So I think the streaming of content is extremely powerful. So Spotify solved the piracy online because you can't really download the library arbitrary, it's streamed to you one song at a time. So you can't literally access it faster than you can hear it. The same can apply to the NFT metadata. So it can be streamed only to the owner or to the owner of any other key NFT and for this to work as this DRM basically for the

decentralized world data. I think that's really powerful because right now, with this all metadata being public, the economy is missing this access rights. You were completely right when you said that as an owner, you should be able to do something. And if you are able to access something only if you're an owner, that's the most basic building block out there. you know i've been actually looking quite deeply into some of the nfts standards um one of the things that was a little bit concerning to me right now is like the amount of centralization that's

happening within a lot of the nfti stuff so like like you guys even like the data hiding the data stuff like you know right now it's totally dependent on verbal system but you know like you mentioned you know ideally we want to move it to like new cipher and stuff like that but like even things as basic as like where the metadata of NFT is as stored. I had thought that more of the metadata would be being stored on chain or maybe at least the hash of a metadata

would be stored on chain. But once I looked into it, I'm like, oh, wow, the NFT is literally just pointing at a URL to fetch the data from. And it's like, this can be like centralized URLs and people are storing metadata on like AWS and things like that. And then what was really kind of funny to me

was yesterday that, There was a artist who, like, you know, sold all their artwork. And then after they did that, they replaced all of them with, like, they did a literal rug pool where they replaced all of the pictures with like pictures of like Persian rugs. And I thought that was like really funny. And it's like, how do we like promote better standards in the space? Like, you know, obviously you can solve this by using things like IPFS or file coin or sci or sci or whatever.

But like, it seems that this is not the standard. right now. And so how do we how do we like nudge the ecosystem towards that? Excellent question and ideas. So I think it's really important to understand that on-chain isn't a place for the metadata at all. So all the metadata for the NFTs cannot be fit into the own-chain data. Blockchain isn't really suitable. When you upload something on-chain on-chain on the Ethereum, it gets stored on 10,000. nodes at least. So you can't really upload a gigabyte worth of video to 10,000 nodes. That's why most of the NFTs and NFT providers and NFT server, they choose IPFS as a storage

option. IPFS is much better because it works on on hashes of the content. So when the picture is uploaded to IPFS and then the metadata is uploaded to IPFS, it gives you a hash of that metadata. And this token URI, the URL that you were referring to, it has the hash. So that's the ideal scenario for now, because if you have this important NFT out there, you can literally become another provider for the metadata to be served. Like obviously, file coin and other decentralized storage solutions like RV are the perfect use cases for the metadata. You can even have this royalty stream backed into the metadata that would pay for backed in the token that would pay for the metadata storage.

And how to promote that, it's really simple. You just need to tell people where the metadata is stored. You can look it over right now. If you go to either scan, you'll find your NFT contract and you'll click the read contract. And there would be this token URI method in the contract that would require you to paste a token idea there. And you would see where the metadata is stored. If you see a centralized IP,

a centralized URL, then that means that this metadata is completely free to change. While the file coin in IPFS allows you much of a better protection. So I think, yeah, I almost, feel that at some point we will see the small checkmark on the NFT that would say if that metadata is stored securely or not. Another technical challenge, you know, I actually try to mint some NFTs on rareable probably almost four or five months ago now.

And, you know, for context, we're actually trying to mint some NFTs for Epicenter with all the cover art from, you know, the past five, six years. of which you'll have one after this episode, I guess. But, you know, we were trying to mint like 400 NFTs, and the gas prices were just way too high. And the, I decided not to do the minting then. I was like, all right, let me wait a little bit until the gas prices go down.

And lo and behold, that never happened. So now they're like 5x of what they were when I originally tried doing it. So how do we solve this problem for, like, users, especially for artists who like have a lot of artwork that they're trying to sell and like until they know that there's a buyer having to pay thousands of dollars just to mint the NFTs is a bit quite high and so have you have you guys looked into things like gasless minting and things like that where like how I was the simple thing I was thinking of like why can't as an artist I just have a signature uh off chain signature and that the first buyer you know offload the gas cost onto the first buyer So what are some of the ways of doing this you've been thinking about? Yeah, that's the most important problem in the whole Ethereum space right now, the gas prices. Obviously, again, the gas prices come from this understanding of the security. You're paying for your stuff to be stored on that many computers that you have the best security guarantees out there.

And your idea about gasless minting is obviously on the table. several marketplaces already implemented that and we will implement that too in the future. But the ultimate solution would be, I think the market is moving towards a multi-chain world when NFTs would be able to freely move across different environments being layered ones and layer two solutions. You can start creating your NFT on something like medic and then if it gets really popular and expensive and you want to start using it as a collateral and some landing service on the Ethereum main net. You can move it across the bridge and now it will be living on Ethereum. The same things happens with flow. We have an enormous amount of requests about

trading NBA top shot cards at some secondary marketplaces. So that's the real future for the NFTs. Luckily, we have this blazing fast layer two. built on ZK roll-ups right now, such as StarCware or ZKSync, they are the real future for the scalability of the blockchain. You know, I think that point about like the gas fees are representative of the security you're getting from the network and because you're paying for this to be stored on all these computers and all that. And so like, you know, part of it is like,

do the NFTs really need the same amount of security as the MakerDAO, for example, you know, like maybe not? And so what do you think about like the dapper labs approach where like with the flow blockchain? And like, do you think that we're going to see like a specialized blockchain that's like really focused on NFTs? Or do you think that like NFTs are going to start to sort of exist on all these like layer twos? And like if the latter, then like how do we deal with all this? UX overhead of like dealing with NFTs on different chains. There's been all these like issues concerns these days, which I don't quite fully understand,

but people are like, oh, what if like you start double minting NFTs on different chains and does that like destroy the scarcity benefits and all that? So how do you think about some of these things? Extremely valuable thoughts. So I think you're totally right in by saying that NFTs do not need the same security guarantees as a $100 million worth of tokens stored in the Ethereum blockchain.

So we'll definitely see, and we are already seeing this NFT tailored blockchain flow. That's literally their thesis. One concern here is the securitization of the NFT market. What we see with the projects like NFTX that allow you to create a funds for NFT or or projects like upshot protocol that allow you to price NFTs and understand how much do they cost in order to create a better lending system or any other solution that requires interoperability between financial services and NFT providers. So I think to me, it feels like there will be two spaces, one of which will be blazing fast for this media NFTs, let's say,

where the new Facebook, the new social network built on NFT thesis would be. And the second where this financialized NFTs that are work as an asset class would be stored and operating. Probably that would be in some environment where defy market would go. And with moving across this environment, you're again extremely right about the double minting and stuff, it's much more hard to move an NFT across the bridge than any other ERC20 token because you need to move the contract and what if there was no contract like that in another network. So ultimately there will be always the origin network for the NFT and

an origin network for some contract of NFT. And so far it looks. like you will be only able to mint an NFT inside the specific collection only on its origin. So if the first contract was created on Ethereum network and then you decided to move this NFT over to flow, then you would be able to create NFTs only on the Ethereum network inside the specific collection that we are referring to. If this collection was created on Flow and you moved a couple of them to Ethereum, own, then you will be able to mint only on flow. That's where the market is moving.

So it's kind of a multi-chain, NST standard is what the market needs. Well, I believe some people in the Cosmosse ecosystem ecosystem actually were developing something like that. So we should sync up on that. So you mentioned the idea or maybe social network based on NFTs. And I would love if you could, you know, we've talked already.

about like some of these weird possibilities, you know, with like artworks where different people own different layers, they can change them. And in a way, we're talking about like new modes of interaction, new modes of like collaborating with each other, new sort of economic relationships that emerge from this. And, you know, then you mentioned sort of this idea, oh, maybe the next social network would be built on NFT. So I would love if you could just like, what are some of the craziest, most exciting, maybe far out ideas, like things that you think could happen or products people could build that, you know, you leverage some of these fundamental qualities of NFTs. Once the scalability problem is solved for good when we have this ability to reach current

internet level speed. And once, Jesse Walden, once said, that NFT is the file that you can't copy. So basically, you can, it makes the internet ownable. And when you find the picture on the social network, whose picture is that? There is a lot of copyright infringement out there right now. And NFTs would just be a better database for all of that, where you would understand who is the owner. You know, there is this case. We have a really famous creator that creates the 3D sculptures that a lot of people just copy it and put on their avatars because they're usually animal faces,

really stylish animal faces. And this item was minted on wearable and somebody bought it for $10,000 just to place on his variable. avatar by like properly without without copying the stuff he is the real owner of his social network avatar now of his social network picture i think that that can hint of how this all can be used you can use only those images that you have rights to isn't this beautiful at some point this account on the twitter board Elon mask that is like a parody account he sold the right to tweet the next tweet on his account for $5,000. So that's literally just making every piece of the internet ownable and tradable and liquid.

I know right now, if you want to buy some IP rights, you're literally just going somewhere in the room and writing a contract on a paper. it isn't traded like Wall Street, an efficient market and all that stuff. That NFT is the way to bring this liquid market ideas to the IP rights market. Yeah. And what's fascinating, this example, right, like Elon Musk selling the right to the next tweet for some amount. The kind of idea it brings up for me is also when you have different people work together, There's like different modes of doing that.

You know, there's like, for example, a stock corporation where you say like, oh, we are all kind of organized underneath this thing and, you know, we own shares in it. Or then you have like, you know, some of these, maybe a contract relationship, right, where you have like specific deliverables and you pay for that. And in a way, it feels like, oh, maybe with an NFT, you can have much more also like fine grain and granular markets and maybe new ways. of, you know, sort of splicing and selling products and investing in things as well. Yes. What if you would be able to buy the rights to place an advertisement on the account

of an uprising blogger star in a couple years from now? They would got some pre-order for the ad services. This is actually something that was done by Let's Talk Bitcoin. they did that many years ago where they had they had a token. It was maybe on counterparty or something, you know, like a long time ago. They sold this LTP ad token, if I remember it correctly. And so you could buy it for Bitcoin and then you could kind of go and redeem it for like an ad on less so Bitcoin. And then I think you also had, you know, in principle, this possibility of someone could buy some of the ads and maybe made a later point they raised the prices. And then of course, that was pretty.

NFTs, right? It didn't use NFTs, but I think, yeah, it's sort of an early idea in this direction. The NFT space is earlier. It's just shown up itself to the public. The public really met it well, and now there will be a massive wave of experimentation what is really possible with this NFTs. We will see a lot of projects emerge in just a half of the year, because right now they're all building somewhere behind the scenes they are building nfti projects and use cases so what do you see as the roadmap for variable has a marketplace do you intend it to focus like you know currently it seems to be mostly focused on the like digital art marketplace but do you also is idea for variable to like specialize and become like the platform for digital art or is it also to like go into these

other types of NFTs. Like, you know, eventually even the DeFi will have to issue NFTs, you know, insurance products or ENS names and stuff. Thank you for asking that. So I think one of the really great points in variable history was launching the liquidity mining program when we basically kickstarted the marketplace business by rewarding people with the rights to control the platform. that's a really powerful idea that creates a positive feedback loop.

People came for the token and state for the product. We are basically expanding in that direction. We are doing the progressive decentralization. We're launching the Dow with an actual budget that would be controlling the wearable protocol and moving towards a protocol business that would be a horizontal protocol with all the liquidity of the NFT captured in one.

place imagine you can think about it as NFT uniswap so all the businesses that would be using nfts and ft issue NFT issuers and ft insurance as you said that the nfti lending services they all need the single place to make sure that this nfti isn't exchangeable to understand the price of the NFT to understand that you can sell that NFT in the protocol without touching the variable website. This is the future, this is the future goals for variable. Now, right now we see this market diverge. Back then, half of the year ago, every, every issuance platform that allow you to issue crypto art had its own marketplace.

Right now, we see that it's really hard to grow a marketplace because there is this chicken an egg problem people go buyers go where the sellers are sellers go where the buyers are so this liquidity problem for the upcoming nfti projects is a really large pain on and we intend to solve this with a protocol that would allow them to to interact with the marketplaces just only on the protocol level protocol to protocol interaction imagine that you issued an nfti in the same transaction it was a automatically placed on the auction somewhere on wearable. And wearable is the largest front end that has now over the 500,000 eyes looking at it over the last month. It would be serving as a large distribution channel for all the stuff created and pushed to the protocol. Or you can go the other

way around and you have a mobile wallet. You have a mobile app that can serve as a storefront for the protocol. The same way like MetaMask is doing now, it's serving the ERC20 trading to all its clients while interacting with on-chain protocols. And this protocol's idea that basically emerged in Ethereum ecosystem is extremely powerful. There has never been as such a resilient API on the internet as current protocols living on Ethereum ecosystem. That's the higher vision for the variable next steps. And of course, for it to be community owned and governed by the, by the Tao and its members. We're going to see actually a more NFTIization of a lot of things in Defi. For example, like CDP positions, right? Like currently those are linked to your address, but like do you see that we're

going to like people are going to start building wrappers and stuff around these that turn all of these into NFTs? And like, do you see variable becoming a platform for D.D.? defy trading as well of NFTs? Yes, please. We so want this. So we already launched NFTs for urine insurance with the partnership with them.

And I think Hedgik explored some NFTs options. Actually, wrapping a CDP inside NFT was already done by the Project One Hub on the Ethereum, East London, Hackathon.

They haven't decided to move forward with it, but the idea is so right. A lot of projects that are out there in the Defyre world right now, they are so difficult to understand this YCRV BDC pool, right? When you have only this small place in a ticker for the token to explain the person what this actually is, you can wrap that into an NFT with an image, with a name, with a description, The same exact product would be much more understandable. It would lie in your wallet, in a collectible tab. It will be always there showing you what is your position status. That's super important for this space.

And I think the lowest hanging fruit is NFTs that has other EFC20 tokens inside it. So you can literally create this OTC market based on NFTs. if you have 100,000 tokens that aren't yet as liquid to be traded on Uniswap, you can wrap them and sell them in batch on some NFT marketplace. I think charged particles is the project that started doing something like that already. So is that actually a feature that's supported today? Like can you have NFT's own Ethereum or ERC20? So we as wearable support any ERC 721 and 1155 tokens to be traded.

And if you created the token that complies with the NFT standard, but has an extension that allow it to hold other tokens or have other capabilities, then it would be tradable and wearable. And there are several projects that are doing various stuff with extending NFT contracts to be able to hold. ERC20 tokens or other NFTs or CDPs or the rights to do something in a game, the ability to build something on the land that NFT represents and that kind of stuff. Can you tell us a bit about this ERC 1155? Because I think everyone's probably heard of ERC 721s, because that's like the NFT standard that's existed for three, four years now, Cryptocrity is. I think they helped, like, Dapper Labs helped create it and stuff. But this

1155 one is newer. So can tell us a bit about it? Yeah, let's start with ERC 721. So the way it works underneath is basically a contract that has this records that NFT number five belongs to the wallet X, X, X, Y, Z. And it has this token URI with metadata. So it's a token ID. It's a, it's a owner wallet and it's a metadata. That's ERC 721. What ERC 1155 brings is semi-fundability. It adds the number of tokens that this particular address holds to the equation. It can work like a gold, bronze and a silver and a game. You have five of gold and 10 of bronze and one of the silver. So it's basically an NFT token with a balance. We utilize that standard to create NFT with additions. The author can mint a hundred of the same NFTs and sell only 50 of them on one marketplace and 50 of them

on another marketplace, for example. That arguably makes NFTs 1155 NFTs on the same level as you're C20 NFTs because you can actually do everything with 1155 NFTs that you could do. with AirC20. So when I was buying this art, right, there was like different additions, right? So one, two, three. So an artist could say, oh, I make this artwork

and I, you know, either they sell it just to one person or they could say, oh, I'm creating three of it and five of it. And then those tokens, yeah, they are then fungible underneath. There's no, for example, like ordering of them. Yes, exactly right. no ordering of them. All of them are the same. That's actually funny that not all blockchains have this ability to create semi-fungible NFTs. For example, on the flow blockchain,

when you have a hundred of NFTs devoted to specific player, they are all different. They have ordering and they have unique ideas and numbers. And that resulted in the funny cases when the NFT number seven for the player number seven costs much more than the other than the same other NFTs with other ideas. You know, you talked before about uniswap and then the idea of variable being something like uniswap where you have this kind of, you know, way widely integrated token exchange standard. Can you talk a little bit about like what are the challenges around, you know, liquidity and trading and markets with NFTs, right? Because there's something very different with like, you know, Bitcoin and Ethereum and

you have this like huge supply and, you know, orderbook exchanges. I guess that kind of stuff doesn't work for NFTs, no. Yeah. So the biggest invention of the defy world and uniswap and other trading, uh, trading venues is, is the notion of AMM. market making. When you can supply some parts of the products, supply, supply tokens in the pool, this supply would be used as an extra liquidity for everybody who comes to trade. That single invention allowed exchanges to get rid of the order book. Unisop doesn't have an order book

underneath. All the previous exchanges, all the previous dexes, like either Delta or something like this, that were order booked based, basically were deemed obsolete on this event. Because this massive liquidity on Unuswap allow you to swap a million dollars with the minimum slippage right now. That was the biggest invention for the defile world for fungible tokens. And the same invention isn't really working for NFTs. NFTs are singular by nature. they all are different and you need to have an actual, an actual separate order book for each NFT out there. If this is a one-of-one NFT, you can only have bits for $5,000 and $100,000 for that NFT and that would be all of it. So we are dealing with a massive number of different order

books. And each order creation or deletion would cost you gas prices. And this is a challenging world. So I think these are the first challenges that we will encounter. And I believe this adds another level of functionalization when NFT starts to live on different layer ones and layer twos. And they start moving across these environments. So the markets aren't moving with them. the order book stay on the exchange where they were created. This all is this fractionalized world of a lot of people

want to buy and sell different NFTs. And you kind of have to glue this together to capture this liquidity, to make sure that if you bought an NFT, you can sell it, even with a cheaper price, but you can do it. That's the biggest challenge out there. And so, you know, we mentioned briefly earlier about the liquidity or the yield farming that you guys did with Rarable with the Rari token. So maybe we can talk a little bit about that. So, you know, what was the goal of the Rari token and how did you guys choose to distribute it and why did you choose it to do it that way?

The marketplace business is a really fun and rewarding business because it kind of works as self-perpetuating. Once you have clients, they bring more clients. And again, as I was saying, buyers go where the sellers are and sellers go where the buyers are. That's one of the oldest business model aggregation places out there. We had marketplaces from the ancient times. And all the marketplaces have this cold start problem. When initially you have none of the buyers and none of the buyers. the sellers and you need to grow the marketplace if the first buyers come they have no no no goods to

buy and when the first sellers come they have no no buyers to buy their goods so this is what makes the marketplace business extremely hard and we experienced the same thing at rareable when we started the initial growth was was very was very slow we were growing we were growing several times per months but it still felt very slow we started in november and over the next seven months of building the marketplace in may we had this huge spike that resulted in 30 000 dollars worth of nfts traded on the platform now we're doing a million dollar daily and and that was a huge spike in may and so over the seven months we've been able to acquire only that amount of liquidity So we decided to add some gas to that market and created this governance token that gives you rights to control the platform and started rewarding people directly for their activity on the marketplace.

So we are distributing 75,000 very tokens since the July 13, the day of the token launch, every week proportionally to the volume that buyers and sellers did. So 37 and 5,000 tokens go to all the buyers who made the volume over a week. And the same number go to all the sellers who made the volume over the week. So basically, that creates this extra level of competition that if there is a low week with a low trading volume, you kind of want to be in that week because you would receive the higher portion of the weekly distribution. and this has been so, so great. This worked so great for the platform. Last week, we distributed $2.5 million worth of reward to all the buyers and sellers.

This would really add some fuel to the marketplace, and this is the liquidity mining program that we are talking about. I don't think any other marketplace is in depth 2.0 world ever done something like this. How do you prevent wash trading just to earn Rory tokens? Long story short, it's hard

and that's probably one of the successes of the platform. So we analyze that activity inside the team internally with a special attitude. We're looking at a lot of parameters like where did you fund's came from, who have you interacted

on the platform, who have you interacted before the platform, who are your buyers and sellers, how many of them are verified? All that stuff is extremely important. And we have this multi-layer system when we can withhold some reward, and then the person can claim that it was withhold wrongfully, and they can give us the proof of the legitimacy. That's been a complicated system that we developed over fighting this. And so far, that works. it's all what I can say. It's not perfect. There is some amount of people trying to game the system,

but we're constantly fighting with them. And as we move towards the Dow, we will slowly decrease this liquidity mining volume program towards more of a fundamental stuff like financing development of the marketplace, like financing the marketing activities such as ambassador program. So, right now we have this very staking proposal being drafted that would give you rights to control the Dow Treasury to fund some proposals that can improve the system. This is the real proof civil resistance system of controlling of the reward. So once you have this Dow that like, you know, is the very governance, how do you see the relationship between? How do you see the relationship between the Dow and the development team going forward.

So, you know, I see right now that in the Diva space, or there seems to be like two models that are emerging. And I call them the Uni model versus the sushi model. And the uni model is like this like cathedral model while sushi is like the bizarre. Because like with uni, it's like, yes, here's this like governance token. But like, I mean, I have no idea what Uniswap V3 is. and governance holders have like no say in what Unisov V3 is basically. Meanwhile, sushi is like, you know, they're hiring people through like governance

or like making protocol decisions through governance. Like everything is going through governance. And so where do you see like a rare token governance falling in this spectrum? So I think we have this problem of gradual decentralization right now explored in the wild because a lot of projects started as a centralized company. and they have centralized leadership and the core team and this structure is extremely efficient if you want to have fast decisions. I can gather my team and ship a new future in just one day, literally. Whereas when we're dealing with the doll and this governance proposal that is working

on increasing the value inside the system, it's almost, like private versus public sectors in the country where government is working sometimes slow, but it's really resilient and it's really representative, representative in terms of which votes are counted, while there is a private market that is extremely efficient and fast and make decisions, and they are balancing each other out. So I believe something like that would really work in a long run, although I might be wrong about it. And of course, we'd love to build the DAO that can manage all the protocol and hires and all of it. Just not sure that this dream is really possible to achieve out there.

How does this DAO rollout look like? And, you know, whether some of the things this DAO is going to be, you know, capable of doing. the DAO is only starting and right now we have like five proposals of improving and so far they are all about the DAO structure one of the proposal is a meta proposal of how proposals should be created there is a new proposal on the new liquidity mining program tweaks so these are the first steps in this decentralized activity what I would really love to see is for the development and marketing groups to emerge, for some teams to perform an actual job to promote the protocol and to make the protocol better and to be funded by the core

governance team that would be rewarded as well. So that's what we're building now, this staking process. How it would work is you need to lock your tokens for a specific period of time and the longer you lock them, the more voting power you've got. And since you locked your tokens, that creates a trust in the system. We can trust the person that has his skin in the game. We're absolutely sure that this person would do whatever they can to protect their stake, basically, in the system. That voting power would be then used to vote on proposals on the treasury distribution. to fund activities that perform an actual work for the protocol by developing it or marketing.

That's the base model for the dollar. For example, we can fund another Isshan's protocol that is thinking about connecting to wearable protocol for trading and to be a valuable member inside the wearable protocol, since they are ones who use the protocol for their own product. that's the dream model for us. Yeah, I mean, so this is all super exciting. And, you know, I mentioned earlier in the episode, we were trying to do the epicenter NFTs sale.

And maybe this episode was a little bit self-serving because I, you know, just wanted to learn more about variable and NFTs so, you know, we can execute on this sale. And so do you have any advice? Like, you know, part of it was, you know, I mentioned that part of it was, you know, we did like the gas costs were too high for us to mint earlier. But no, that seems like a foregoing problem at this point.

But part of it was we also just wanted to do something interesting. You know, we wanted to like, I don't know why. I had this vision in my head. Like, let's decentralize a podcast. I don't even know what that means, but I want to do it. You know, I had some ideas of like, okay, maybe. So I actually built a integration for a snapshot. So the snapshot page that like all the defy protocols used for governance.

I actually built an integration for that where you can like vote based off of NFT. ownership rather than fungible token ownership. What is something cool that you think we could do with like epicenter with these like NFTs or like having you know something cool pricing model or some cool usage like based off of what you've seen so far happening? I've seen several great model happening so far. As you speak about tokenizing some some epicenter episodes, I instantly had this thought about making making a game. over it when people when founders can can be assembled in teams that can play football are like so rare it does with NFTS or that game can play businesses such as well versus

unisvof I don't know if you had both of them on the on the epicenter so I think not the real advice but but the best what I can say is to be innovative in terms of the use cases people are are quite okay on it with understanding how NFTs work now and NFTs possibilities are literally endless. You can you can stack them one over other as they say with disassembling NFTs from from football. We have this project that's called either cards that are building this gamification framework on top of the NFTs so that for example if you've collected this six NFTs you would receive the seventh master NFT that represents that you've got a collection or again selling them on a bonding curve,

as you suggested. It's another great idea to understand how dynamic demand is and what can be different pricing. I think Blow did a nice job launching his audio NFTs. There was an auction that the top one winner received some of the perks, the top one bidder received some of the perks, and then the next five bidders received another set of results, and the next five bidders received something else. So that concentrated people across just one sale and gave them this ability to not only win the one auction,

but to be a participant as well. And I think like every, every participant eventually got something like this gratitude, NFTs. All that mechanics are yet to be explored and you can come up with something really cool. You can create some regular issues of NFTs, some play with royalty streams giving to founders that you're tokenized. There is a lot to do. I think you just want to hang out in some. NFT communities and hear the amazing thoughts. I enjoy this clubhouse rooms with people talking about NFTs daily, nightly,

proposing some crazy stuff to do. I don't know. It's been exciting space and exciting times, guys. My mind's been just racing all week, just like, oh, there's always the cool ideas that you could do with NFTs. And so I'm really excited to see how it evolves. Yeah, and the same thing for me. Thanks so much, Alex.

It's really a huge pleasure to have you on. And for me, it's also been, like, really quite mind-blowing and awesome to, like, dive into NFTs these last, like, two days. So, super excited to see where Rarebo is going. And I'm sure there's going to be many more NFTI episodes in the future. So thanks so much for coming on. Thank you for inviting me. It's been a real pleasure to talk to you guys.

The questions are awesome. Cool. Thank you. Thank you for joining us on this week's episode. We release new episodes every week. You can find and subscribe to the show on iTunes, Spotify, YouTube, SoundCloud, or wherever you listen to podcasts. And if you have a Google Home or Alexa device, you can tell it to listen to the latest episode of the Epicenter podcast. Go to epicenter.tv slash subscribe for a full list of places where you can watch and listen.

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