Invest Like the Best with Patrick O'Shaughnessy - Devin Finzer - An Everything Store for Digital Assets - [Founder’s Field Guide, EP. 53]

Starting point is 00:00:00 This week's episode of Founders Field Guide is sponsored by Canalyst. Canalyst is the leading destination for public company data and analysis. Founded by a former byside analyst who encountered friction sourcing, building, and updating models. Canalyst is now used by over 400 institutions, including the largest money managers globally, and by a number of guests on the show. With detailed company-specific models and data on virtually every public company, canalyst's clients are able to ramp up faster, update models instantly, and incorporate the highest-quality fundamental data into any workflow. If you're a professional equity investor and haven't talked to Canalyst recently, you should give them a shout. Learn more and try Canalyst for yourself at canalyst.com slash Patrick. That's C-A-N-A-L-Y-S-T dot com slash Patrick.

Starting point is 00:00:43 This week's episode of Founders Field Guide is sponsored by 8 Sleep. Eight Sleep's new Pod Pro cover is the easiest and fastest way to sleep at your perfect temperature. It pairs dynamic cooling and heating with biometric tracking to offer the most advanced solution on the market. simply add the Pod Pro cover to your current mattress and start sleeping as cool as 55 degrees or as hot as 110 degrees. It also splits your bed in half so your partner can choose a totally different temperature. I was so impressed after using 8Sleep that I became an investor. To embrace the future of sleep and get $150 off your new mattress, go to 8Sleep.com slash Patrick or use the code Patrick. Hello and welcome everyone. I'm Patrick O'Shaughnessy and this is Founders Field Guide.

Starting point is 00:01:27 Founders Field Guide is a series of conversations with founders, CEOs, and operators building great businesses. I believe we are all builders in our own way, and this series is dedicated to stories and lessons from builders of all types. Founders Field Guide is part of the Colossus family of podcasts, and you can access all of our podcasts, including edited transcripts, show notes, and resources to keep learning at join colossus.com. Patrick O'Shaughnessy is the CEO of O'Shaughnessy Asset Management, all opinions expressed by Patrick. and podcast guests are solely their own opinions and do not reflect the opinion of O'Shaunsi Asset Management. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions.

Starting point is 00:02:12 Clients of O'Shaunosie Asset Management may maintain positions and the securities discussed in this podcast. My guest today is Devin Finzer, co-founder and CEO of OpenC, the world's largest NFT marketplace. In a journey that started like many other founders in the space, Devin went deep down the crypto rabbit hole in 2017. and became particularly fascinated with the potential behind digital assets. During our conversation, we touch on the origin story of OpenC, how Devin differentiates between the spectrum of NFTs in the market

Starting point is 00:02:41 and what he sees as the opportunity in the future for the industry. We also talk about the various risks within a blockchain, from security dynamics to market speculation. I hope you enjoy this great conversation with Devin Finser. So, Devin, with stories like OpenC's, which now appears like an overnight success, I always like to go back and pick apart the early days first because I know everything's not always easy. And maybe the beginning point for our conversation can just be when you first conceived of this concept of OpenC and kind of describe what that early conception was. And then we can pick up the story there and go into all aspects of what's interesting today.

Starting point is 00:03:20 Sure. Yeah. So the way that we came across the idea for OpenC was first started with crypto. We were just, my co-founder and I were just really excited about what was going on in crypto. there was all of this philosophizing about the future of the internet, future of finance, these protocols and autonomous organizations. And we were just really interested in that, just reading all the white papers, kind of the classic falling down in the crypto rabbit hole situation.

Starting point is 00:03:46 Cryptokitties hit while we were working on this other idea, which was around decentralized network for sharing internet bandwidth. It was very much in its infancy. But CryptoKitties, when it happened, which was the first NFT, this digital cat breeding game where you could buy and sell these cats and trade them on the blockchain. It was just really interesting to see a blockchain-based application oriented towards a consumer audience. So for a lot of people, it's the first time they were ever installing MetaMask, which is a browser-based Chrome extension that allows you to have a wallet

Starting point is 00:04:23 inside of your browser. And it was really the first time that people were getting their hands on what people now refer to as Web3. That was just a software-based Chrome extension. That was just a really cool. We sort of joined the communities. And one of the exciting things about CryptoKitties was the fact that you could permissionlessly build other applications on top of CryptoKitties. So, for example, someone built something called Kitty Race, which allowed you to take your CryptoKitties, which again, you kind of owned on the blockchain and race them inside of this other application. Or like, there was something called Kitty Hats where you could accessorize Crypto Kitties. And actually, I was thinking about creating CryptoKittie battling, just because

Starting point is 00:04:58 I thought, you know, wouldn't be not be good. That'll, yeah. From there, I was like, oh, well, maybe there's actually like a bigger idea here where it's not building another experience on top of Crypto Kitties, but rather building another experience marketplace for CryptoKitties, but then a marketplace that could span horizontally across other NFTs that come online. This sort of idea of interoperability would apply to something that maybe was actually, like, a much more long-term play.

Starting point is 00:05:27 That was where this idea of building. a general NFT marketplace came from. The nice thing that happened after that was other NFTs came online slowly but surely. So there was the central land, land, which was a virtual world where you could buy land as NFTs. There were a few little trading card games. There's new things coming out. It seems like this trend is early, but legitimate.

Starting point is 00:05:52 And some of these things need marketplaces. So OpenCorp became the marketplace for these smaller projects. I love in marketplaces talking about sequencing and sort of how you made it work and got to a dominant position. So I'm going to come back to that in just a second. I think it's great for us to level set just with the audience, the scope of this activity today. So can you just give us sort of a general sense of like what is listed on OpenC, like how many assets or NFTs, whatever you want to call them, are on the marketplace today? What's typical volume, whether a quarter than US dollars or an ETH, just give us a sense for the scope in September, late September, 2021. I don't know the exact numbers of listings, but there's 12 million items you can explore on OpenC.

Starting point is 00:06:35 If you go and browse our website, you can dig around, you can find NAFT, although that includes things that are not listed on OpenC as well. Those are things that you can just kind of go and find. In terms of volume, last month, we did $3.4 billion in transaction volume on the marketplace. September looks to be around that same number. I think the crazy thing for us is that we've gone from about a million dollars per month in transaction volume. If you rewind back to August of 2020 to now the billion, so it's been really excited to see the NFT space grow and the diversity of projects grow. So there's just a lot of really cool stuff that people are building.

Starting point is 00:07:13 There's people who are so excited about this. I'm here in New York. You get to just meet lots of people who are building new NFT games, new NFT art projects. It's really flourishing. One of the observations from a prior podcast guest, I think it was Jeremy Kai who said this, which is that like each new generation has its own everything store. And it strikes me as interesting that OpenC has the potential to be a certain kind of everything store. That number of listings and that volume certainly starts to tell that story. How do you think about the job that OpenC fills today in this ecosystem and might fulfill in the future? Is that everything store concept right as it pertains to digital assets? How do you think about the scope of your ambition? That's a good way of framing it. We're a one-stop shop for all of your NFT and portal into this new universe.

Starting point is 00:08:06 We've always built our platform very horizontally, meaning that we didn't know what was going to be the most successful use cases for this new type of digital item. And we built generic tool. We'll set allow any project to come online and have a peer-to-peer marketplace from the get-go, and that providing liquidity for these projects turned out to be a really important function. And then on the consumer side, we have a long way to go here. But we do want to be the entry point for people who are learning about how to buy and how to sell these things.

Starting point is 00:08:37 We just launched our mobile application, which allows us to have a permanent home on people's phone, where they can go and see what's trending, see what's interesting, and participate in this. What we're really excited about with regards to the everything store idea is just more and more, more things being tokenized as NFTs. So everything from game items, event tickets, digital art, even physical items. We think that more and more things are going to benefit from this native digital ownership. We hope to serve as many as we can. We also acknowledge that there's going to be lots of different portals to visualize and view and explore and trade these things. But we want to be the one that solidifies, built a trusted relationship with consumers. So obviously this business model,

Starting point is 00:09:22 is elegant and well understood that of the marketplace, the two-sided marketplace, buyers and sellers, things like liquidity that matter a lot. There's things like a clear network effect that starts to build. I always love the joke that eBay's second employee's job was literally like opening checks that were being mailed in. So, you know, a marketplace that works as a business and wins tends to be an incredible business model. But getting going is hard. So you are where you are, but I'm very interested in that million-dollar transaction. volume stage of the business. And sort of what you saw, what were you watching back then? There's countless other competitors. I can't even name them all. There's a lot of places that want to be the

Starting point is 00:10:00 marketplace for NFTs and you seem to have sort of one pole position. So why do you think that was the case? How much of that was deliberate strategy on your part? And what was that strategy early on? Yeah. Well, I do think a big component of it was just being the first and earliest and then continuing to invest in the features that users wanted and sticking around, right? So back in 2017, when we started late 2017, it was not a very competitive environment, right? There were a few competitors. And there wasn't some magical strategic move that we made to best our competitors. Really, it was just people kind of left because there wasn't much traction.

Starting point is 00:10:39 And so it was more really just being excited enough about the fundamental idea to wait to kind of work on it for three or four years. Honestly, if I was attributed to one thing of just being early and sticking around, as not sexy as that might sound, I do think an important strategic decision for us was being horizontal from day one as opposed to trying to like really nail a specific vertical

Starting point is 00:11:05 and the land and expand model. And you can like pattern matching and say, oh, that's sort of what Amazon did for books. We really strongly believe it's like every industry is really different. It's very dangerous, I think, to just like take the playbook of one trend and then apply it to another one. Because Amazon did this, we should do this. You need to really think about these things from first principles. There's a reason that Amazon started with books.

Starting point is 00:11:29 They're very different business than the business of period of your marketplace for digital items. And I think the better comparison for us is eBay was very early and just sort of was the place where you could do this and just continue to invest in the customer experience. And of course, Amazon eBay, right? That story played out differently over time. But, yeah, I think just like really staying horizontal and not being overly dogmatic about what use cases would work. If you look at the recent growth, it's been very surprising projects. It's these sort of cryptocultural phenomenon, the crypto-punks,

Starting point is 00:12:06 four-dapia clubs of the world, as opposed to we would have bet on games if we had to bet on something. And games are certainly, they have a thing. ton of potential and some of them are doing well. But if we had built a marketplace just for games, then we would have missed out on all the opportunity that we've seen in like collectibles and art. So I think that was probably just the most important piece of the strategy. Can you say a little bit about technically what's going on here with NFTs and the different kinds of them? Because I remain myself a little confused about how much the thing itself,

Starting point is 00:12:38 the pixelated art in the case of cryptopunks or something, is literally itself stored on a decentralized blockchain versus some sort of pointer to an image that's stored not on a blockchain. And I think that difference is just maybe it's two in the weeds, but to me it's fascinating. And I'd love you to explain kind of literally what are NFTs and are there different classes of them? The way to think about an NFT is it's really just the record of ownership of some unique identifier. Let's take Cryptopunk number one, two, three, four, five, for example, the smart contract on the blockchain has this record that says Devin is the owner of this particular identifier, but the metadata, the name of that thing, the description of it, the image associated with it,

Starting point is 00:13:27 could, as your point, be stored in a variety of different ways. So on one extreme, you have storing that data on chain, so meaning that literally in the blockchain, You have the name and code the image in some capacity. Usually it just is not possible, but various ways of trying to do that. And you have everything on chain, on chain metadata. The other way, which was what CryptoKitties did, for example, is you just say, okay, and there's some service out there, some server that if you hit a URL on it, it's going to return the metadata.

Starting point is 00:14:01 And that's where an application that wants to show you your CryptoKitties, they have to kind of go there and grab that data and that data can change over time. You can kind of see that the on-chain way is a lot more permanent, it's a lot more immutable, and there's sort of these guarantees around it, and the off-chain way does not have a lot of those guarantees. And there's somewhere in the middle where you say, like, okay, we're not going to put it on-chain just because it's expensive. That's really the constraint of putting this stuff on chain.

Starting point is 00:14:26 But we're going to put it on this decentralized file system, one of which is IPFS, and it's also R-Weave, and it'll be off the blockchain, but at least it has these other characteristics where it's permanent and immutable. So there's a whole spectrum. And I think one interesting thing that's happened is applications like OpenC, for example, we go and pull that data from whatever source. We'll pull it from the chain. We'll pull it from IPFS or we'll pull it from centralized data sources.

Starting point is 00:14:53 And we'll sort of be this giant cache. And we're very much incentivized to sort of keep those metadata sources accountable, right? Like if someone just kind of went and changed a thing, while they could do that, it would be sort of against the interest of the people who hold it. But there are certainly people whose arguments resonate with me that think like only NFTs that have on-chain metadata are valuable because you need everything to be permanent and immutable versus the more flexible approach where some of them have off-chain metadata. Certainly is my from the cheapseats bias that a crypto punk that's purely on-chain is way more

Starting point is 00:15:29 interesting than something that relies on less secure, less imutable, less provably scarce sources. So that's really interesting. It begs the question, like, how much of your volume, if you know, transaction volume or auction volume on the platform, is in one category versus the other. It seems like having to be on change, a huge constraint because it's just limiting, like, how big the file can be? And a lot of stuff just wouldn't fit. So how do you see that today? Like, what's the distribution today? And how do you think that plays out in the future? What I'd say is, like, it's really important for collectibles and art where there's not a specific environment where you're supposed to be using this thing.

Starting point is 00:16:08 There is the Cryptopunk's website, but it's sort of like this autonomous thing where you can take your Cryptopunk kind of wherever you want with you. And for that reason, it's really important that the metadata sort of lives on the blockchain. But on the other hand, a game that's using, let's take like Zed Run, for example. So Zed Run is a horse racing game. When you buy a horse, you're not just buying it as like an art piece or a collectible. you're buying it because you want to like race it against someone else's horse in a game.

Starting point is 00:16:37 There's so much that relies on the game running, dead run being an actual game that you can play, that it almost doesn't really matter where the metadata is stored because if the game shuts down, then your horse is not really that useful. For art and collectibles and these sorts of things, having it be this sort of self-contained thing makes a lot of sense. But when you're using it for more utility-based applications like games,

Starting point is 00:17:03 it almost doesn't matter as much. Maybe I could ask a few questions about some categories of NFTs, just to hear your fun take or impression of what's interesting about them. And I'm borrowing here from a taxonomy system that I saw. I think it was Magdalena Kala that put it up on Twitter or somewhere. And the first is this what I'll call profile pictures category, whether that's board apes or crypto punks. What's exciting or interesting to you about this category

Starting point is 00:17:29 because it seems to have been kind of the early dominant one? What's interesting about that, is if you zoom out, I think you can look at crypto as this cultural movement. I would say that when you fall down the crypto rabbit hole, there's certainly some people can straddle to areas of interest. Like maybe they are in traditional tech, but they're also in crypto too. But I would say a large percentage of people just end up devoting their entire lives to crypto, quitting their jobs, either starting a crypto company, dilly-douling around.

Starting point is 00:18:03 and messing around with Daos, all these things. You could maybe say that about some other industries where those people making this mass exodus into VR AI, but I don't think that there's like the extreme cultural movement that you see in crypto. And I think these specific types of entities, the Borde A Biog Club Cryptopunk of the World, are really playing into that cultural movement

Starting point is 00:18:25 and providing people with a way to show off and appreciate each other in this environment. and it is a weird one. People are spending lots of money for these things. And I don't think it's like a fully positive cultural movement. That's what's interesting to me is that you talk to people today and they're devoting their entire lives to crypto and all of their friends are in crypto.

Starting point is 00:18:47 And that community is slowly but steadily growing. And you sort of have this really interesting ecosystem that people refer to as Web 3. And NFTs are providing a social component to that. You have something that you can show off on your, theory of address where previously was really just the defy applications that you interact with, which wasn't really a social experience. So that's kind of what I think is interesting about it. So it's almost like the first step in crypto and NFTs that's bridging into the category of

Starting point is 00:19:16 digital identity. I think so, yeah. Your profile is no longer your Twitter account. It's now your wallet. The second one that's, I think, fascinating maybe to mention briefly, because I know there's been a lot of activity in it, is this idea of generative art and the project art blocks specifically. Can you talk about that project and what that means and why you think it's met with such incredible amount of interest and crazy prices for these NFTs? So the idea of generative art is basically art pieces that instead of just being created by a human are created from data source or like some generative algorithm. You can have larger numbers of them where each one is unique and they have these interesting

Starting point is 00:19:56 properties associated with them versus each one having to be created individually by human. And this isn't like a crypto-specific phenomenon. It's just sort of a way of making art. Art blocks is a generative art project. And I think what's interesting is that there are also projects in crypto where taking the existing model for making art where someone creates a piece of art and then sells it. And it looks beautiful.

Starting point is 00:20:20 It's sort of this original thing. But I think what's cool is with generative art, they're sort of fitting the medium of crypto a lot better. So with crypto art, you want to have a good number of people holding a type of piece as opposed to just a single piece. And so this generative idea adds a little bit of a game mechanic to it, makes it so that when you buy something, you don't know necessarily what it's going to look like. And that's sort of this fun dynamic. The way I would look at it is it's just art but tailored to the medium of blockchain and NFTs that I think has really resonated with people. that's kind of why I think it's doing pretty well as a project.

Starting point is 00:21:00 I would encourage people to check out Fidenza's specifically, cool color flow pattern looking things that, like you said, are generated by algorithm. And they're kind of mesmerizing. It's crazy what prices they fetch. So I'm certainly not commenting on the value or the price. But just as a project, I do think everything you just said is sort of encapsulated by that project. It's worth checking out. Beyond these profile pictures and generative art, what other categories do you most have? your eye on it. You mentioned games. I'm curious what you've learned or seen thus far, because that

Starting point is 00:21:31 would have been my guess, too, that games is a use case that we know is popular globally. There's tons of people that play games. Tons of games have objects in them that are valuable from a cosmetic or utility standpoint. So it seems like an obvious market to dominate NFTs. Why do you think that hasn't yet been the case? And do you think it will become the case? I think gaming has been successful in some regards as it relates to NFTs and crypto. So Axi Infinity, I think is a great example of a game company that has had a very successful business building a blockchain game and a community around it. There's questions around the longevity of their game and whether or not people will keep on playing it without the economic incentives. But I think that with games, it's just sort of this

Starting point is 00:22:12 cyclical phenomenon where you have the extreme early adopters, the Axi infinities of the world, some of those early companies and the Moca brands, I think is a good one that we're like extremely early into blockchain, testing things out, seeing what work. And I think the thing to remember is it takes a while to build a good game. And so often the feedback cycle is a little bit prolonged. You have, I think what you're seeing right now is a lot of really exciting early game companies jumping in the space, starting to develop. And I think we'll see the fruits of that labor sometime in the next three to six months. I think the fit with games, the thing I'm excited about with games, zooming out philosophically is if you think about

Starting point is 00:22:56 games today, for the most part, there's command and control economy where there's no imports, there's no exports, you have to build all of the economic infrastructure yourself, entrepreneurship in the game, but often shut down by the people who control the economy. And so the question is, well, what if you kind of flip the script and you said, instead of a command and control economy, we're going to create a free market from the beginning. And we're going to allow people to buy and sell open marketplaces. We're going to allow people to leverage defy to have more entrepreneurial activities in the game. And it might be a very different looking thing than a traditional game.

Starting point is 00:23:32 It might look more like a virtual world or social experience with real economic activity happening in it. But I do think that that's the blockchain bring, is this sort of free market, the interoperability. So if you look at projects like Lute, which is this very basic project where they just issued NFTs that are these game item type things. and people can build games on top of them, that's really powerful, in my opinion. And it might be really early, but having these items that can cross through and move through different ecosystems is sort of where I see this all becoming really interesting.

Starting point is 00:24:08 I think the reason it hasn't happened in a huge way yet is just the development cycle is a little bit longer and takes a couple iterations for people to get it right. So if we could come back, all these interesting categories will continue to proliferate in unexpected ways. I'd love to now come back kind of to OpenC, the business and the platform, and just hear a bit more about how it mechanically works. So I have to remember that like not everyone out there is most people probably haven't bought an NFT. They probably don't have a self-custody wallet. So if I wanted to buy something on OpenC, what are the literal steps that I would have to have done before showing up to buy something? And then once I buy it, where does it go?

Starting point is 00:24:44 Just give us like a story of a transaction as it would happen on OpenC. The way that you interact with OpenC is you first get your own crypto wallet. So the most popular one these days is called Metamask. And this is your wallet where you can self-custody both your crypto, so your Ethereum and then as well as your NFTs. That's the first step. To buy an NFT on OpenC, you will need to first buy crypto. We do have a widget that works in some locales to purchase crypto directly on OpenC, but there is still this sort of process whereby the first step is you get Ethereum and then

Starting point is 00:25:20 you buy an NFT in Ethereum and you're going to be submitting a transaction to the blockchain and buying this thing directly from the person who is selling it facilitated by a smart contract. There's a lot of technical details that go into that. What's most exciting is that once you bought that NFT, I think one source of confusion is a lot of people think it's like in their OpenC account or something like that or in OpenC or somehow tied to OpenC and really the reality is that

Starting point is 00:25:50 it lives inside of your wallet and OpenC is more of just like a portal to view the stuff inside of your wallet and list them for sale but we're really just providing this lent into your wallet we can't just destroy your NFTs or we can't really do anything to them

Starting point is 00:26:06 without your permission. The other exciting thing about that is because they're in your wallet you can go and like use them in some other context So you could buy a piece of art, and then you can go to some other website and connect your wallet and then put that art on display in some gallery or something like that. You could buy a piece of clothing for the game, Decentraland, which is a sort of second life-type style virtual world game. And then you can go into DeCentraland and connect your wallet, and then you can put that clothing on. I think the magic of NFTs is really that you own them in your own wallet,

Starting point is 00:26:39 and then you can use them in a variety of different contexts. Just literally mechanically, I'm interested in how the transfer works. So let's say you've got a board ape you want to sell me. I've got Eith. I want to pay you to get it. How does that function? Like, is there some sort of escrow account that you wait till both are in escrow and then you cross the assets to the two people in the transaction?

Starting point is 00:26:59 Or if not, like, what is actually happening? How does that work between the wallets? When you list something for sale, you basically give permission to this smart contract to transfer it to a buyer. in a certain set of circumstances. In those certain set of circumstances are essentially when the other person supplies the requisite amount of payment. It stays in your wallet, and when someone purchases it, they submit a transaction to the

Starting point is 00:27:29 blockchain. And in sort of a single atomic transaction entirely succeeds or entirely fails, both the currency is transferred to the seller and the item is transferred to the buyer. And so what's interesting about that is if we were to build this in sort of more of a traditional fashion, we might say, okay, you know, you want a list a thing for sale, give it to us, and then we'll transfer it to the buyer whenever they want it. That is not the case of open seat. It never sort of leaves the hands of the seller until the purchase is actually made.

Starting point is 00:28:01 That's completely fascinating. It highlights your point earlier about maybe why this is also interesting with wallets as digital identity. So you get something and now you can show up and plug that asset into all sorts of different applications elsewhere. How much time do you and your team spend thinking about that part of it? Or are you really just focused on, I guess this is kind of like a partnerships question. Are you partnered with digital gallery company or something because it's kind of a key part of the ecosystem? Or is your opinion, let's stay heads down and just have the best marketplace

Starting point is 00:28:31 and let others deal with other uses of the assets once they're in someone's wallet? We've been traditionally like a very small company during this sort of hyper growth phase. So generally speaking, we have to be very rigorous about like, what we do and what we don't do, but we are acquiring more resources on the team. We're actively hiring. So that's always the constraint for us is how much can we do with the team that we have? That being said, I think the biggest area where we've been pioneering and really trying to push the space forward regarding sort of this idea of interoperability, the ability to bring an NFT from one application to another is around the metadata standard,

Starting point is 00:29:05 which we talked a little bit about earlier. You can basically richly describe what this NFT is. So you can give it a name, description, image. You can also give it properties which basically say, like, this NFT is sort of rare or like has gold chain or something like that. And this metadata standard allows other applications to go and like surface these things in interesting ways. We also provide an API that allows anyone to easily pull NFT data.

Starting point is 00:29:31 Through these sorts of things, we are fostering more and more interoperability between applications. It is really important for us. we were so early that the metadata standard, which is entirely open, and OpenC sort of is the place where you come to learn about that and understand it and implement it. So we have this exciting opportunity to really push it forward as the space evolves, and it's something that we want to continue investing in overtime. And then just generally speaking, we are an extremely partnership heavy company. We love working with every single application in the space from the smaller artists to the game. companies that are just starting up to, we've worked with Mike Tyson, Rob Brinkowski.

Starting point is 00:30:14 We've worked with the bigger ones as well, Golden State Warriors, athletes, musicians, you name it. And so we both want to kind of help the people who are coming up from the grassroots and then also be there for these bigger companies and brands that are trying to learn about the space as well. For the supply side of all this, the artists, the creators, the people coming up with the NFTs, the homepage or near the homepage of OpenC has to be the world's most valuable real estate, and it's obviously limited. Like, I go to the website, I see a certain handful of things and not others. How do you think about your role, like, governing what gets on to that homepage? It's like the ultimate shelving space on the internet right now. And I'm sure

Starting point is 00:30:54 it's something that would be hard to appreciate all the nuance that goes into your thinking around it. But at a high level, how do you think about that real estate and being judicious about what gets on there and why? We have a responsibility to our community to create really a trusted open platform where we're surfacing content that's high quality and that also provides sort of a level playing field for smaller artists who are up and coming, but then also bigger projects that have more resources and want to promote. We've talked about how to sort of make this less centralized. Today it is curated by the OpenC team, but we are in the early phases of exploring how can we make this more of a community-inspired thing.

Starting point is 00:31:36 There's a lot of different exciting opportunities there, you know, working with some of the DAOs, we're working with some of the organizations that aren't heavily involved in NFTs. But for the time being, we try to provide opportunities for smaller and bigger players on our homepage. And then there's also some of our content on our homepage

Starting point is 00:31:54 that is algorithmically taken from the trending collections that are rising popularity. So it's sort of an early exploration. We have the basics up right now, but we'll be refining and iterating over time. How do you think about the major business choices that you have? I guess the main one here is take rate. What percent of transactions goes to the OpenC business? How much did you deliberate that and how much do you expect it to be static or based on the kind of transaction,

Starting point is 00:32:23 since that's kind of at the core of your business model? Yeah, currently it's two and a half percent. The way that it works today is projects can specify a take rate on top. of our 2.5% fee that goes directly to them. OpenC always takes 2.5%. Let's say I'm a new game developer and I want to have people trade my NFTs. Well, wouldn't it be great if I could actually benefit from my NFTs being traded? So that's a piece of functionality that we added early on in this sort of intuitive way to align incentives between projects and the platform. We're certainly open to adjusting the fee over time. We think 2.5% is pretty fair relative to other

Starting point is 00:33:02 NFTE marketplaces that exist. Some of the art platforms, I think, are in the 10% range. If you look at consumer internet companies tend to be a lot higher. We think for the service we provide, helping people discover, find, explore, buy and and sell, the 2.5% is reasonable. I believe it's, like, the lowest in space in the moment. I'm interested in why it's so low relative to, like you said, consumer internet. Like, I think eBay is like 15% or was 20%.

Starting point is 00:33:28 If you look at take rates generally, there's like some kind of central. clustering around 20% as a very common take rate for platforms like this. I suppose part of this is the smart contract relationship you described earlier in the lack of physical goods or inventory or anything that allows this to be lower. Is there anything else that's interesting that explains that pretty big gap between your take rate and more traditional take rates that the internet's seen? Crypto is maybe more sensitive to platform fees than other industries. Way back when there was this talk of decentralized marketplaces disintermediating the ubers and Airbnbs and none of that has played out. But the philosophy there was, are these companies really providing a service

Starting point is 00:34:13 should this be done by more of a decentralized network of things? And then the other thing is, this is all digital. We're not dealing with physical items that are moving hands. So if you look at like Stock X are sort of providing this service of custodying the items and verifying. It is an interesting thing to think about what the sensitivity is on that. But we just wanted to be fair to the crypto community. And we do get some people who think that shouldn't be any fees. That's their mentality. But then we also get people who think that the two and a half percent fee is either fair or maybe too low. How do you think about the world of, I'll call a layer one blockchains and their relationship to NFTs going forward? It seems like Ethereum has been the single dominant

Starting point is 00:34:57 blockchain where all of this stuff is happening. And there's reasons for that. There's also reasons for concern, especially like transaction costs or gas fees being so high on the Ethereum network. How do you think about OpenC's kind of relationship to the different blockchains? And what do you think will happen in the future? Like, will there be more NFTs on other blockchains? Do you care? What's your view on all that? We definitely envision a multi-blockchain future. And it's already happening. There's several blockchain that have gotten significant traction around and appease, Flos, Salana, Tezos. We also have already made our foray into multiple blockchain.

Starting point is 00:35:34 We currently support Polygon, which is a layer two on top of Ethereum, but basically think about it as a separate chain altogether. I do think that there is a very strong network effect going on Ethereum today, which is that the number of people who have installed metamask or wallets and understand how to use Ethereum, it's a significant community now and the interoperability between applications. This idea that I touched on of being able to have one wallet and move your stuff between apps is really powerful. Ethereum is really the furthest along there.

Starting point is 00:36:11 Additionally, on Ethereum, you have the entire defy infrastructure world where you can collateralize or take loans out on different tokens and things like this. So there's this whole really rich ecosystem happening on Ethereum that I think is going be challenging for other chains to fully replicate. But of course, Ethereum does have its challenges and starting fresh, supporting different programming languages, rethinking kind of some of the fundamentals is worthwhile to think about. We've built OpenC in a way that we can add additional blockchains as they make sense to support. And you'll be seeing some interesting stuff from us there pretty soon. Can you teach us a little bit about your perspective on wallets and the role that

Starting point is 00:36:54 they might play both as businesses and as products in this ecosystem going forward. You've mentioned Metamask several times, and I know there are lots of others. Just describe why the wallet as a piece of all of this is so interesting and what you think it might unlock in the future. Well, I think the first really cool thing to say about wallets is that it's like a bring-your-own wallet situation. I guess we sort of take this for granted. It is pretty cool that you can use any wallet you want on any Web3 application.

Starting point is 00:37:22 If you don't like Metamask, then don't use Metamask. So you have this freedom of choice that you really did not have in sort of a Web 2 world, where if you were using Facebook and you could sign in with Facebook, but you're sort of wedded to the Facebook platform, I guess email is the closest thing, sort of limited in what you can do. It's in the realm of the centralized identity. You can bring any wallet provider you want. So I think that's the first thing that's really cool is that you sort of have this unbuddling

Starting point is 00:37:50 where the wallet isn't attached, or the identity isn't attached to a specific application. And then I think the role of wallets, I guess if you just look at what role they're playing today, while they're providing a lot of utility around helping people understand what's going on. So if you look at Metamask, you can see your tokens. You can see your NFTs to some extent in Metamask. Then you can see what's going on with your transactions. They abstract away and educate people around some of the technical complexity of using Web3 applications. And I think that will just continue to be the case over time.

Starting point is 00:38:24 I think Metamask will kind of continue to improve, continue to support other blockchains and be sort of this portal. If you look at what Metamask has done to monetize or to provide even additional value, one thing that they've done is they provide a way to swap tokens inside of Metamask. So wallets can start to add new utility on top of their user bases that goes beyond the basics of being able to see your transactions and monetize that. In the case of Metamask, I believe they take a fee on those swaps. And I can't remember exactly their numbers, but they were transparent on the blockchain.

Starting point is 00:38:58 They had a really strong business just by adding that. And I think you'll see interesting things related to NFTs, you know, integrations where you can immediately list on OpenC from a wallet, which I believe a couple of wallets have explored. So, yeah, I think being this portal is an interesting role to that way. What do you think about what I'll call like the dark side of all of this, typically with completely new standards like this or new markets like this. It's not regulated.

Starting point is 00:39:25 There's a lot of Wild West type activity famously early in the Bitcoin ecosystem. There was Mount Gox. There was use of Bitcoin for illicit reasons like Soap Road, et cetera. What do you think the equivalents are in NFT land that people should be aware of, the sort of dark side of all this, which feels sort of inevitable? One simple dark side is just that we're dealing with today is just whenever there's an opportunity to make money or to profit, then scammers come and figure out how they can take advantage of it. So on OpenC, we have this issue where it's an open platform, it's a horizontal

Starting point is 00:39:58 platform, so anyone can come and mint an MFT, which means that you could screenshot a crypto bunk and mint it and try to pass it off. It's a real cool. So that's a problem that we deal with today, and we have infrastructure in place to try to limit that behavior, but sort of this cat and mouse game where scammers get more and more sophisticated, and then you sort of build the systems, and then you just sort of have to have that as a marketplace that wants to have a permanent role in the space. People are just figuring these things out.

Starting point is 00:40:27 So there's all sorts of opportunities for scammers to come and fish people, hack into the wall, and we're seeing that every day today, right, where people are getting taken advantage of because it's such a new space and they just don't understand how everything works. So I think with that reading frontier, there's those opportunities, and it's sort of the role of platforms like ours to do our best, we've been against them. I have to ask the inevitable question that people will just get mad if I don't ask even though I think it's maybe kind of a silly question and an obvious answer. But how do you think

Starting point is 00:40:55 just about prices? The whole story of crypto has been massive boom and bust cycles. And my personal view, so it's not to cop out on it, is that long term, this stuff is super interesting and that there's plenty of bubble-like behavior that everyone likes to use that bubble word. Do you think much about that at all? Do you think that OpenC, the platform, the business you personally as its leader, needs to like factor that into how you build the product or anything like this. What, if any, responsibility or thinking do you have around some crazy prices and huge booms in these assets? There's sort of maybe two lenses.

Starting point is 00:41:26 One is just as a business, crypto and blockchain-based applications tend to be very cyclical in nature where you have this giant waves of excitement and prices moving up. And then you see a cool down afterwards. And just as a business, you have to prepare from that from like a, cash flow cultural perspective within the company. And so we definitely keep that in mind and try to look to other companies that have gone through that for advice and wisdom around how to deal with just a very simple industry. If we zoom further out into OpenC's role in Web3 writ large, if we think of Web3 as like a big map or something, there's lots of different key functions

Starting point is 00:42:08 or things being built, whether that's decentralized storage like IPFS that you mentioned, whether that's exchanges, whether that's marketplaces like OpenC, what do you think the big, chunky, interesting sections of Web3 are that are under development right now? Yeah, well, I think Dow's is definitely one to these autonomous organization where people can commission work and many of them are social organizations as well. So I think this idea that there's lots of opportunities to participate, contribute, and profit from Web3 and providing the tools for people to do that and the jobs of the future in some way. So I think DAOs are an incredibly vital piece of that.

Starting point is 00:42:50 I think NFTs are sort of a piece of that and that they're providing an outlet for creators to really monetize their work as well. I think the idea, the identity player is an interesting one. I do think that it's challenging start an identity company fresh. I think identity tends to sort of be bundled with the most successful applications or, You could argue that MetaMask is an interesting position as an identity layer or ENS is an interesting position. So EnS is sort of a name system for Web3, whereby you can.

Starting point is 00:43:22 It's like a website address or something, but for a person. Exactly, right. You can own Definsor.euf, and instead of sending to the hexadecimal address, you can send ether, or send an FD's to that given readable name. So those sort of like infrastructural components are really exciting. And then, of course, the other big obvious chunk is just the infrastructure layer. The layer ones, layer one blockchains, layer two's around Ethereum, the ability to move between those layer ones and layer twos is a big chunk.

Starting point is 00:43:52 And then, of course, you have over the last four years the evolution of defy as sort of this underlying financial infrastructure that has really helped the NFT ecosystem flourish by giving people the right tools to, whether it's buy and sell with stable coins or take loans out or whatnot. It's a pretty rich intertwined ecosystem. Taking your leadership and business hat off, what project have you just most enjoyed watching and learning from in the world of NFTs? Probably one of my favorites is a project called Cryptovoxels. So Cryptovoxels is a virtual world that started, I think, early 2018.

Starting point is 00:44:31 And what was cool about it was it was it was just one person at the time. they showed up to OpenC, we didn't even know who they were, but they started selling a couple of parcels of virtual land. And when you own these parcels, you could build things inside of them. So if I buy a parcel, like build some museum and sort of like Minecraft where you like build things. The land sold, I don't know, at the time, I'd have to do some math to figure out how much is probably like 20 or 30 bucks per parcel or something like that because eats was really low and 0.1 eats or something like that, right? when he eats was quite well. And what happened over time is he just kept on building the website, he kept on building the tools where you could build better and better experiences. He kept on selling land. And then fast forward to today, land, we've had bundles of land sell for hundreds of

Starting point is 00:45:18 thousands of dollars. And it's still a pretty small community, but it's this really rich world. And it's super interoperable and complementary to all the other things that are going on. So for example, another feature that CryptoVoxels added was the ability to bring in your NFTs inside of the world. So you can create like a Cryptopunks Museum inside of CryptoVoxels. So a lot of people are doing that. Not long ago, I went on like a digital art tour. You have your avatar, you have wearables and things like this. Everyone's going around looking at digital art and stuff.

Starting point is 00:45:50 And so it's just this really cool community. And then the reason I open and see specifically as excited about is we powered their entire economy. So all of the buying and selling happens on OpenC, and the developers didn't have to go and create all that infrastructure. They can just use us for both the initial sales and the secondary sales, and they get to monetize that. Every time a crypto-opsils piece of land sells, they take a cut. So it's really just this cool open ecosystem that has the early community that

Starting point is 00:46:19 participated in it. The landholders have really benefited from being early in it. And so I think that's one of those examples of projects that really came from grassroots and has stuck with it over time. And I really do think that sometime in the next while we'll see a renaissance of these virtual world type things happening that are very complimentary to what's going on with NFC more broadly. If we take our future lens and put it on and think 10, five years into the future or something like that, stretch your imagination the most. How do you think OpenC will be most different than it is today? So it's this incredibly pure,

Starting point is 00:46:54 elegant, incredibly successful, high liquidity marketplace today. You mentioned APIs and like other people building stuff because of open-season infrastructure. Where do you think this goes? What's the kind of most fun, dreamy version of the future of what this might become as a platform? What's most exciting is just sort of the expansion of NFTs into new areas. So right now, the use cases are collectibles and art and a little bit of gaming. But I think ultimately this is something that could impact every single industry, it's just sort of a matter of when it makes sense. So physical items, there's been a few projects where physical items are kind of turned into NFTs and bought and sold as NFTs, but then redeemable for the actual physical item, which is really cool. So you can imagine

Starting point is 00:47:39 like a whole chunk of OpenC that's devoted to buying and selling physical items. I don't know if we'll get into this area, but I do think generally real estate could benefit from being tokenized as an NFT and maybe there are some interesting later stage after. So that invent tickets, all of these things, I think, will start to emerge over time. As a platform, I think we really do want to try to support these verticals as best we can and provide the interface and trading and buying and selling experience that's tailored towards those specific use cases. So doing a better job supporting games, doing a better job supporting art, I think you'll see sort of a more customized and tailored experience.

Starting point is 00:48:19 And then also, maybe this is hopefully shorter run than five years, but also just making this completely accessible to a regular user. Someone can go from zero to owning an NFT in like minutes. I think that's super important. Lastly, I would say just to that end, expanding this to something that billions of people in the world are using and getting value from, I actually do think that that's a real possibility here. I don't think that this is like a niche market. I think it's something that will go more and more and more mainstream and just have a bigger and bigger impact on the world. That order of magnitude shift in terms of the size of the market, I think, will, will happen over that time period. What a cool exploration of a cornerstone business and piece of

Starting point is 00:48:59 the Web3 ecosystem. I've so enjoyed learning about OpenC and everything that might be coming. I asked the same traditional closing question of everyone I have on the show. What is the kindest thing that anyone's ever done for you? My parents were just incredibly kind to me growing up. And specifically, they were always 100% supportive of whatever I wanted to do, the sort of unconditional love that really provides a strong foundation for feeling like you have the freedom to explore your curiosity. And I just don't think that that's always the case with parents. Maybe they have this unstated bias towards certain professions

Starting point is 00:49:40 or certain ways living your life. Obviously, they want me to be a good person. There's certain things they wouldn't want me to, do. They just expressed that support of whatever my interests were early on and continued to support it over time. I think that was really kind and a really great way to grow up. That's the one that comes in mind. First of all, awesome. Answer, hard to imagine topping that, but it also probably relates intimately to what you've built. This is a very different new thing to have been doing, probably starting in your late teenage years without that kind of support. I'm sure maybe the story would

Starting point is 00:50:14 have been a little different or at least a little bit harder. So I think that's a fantastic place to end. Thanks, Devin, so much for your time today. Thank you so much. If you enjoy this episode, check out join colossus.com. There you'll find every episode of this podcast complete with transcripts, show notes, and resources to keep learning. You can also sign up for our newsletter, Colossus Weekly, where we condense episodes to the big ideas, quotations, and more, as well as share the best content we find on the internet every week.

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