On The Brink with Castle Island - Dave Balter and Jim Myers (Flipside Crypto) on NFTs and on-chain data (EP.332)

Episode Date: July 7, 2022

Dave Balter and Jim Myers, the founders of Flipside Crypto join the show. In this episode we discuss: The early insights that led to the launch of Flipside Crypto Current market conditions and how Dave compares that to the dot com era The proliferation of NFTs and how the SaaS market will change as a result of this technology How Flipside prioritizes new blockchains ShroomDK, Flipside's latest product release   To learn more visit www.flipsidecrypto.xyz

Today in the podcast, I sat down with Dave Balter and Jim Myers, the co-founders of Flipside Crypto, a portfolio company of ours that's at the forefront of data and analytics for public blockchains. In this episode, we discussed the state of the crypto markets, where Flipside is seeing the most developer activity in the industry, their outlook for NFTs and the use cases that they see on the horizon for this technology. And we also discussed Flipside's new product, ShroomDK, and the new features that they're enabling on their platforms starting this week. I think you'll enjoy this one. so without further ado, here's my conversation with Dave Balter and Jim Myers. Matt Walsh and Nick Carter are partners at Castle Island Ventures.

All of these expressed by them or the guests on this podcast are solely their opinions and do not reflect the opinions of Castle Island Ventures. You should not treat any opinion expressed by anyone on this podcast as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of their personal opinion. This podcast is for informational purposes only. Brought down by bad mortgage investments, Lehman, which has 25,000 employees will be liquidated.

The federal government loans, American International Group, AIG, $85 billion. This is a different kind of market, and the Fed is asleep. The federal government is stepping it to stabilize Fannie Mae and Freddie Mac, the two mortgage giants that have been threatened by the housing crisis. The Bank of England has pumped 75 billion pounds more to Britain's ailing economy with a new round of concentrated easy. You print a couple trillion dollars, and all of a sudden, people start to worry.

So out of this worry, we have something called a Bitcoin. Bitcoin. Welcome to On the Brink. I'm joined by Dave Balter and Jim Meyer. the founders of Flipside. Dave, welcome back to the pod. Jim, this is your first on the Brink. So congratulations and welcome to the pod. Thank you, Matt. Happy to be here. It's an exciting time. You guys are releasing a product. I believe it'll be, this podcast will be released a couple days after the product is released. So a lot to talk about there. But why don't we just set the

table with what is Flipside for those who may have not heard Dave's illustrious two prior on the Brink episodes? Am I the first three-peat? We've had a couple of repeats. You were very early though, I think we were doing a rickety single microphone. I don't know if you remember that. Like at the very beginning, it was you and I in a conference room in Boston doing it on the brink episode. I don't even think you listened to it. I think we recorded it on a piece of string and two cans. It was very exciting the time. It was early. It wasn't even crypto then. We just were talking about what if crypto could be. Simpler times. Simpler times. Those were the easy days, the days of lore. If it's okay, I'll give the quick overview on flip side.

keep moving. Yeah, so Flipside provides blockchain ecosystem growth and analytics. We work with customers like Flow and NIR and Solana, Samosis, Thorchain, etc. And we have a process where we release curated data for our partners to the market, so any analysts can use that data for anything. And then we structure fee-based challenges to incentivize those analysts to go build insights and analytics and near real time based on whatever their community needs. We work with grants and delegations from our partners, and we put assets into the hands of community members who want that ecosystem to grow. So, Jim, we've heard the origin story of Flipside from Dave in the past, but maybe from your perspective, what was it that really sparked the insight around

wanting to build in the blockchain space and start Flipside? Backing up from before Flipside, I had been interested in Ethereum for a while before that, and especially was always kind of tinkering on new ideas with our other co-founder, Eric. Eric, is a data scientist, him working on the data side, mainly on me on the engineering. When we originally started talking about Flipside, which you were a big influence in, early helping us get going, started talking to him about like, hey, like, everything that is happening in crypto, this was in 2017, was all about what's going on on telegram and what's going on on Twitter.

And there was very little on-chain insight at that time. We said, okay, well, what if there's actual data moving between all these nodes? what if we could extract that and make sense of it? A lot of some of the initial infrastructure we built was around how do we break through kind of that noise that we're seeing in Telegram and Twitter at the time and figure out what's actually happening. And that is really what fueled kind of the beginning of the business. And a lot of that tech is still on use today for how we extract data from these networks.

One of the most remarkable things about that is I remember being with you guys in conference room or getting breakfast back in like 2017. And I would say most of the things that you have going on at flips up. right now just didn't even exist back then. And so we were talking about use cases for blockchains and talking about blockchains that some don't even exist now, but largely these ecosystems have been developed over the past 48 months or so, I'd say. So what's it like to build in this environment where a year from now, your biggest customer

might not even exist yet today? I'll answer to this. I mean, look, crypto is an industry of evolution at all times. You have to be able to imagine the future while recognizing that your past. maybe changing on a moment's notice. Terra was a large customer of ours and in three days transformed. And this is how this industry works. There are many customers that are talking to us now that weren't here three months ago,

four months ago. This has ruined every industry for me because I might get moved so fast and there's so many smart people trying to build things. I don't know how I go back to anything ever again. I also think it's being open to a lot of ideas that seem foreign at first. it seemed odd. Like, if you look back at previous errors of innovation and you look at going from pencil and paper to, like, computer, a lot of the digital equivalence where when you first had a computer, you had something looked like a notepad that you'd be typing on a computer. And then, like,

these variations evolved over time. We lead up to today with social and mobile and whatnot. But there's going to be a lot of things that we see in this space that look really weird at first. And so being able to, like, identify where interesting things are happening. And then, place bets on them and be willing to dive in and have an open mind about them, which I think we're going to get into a in a minute. SaaS, NFT stuff. So Jim, you kind of hit on an important insight there. I think if you rewind the clock a few years when this industry is really just Bitcoin,

I guess you always just follow the developers. And so a few years ago, it was just developers that were interested in building out non-state money. And the thesis has really changed for a lot of folks. You still have that part of the market for sure. but you have a broader use case set, I would say. And so what are sort of the common traits amongst your customer set in terms of what they're trying to build and what they're using blockchains for? There's a few different camps, I think, of users.

And so we have analysts, which is a really big part of our community base today. And so that's taking any specific questions, a protocol might have or the community might have and trying to solve that on demand with our data. And then our data itself starts from what we call core. So baseline data transactions, blocks, events, but then all the way up to like very curated stuff that even stretches like across chains. So like imagine like NFT sales across multiple blockchains or loans across multiple blockchains looking at data holistically. So that's one group. And then like another group, smaller group today, but this is why I think an SDK or API that provides access to data is really important is enabling other types of builders. So people that want to build products that require this data.

Because ironically, this data is all freely available, but it's incredibly hard to access for the average developer analyst, data scientists out there. There's so much pre-work you have to do before you can actually get to the building that you want to do. Yeah, in a lot of ways I think about that as similar to a lot of folks will say, hey, SEC filings are all kind of public, but there's a lot of value in just aggregating that insight. And same thing holds true for blockchains. I mean, you can dig down deep and find something, but it's really the curation and the aggregation where a lot of the insight is driven. Exactly.

So Dave, touching on just like general market conditions here, so we're recording this in a week where we're coming off of Celsius. We're coming a few weeks ago, Tara, which you referenced, blew up. We have this fraud unfolding with three arrows capital. And just happening in the backdrop of a global macro situation with raising rates and potentially heading into her session. So calls to mind sort of the dot-com era and you were building through that. And so we'd love to just understand how you're contextualizing what's happening in this market

and maybe some comparisons to previous entrepreneurial paths you've been on. Well, I was having a good day until you laid out all those things. And now things seem terrible to me. What's happening out there? I did come through the dot-com era. I remember we had a term sheet per company in early 2000. I won't name the BC, but a big term sheet. I remember standing in the room in the Hilton and New York City.

as the VC called and said, the market was melting. It was on the day the market melted. I didn't really understand, but he said, I know we signed that, but we're not doing that. And I'm like,

oh, you're changing the deal? No, no, no, we're not doing that or anything. I was like, oh my God,

so I've seen it up close. That company went away. But crypto is about death and rebirth. It's been that way in this industry all along. People are trying innovation at the edge of innovation itself. And Forest Burns, down and seed ligs grow. And it's not going to be a pleasant era in the depth of winter.

But I think amazing outcomes will come from this. And I've told our team, I'm thrilled to build right now. This is a time when the real builders show up and start doing things. And it's not the loss of everybody else, but those things didn't work. And I hope that we find a way to build through to what will be an enlightened era of crypto. So I think that's well said. you're doing it from the position of having just raised a big round of capital to fuel this growth. And so how do you see this market unfolding over the next couple of years here in terms of

will we see consolidation in your space? Will we see some weaker players maybe jump into some of these better capitalized competitors? Massive amounts of M&A will happen. Usually it'll be like two drowning frogs on a log, so to speak, of M&A. But there'll be other good companies get bought up because they're in trouble. That'll create some good consolidation. It's weird in Web 3. Sometimes companies go out of business is more like the withering.

It's not like we're shutting our doors. It just sort of like withers away into some other frittered thing that you're like, oh, that happened. And so there'll be a lot. We probably don't even hear about to just sort of kind of wind out into nothingness. Lots of consolidation, lots of companies that just don't survive.

And that's good for an industry that maybe got a little, ahead of itself over the last year too. Maybe just transitioning here. So talking a little bit about what you guys are building. And I think the way that the industry really pulls itself out of these bear markets is through new narratives. And those narratives are formed around new use cases for blockchain technology.

So I want to talk a little bit about what you guys are releasing today. So maybe just tee that up and talk about the new product and what you guys are building. Let me set the stage first. And then Jimmy is going to have the glory of talking about this amazing thing that we released by the time this comes out. The stage is Flipside began offering bounties to analysts as drops. And those drops sell out in seconds. So analysts are being paid to develop insights and learning, grow in tokens. They sell it in seconds. And so six weeks ago, eight weeks ago, we released something called God Mode, which was an NFT that let anyone into any bounty. If you hold this

NFT, you're able to get into a bounty that's closed, that's sold out. And so think of it like an NFT that gives you unlimited earnings, which is amazing for anybody who wants to make money in crypto. You could be a full-time data scientist by holding one of these NFTs and never hold a real job. That's amazing. That taught us a lot about NFTs. And as we headed into the next phase of what we were releasing as a business, it provided a foundation for what is coming or has it just released from flipside. What we're about to, or we have just released, is an SDK that is wrapped in an NFT that we call ShroomDK. And so the best way to think about ShroomDK is really as like a toolkit for builders, for data scientists, for advanced

analysts, for developers, that enables them to really build without having to manage notes. or complex data pipelines or huge databases. So it's a straight SQL interface to dozens of cross-chain data sets that Flipside has access to right now. The NFT portion of it, you can mint this NFT, and it gives you an API key that you can use to access the SDK. And there are lots of benefits to using an NFT around this. We have this concept of a second NFT that's coming with it called a sport that you can use to upgrade the main NFT. So you'll be able to add on additional product functionality like there's going to basically be a very large free tier with this. And so the base NFT will let you query lots of

data. But if you build a service or a product and you want more access, you could imagine a sport that gives you more queries per day or maybe more compute per day. And we have a whole bunch of other host of fun features and stuff that we plan to also roll out and give access to with that. It's a fascinating thing to try to conceptualize what this would look like to someone that might not be familiar with blockchains. It's almost the equivalent of like imagine a world where TCPIP was an organization and they wanted to promote more development on the platform. So they hired Flipside to help create these quests for developers to build things on top of. I mean, that's one way that I think about it. But how do you guys describe this to folks that might not be familiar with blockchains just around these freelance analysts and how the market actually works?

You're asking about flipside, not the NFT for the moment. Right. The way I would conceptualize it, there is no Google Analytics or Mix panel in crypto. And there are thousands, hundreds of thousands of data scientists and analysts who want to understand and certainly want to earn tokens. And so we give them the tools to go build in near real time Google Analytics every day. We did 30,000 boundaries alone last month. Every day they're building whatever is needed for anyone to get insight in this chain. So they give it that way, like on-demand analysts.

Someone today called it like a real-time up-to-the-minute hackathon, which is true. There are bounties dropping all the time and people get to hack and build solutions that are needed. And so I guess to double-click into that a little bit more on the NFT side, why is an NFT the right technology, the right tool for the job to be pushing forward this product? What was it about the non-fungible standard that got you guys excited? I think NFTs have been to date really dominated as this collectible that is largely around the art, which I think is fascinating in its own right. But there's this use case around using it for gated product experiences that I think is

really under explored. And if you take a step back from ShrindbK and just think about software licenses, they're typically a sunk cost when you purchase one. If you don't fully utilize it, it goes to waste. And that's not a great experience for the end user. and I'd also argue it's bad for the developer of the product, since they don't actually have large loyal users using the product. But if you could represent a license as an NFT,

then you can turn what is a sum cost into something of value for an organization or an individual. And if you as the user, if you haven't extracted all the value from the product that you're using, you can end up and sell that license if it's an NFT. Or if you're on the other side and you haven't used the product yet, you don't want to commit to it. You could also buy one of these NFTs at a discount from somebody else.

To me, it's this turning what is typically a cost into something of value for the end user. It'd be fascinating to imagine Adobe using this in the context of their software. You could imagine a future where we're buying stub subscriptions of Photoshop and things like that. Yeah, you're done with your Photoshop subscription. What do you do now? You let it run out and you hope it doesn't auto renew. In this case, you could say, well, there's three months. left and actually somebody out there has a two-month project, you could list this and someone

could buy that subscription. And remember, Adobe benefits from that too. They're moving a subscription into the hands of the user that wants to use it and probably receiving a share of fees if they do that because of the way NFTs work. So it benefits everybody. It's SaaS seems antiquated and its philosophy of how it works for the user and the organization today. This is probably the next step in the SaaS journey. It's crazy because SaaS is such a huge market. We all think of this as this just enormous part of the economy, but it's actually probably a much bigger market if you factor in all of the sunk costs here. And think about what could be remonitized on the back of this to benefit not only the user, but the original publisher. Yeah, I mean, you just said it. What do I

need to say? That was perfect. Tell all the SaaS companies, what are they doing? They should be using NFTs to wrap their products. It would be amazing. Plus, you get all the other benefits, community building and private access to stuff. It turns your casual user into somebody who has a belief system. I mean, that's amazing. How do you guys think about just riding that wave from where we are right now with NFTs and what your customers are asking for to get towards this future where everyone's going to be using them every day and no one's going to even know that there's a blockchain on the back end? What does that look like from the perspective of being entrepreneurs riding that wave. I was actually thinking about this back when we started developing

God mode, which is a previous NFT that we launched, as Dave mentioned. And I was thinking about how if I had gone back to 2017, this idea of like going to a website and like connecting my wallet and just interacting would have seemed so foreign. And now it's almost, I know it's not common on a mass scale, but like at least in the crypto space, that is a very common experience. And I think NFTs, OpenC, and others have like paved the way for a lot of that to become more commonplace. So when we go and we launch empties like this, people have experience doing this. I think we still have a long way to go where it's all occurring behind the scenes.

And some of that will be about better wallet UI, better wallet native integration. But I think it's in large precedent to what has been developed so far. Jim, from a technologist's perspective here, how do you think about just the competition that's happening at the blockchain level and what you guys will support and what you won't support. So EVM chains versus new L-Wans, how do you guys prioritize? We have this debate a lot internally. I would say that we want to support where the builders are, so where the momentum is around where people care about building protocols, where they deploy.

And the reality is today, there's a lot of interesting chains and technology out there, but there's a lot that is being deployed within the EVM world. I don't have a particular favorite or winner, but our goal is, is we, think about from the technology standpoint, our goal is to integrate as much EVM data as possible. And so we build our tech to basically be applied to lots of different EVM chains. And so last week, we rolled out, or a couple weeks ago, we rolled out six new blockchains, all EVM chains, and we'll be rolling out a lot more. And that is all because of a lot of the tech that our team has built.

Beyond that, there's also a lot of other interesting chains. We have a lot of other really important partners in the space, Solana and Flow and NIR. And we continue to support them. I think they're going to play a really big part in the ecosystem as well. And with the product release, this SDK, does this sit across a variety of blockchains? How do you guys imagine this unfolding over time from a product perspective? Right now, when we have a product, we call Velocity, which is a UI-based query interface. You can write SQL, query, all of our cross-chain datasets.

Any data that we expose in there is going to be queriable via our SDK. So that's like the baseline. So every user of this SDK is going to have immediate programmatic access to all this data to embed natively wherever they want. The second thing that will come later is we have lots of interesting tools that aren't full-fledged products in their own right, but are interesting features. I'll give you an example. We've helped in a couple of prominent NFT launches, debodding or de-duping addresses that are on allowless. So we helped Moonbirds and Tiger Bobbs most recently, basically just removing lots of fraud. That piece of tech, a lot of other NFT projects have come and asked us about.

We even talked a bit to Rabbit Hole about how they could use some of that. That is something that could be a spore, which is a feature that you could buy and attach and access via the SDK API. And so we have lots of little examples like that that we have built out. And this provides a home to access those and to build with. It's fascinating. I mean, if you think about this from the perspective of a blockchain project that wants to know more about their users, it's almost the equivalent of being Walmart and saying, bring me a list of people that have shopped at Target twice in the last month that also live within five blocks of here. And these are the types of folks that I want to target. This public blockchain information, although it's pseudonymous, is extraordinarily powerful when you compare it to the Web 2.0 model of silo data. They used to have to buy credit card data from third parties or they used to, that's what they're doing today. They're buying credit card data or some other transaction data. It's now all freely available.

It totally takes out this idea of having to like identify third party sources to understand who your buyer is. It's all public who's buying what and where, not PII, not it's gym or it's Matt, but the behavior set that you're after is all publicly available. And now you just have to tap into it. How do you think this unfold in terms of getting in touch with some of these people once you've targeted them or getting in touch with some of these wallets? I know there's a lot of messaging standards that are being built out right now. But how do you imagine direct marketing outreach will unfold? There are services that target users like EPNS that are able to message users. So think of it less like the old model is, I'm going to target these people.

I'm going to message them via email or text or whatever it is that you do. and I'm going to buy third party data to do that. Now you're going to have the ability to go understand behavior profiles by wallet. Need to buy third party. It's all public. And yes, there are tools that are starting to be built like EPNS that lets you message to those. That will get better and better.

How that transforms is pretty important. How does it not become spam? There was an error where people were air dropping just insanely to every address. That's spam. Like, how do you not have messaging? that, I think that's an art that someone needs to figure out. Yeah, it's interesting because you had to figure that out in the early days of the internet. Cash Cash was built for internet spam on email systems.

And I think we're going to see similar communications protocols emerging on top of these standards. We developed something called Lunatic score back for Terra. And it was basically a rating system on chain of a variety of different things that you've done that you've participated in. And one of the things we've talked a lot about is this concept of soulbound NFT, which is a very popular concept today. And the idea we had with it was if you could take what you've done on chain and basically raise your hand and say, hey, this is me. I've done X, Y, and Z activity. And I would like to receive messaging for X. Then protocols can come on the other side and basically

use that data, use those people that have signed up via this tollbound NFT to actually receive messages and information. That's fascinating. What's the profile of someone who's a power user on the platform right now? Is it someone that has a day job as a data analyst and is moonlighting and making extra money? Do you have people that are full-time just analysts on the platform? Both. You know, people make it north of 100,000 a year on the platform. So you have folks who are side hustling for extra money, but also you see more of that for learning. I am a data scientist at big company A, and I'm trying to figure out Web 3, and this is like a great way for me to onboard and learn. And then there are definitely people who are making enough to live by becoming a

part of these ecosystems. That's the benefit ultimately to the blockchain. These are not people who are like, thanks for the fast grab of cash. But like, wow, I get to be part of this whole ecosystem and to help everybody else understand what's happening that benefits everybody. It's going to be really interesting when that goes beyond just technical jobs to be done for these protocols. And you have folks that are spending their days doing non-technical things and actually making money? Well, imagine for the moment the short step there is today people come to the platform and do analytical challenges. And SDK may let them come to the platform and do build challenges. So build a protocol, build a solution for this chain, build an X, Y, or Z. And yeah, there are many

other applications that are non-technical, the people, they're already coming and asking, can I help the chain do this. Can I set up a community for them? Can I do all sorts of stuff? That's all available. We have 60,000 people in the network already. And as that grows, more and more skill sets will become apparent and usable. Our mission is to enable blockchain ecosystems to succeed. And so I look at everything that we're doing through that lens, starting with the bounty programs you run today. But this SDK of like enabling building is really about enabling solutions on top of the platform. and so there's so many different things you can solve or build. And so many things we can't even imagine today that will and can be built.

All of those things are going to enable new types of jobs in these ecosystems, new types of businesses in these ecosystems. And so if we're successful in what we're doing, that's ultimately like what we are feeding in every community that we partner with. That makes total sense. So back to the SDK. How are you guys releasing this to the public? Yes.

So the SDK, you can go to SDK. website crypto.com to access it. There will, however, only be a few number of mints every day. It is actually entirely randomly generated. So that mint count every 24 hours will change every day. And that's to make sure that the power users and the right people get access to it. Each mint comes with one free referral code that you can go give to somebody else if it's sold out if somebody really needs it. But we want to make sure that it's offered in a way that lets the right people get access to you.

Our goal is to get this into as many hands as possible, too. So you think about a traditional NFT collection, there's a limited supply with it. So with this, the base NFT that's used to Mitten API key, there is an unlimited supply, ultimately, of that. So every day we allow a limited number of minutes, but these are occurring every single day. And we'll just over time how many people can get in what that range is. That's great. Well, it sounds like a smart way to do it. You don't want to get DDoSD-D-D-D-K.

either. So where can we send people to learn more about Flipside and learn more about the product, guys? Anyone that wants to access the SDK can go to SDK.jsdk.compto.xyc. And every day, we're going to be unveiling new mints there and people can sign up to use it. You can also hop into our Discord to learn more about that and go into there's an SDK channel. Awesome. I guess last question. Why the name Shroom SDK? There's a couple meanings here. It's an SDK. So, Shroom decay fits in with that. Mushrooms are part of growth. They're a part of enabling every other ecosystem to thrive.

They feed trees and plants and everything else that are out there. They feed humans. And so that's what an SDK is doing for the ecosystem. It allows people to build and grow and evolve. There is a play on the decay part. Shrooms also decay. And part of the spores that we're going to be adding is upgrades. There's some decay mechanisms in there.

So multiple meanings, none of them hallucinogenogen. I was going to say, well, as long as they're not hallucinogenic, that's good. Well, you learn something new every day. No free psychedelic mushrooms with your NFT, but maybe down the road when we're based in Oregon, I don't know. When the bull market's back, yeah. When the bull market's back, that's right. All right, guys, well, this has been fun. Thanks, as always, for coming on the pod, and we'll talk to you soon.

Thanks for listening to another episode of On the Brink with Castle Island. To find out more about Castle Island, visit castle island.V.C. To listen to all of our podcast episodes, please go to On the Brink dashpodcast.com or just click on the tab in our website. Thanks for listening.