On The Brink with Castle Island - David Phelps (Jokerace) on Incentivizing Participation and Co-creation (EP.456)

Episode Date: October 2, 2023

David Phelps is the co-founder and CEO of jokerace and a prolific writer. He joins the podcast to discuss:  Why tokens are not optimal for effective governance  Alternative ways to incentivize users and distribute decision making power  How we solve for retaining users versus just attracting them  Composability and evolving from user generated content to user generated apps

Hi, everyone. This is Ria from Castle Island. Welcome back to another episode of On the Brink. Today, I'm excited to share my conversation with David Phelps or Divine Economy on Twitter. He's a co-founder and CEO of Joe Grace, which is a platform for generating contests that allow companies and projects to incentivize, reward, and leverage the collective thinking of stakeholders in their systems. I'm also an angel investor in joke race, so just adding that disclaimer. David is also a brilliant writer, so we discuss some of the thinking he's done around why tokens are not ideal for governance and why he's post token. We discuss his most recent piece on proto apps, where he explains his thesis that apps are becoming protocols and vice versa.

We talk about why are we've is a, content blockchain or why he describes it as such and how it's different from traditional blockchain networks based on the types of transactions that it records and much more. So with that, let's turn it over to our conversation. 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. Guests and host may maintain positions in the assets discussed in this podcast.

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 British.

and zailing economy with a new round of quantitative easing. You print a couple trillion dollars and all of a sudden people start to worry. So out of this worry, we have something called the Bitcoin. So nice to meet you for the first time. So nice to meet you. Yeah, I've heard it. Thanks. I've been a fan of yours for many years now, actually. So it's an honor.

That's my confession. Oh my God. Yeah. Jeez. Well, there's just infinite content to talk about with you. Oh, God. Okay. Yeah. I'm just creating malstroms of discontent wherever I go. So, yes. Yeah, we have to dig into all your hot and spicy takes. Yeah, exactly. Let's go. Yeah, all my engagement bait, I actually now have to defend, which is, that's not why I did it.

I didn't do it for the engagement. I didn't do it to have to actually explain the reasoning, you know. You signed up for this, so here we go. Right, let's do it. Let's do it. Okay, so I'm not really sure how to introduce you in a very succinct way, because I know you as a film critic, I know you as a prolific writer, a shit poster, and Twitter influencer, as we have discussed. Is this a wedding page we're doing right now? No, that's later this week. You're also an angel investor.

You're a founder and CEO. So what am I missing? Or where should we start? I worked as a translator for a while. Yeah, do you want to throw that one in? Yeah, that's enough. My ADHD in life is already readily apparent. crushing it. Okay, so let's start from the beginning. What were you doing before crypto and why did

you get excited about crypto? So Joe Grace, which we'll get to is a third company that I've co-founded. And before that, I had a failed fintech company and a more successful ed tech company. And I think the kind of throughline of all of these was thinking, how do you collect advice freelancers in a world where freelancers are increasingly siloed, loan, have no resources, have to represent themselves, which is very uncomfortable. And how can you create these almost guild-like collective structures where they can support each other much more?

And the strength of them being able to refer each other, represent each other, defend each other, will be much stronger for each one of them than what they could get on their own. So almost like, how do you create little nation states for freelancers? And part of the reason that the fintech company failed, I think, there was lots of reasons, my incompetence was one of them.

But I think one of the reasons it failed was because it was an auto pay app for freelancers to log their hours in an app. We'd automatically send an invoice out on Mondays, charge the client and their credit card on Wednesdays, and then deposit the money on Fridays. And I was like, this is a game changer. It's going to be so easy. They don't have to worry about collecting money or talking about that with their clients.

They can just automatically use this to collect, and it'll be really easy. But going after individuals alone is just a really hard thing to build a business off of. Anyone who's worked in freelance markets will tell you that. But it's also just challenging because freelancers don't always have the best business instincts. And so if they're not working in these collectives and they have to do everything on their own, as a business, you don't get any network effects from these freelancers. But they're also not getting a ton for this either because they feel like, oh, this is an imposition on a client. And so to go back to your question, why did I get into crypto? I originally got into crypto because I saw the credit card fees

playing out in that business, and nobody wanted to pay them. The freelancer didn't want to assume a 2.9% credit card fee on their end compared to, you know, what they were normally getting in check. And the clients didn't want to assume it either. They didn't want to pay for it. And so you have this issue where traditionally businesses just assume credit card fees, but in a world where everyone is a business, and you have this challenge because now people are operating as businesses, but with a consumer mindset. That's really freelancers as a whole. Like freelancers don't see themselves as businesses. They see themselves as consumers.

They operate with traditional consumer psychology, not with business psychology. And so nobody wanted to pay the card card fee. They couldn't see the advantage to it. And so that wrecked the business. And I thought, man, to have this world where you can just disdemeidate these legacy financial institutions and build without credit card fees is this huge boon. And so look, in some ways, it's really funny today because like big news of the past week, Visa is now like supporting Solana.

Visa's been at the forefront of crypto and to their credit has just been crushing it. They really get the proposition and they've done amazing things with it. And so it's not as though credit cards are going to go away anytime soon or my initial hope of that was that well-founded. But with that said, if you think about what I am building today, and this is not why I'm building it, but it is an advantage of it. It's like contests for any communities to be able to come together and make decisions win rewards. That's all happening on crypto blockchain rails. and that means there's no credit card fees. So I'm building now in a way where no one's paying an app store fee, no one's paying a credit card fee,

they're just transacting directly. They pay a gas fee. The gas fee is so much less than what credit card fees or app store fees would be. Sometimes my co-founder and I have this conversation, like, should we let people pay in credit card? And the answer is probably like, I mean, maybe long-term rule, maybe that is an additional option, but probably not. To ask people to pay credit card fees when they could do that without any of those fees whatsoever using this system, which is a blockchain, it's just a huge advantage. So, you know, it's not why I'm

building this thing today. I do still think a little bit of that dream is still there, which is like, I can build this whole thing on my own without any of those third-party dependencies that we used to have. Now my third-party dependencies are wallets, but that's something we're working on, too. That's super interesting. And interestingly enough, I actually came into this space from a similar angle, except I was, I mean, I wasn't building a business, but I was researching the payments and fintech industry at a bank. Before joining Fintech and the team, I didn't know how payments worked. I didn't know how convoluted it was, how many rent-seeking intermediaries there were, and quickly realized that there are like five to six intermediaries that sit between the merchant

and the buyer. And I never really thought about it from the angle of individuals as businesses. The extent to which I thought about it was you have these smaller businesses that don't have that much volume, and they have to assume these massive fees. And in a lot of cases, these minimums, which just doesn't make sense for them for especially small value payments. And, you know, I still see that in my day to day when I'm transacting with small businesses. I mean, it's so interesting seeing something like Plaid become like this dominant player, whereas like T-Mobile wrote me last month to be like, they're going to pay five extra dollars every month. for using credit card. If you want to get off the credit card and just connect your bank directly via ACH, we won't charge you the $5.

Which point I then have to perform this question of the rewards that I get from the credit card versus the savings I get. It was really interesting getting that email and being like, oh, every business wants to get away from credit cards. And effectively a credit card company is just a bribe system.

They bribe the user with 1 to 2% rewards and then they charge the business three to four and knowing that the consumer's going to dictate what the business has to do. It's just a really smart model. But you see, like, now there is a mass movement to get away from credit cards by major players, like T-Mobile.

And the dependency there is, like, they can use something like Plaid to just immediately let you connect your ACH. You don't have to do what you did five years ago of, like, writing in the rounding number and the account number, it's just like the UIUX is much smoother for it now. And that's the bet. It's like credit cards have won because they can bribe you and because the UIUX is better.

It's a lot easier to swipe. And it's a question of, like, well, what about this thing Plaid? that presents this new UIUX, it's so much easier for settlement directly from ACH. The immediate question that you should ask when you see Plaid being successful is, well, what about blockchains? If Vlad can do this, like, there's even easier way, actually, to remit payments anywhere between any two individuals who need to transact that that's actually called a blockchain.

It's funny because the fintech worlds and the crypto worlds are so separate, but I think there's a lot of us who come to crypto from fintech being like, oh, this is clearly the next evolution. Like, this is just the next stage for it. I think it's starting to converge. To your point, we had this announcement from Visa last week saying that it's going to allow issuing banks to pay merchant acquires, which then flows down to the merchants in stable coin. So stable coin settlement. And I'm hopeful that rather than us doing away with cards completely, we kind of evolve how we get the benefit of the UIUX and the ease of swiping, combined with the instant settlement and reduced cost of transacting that blockchains afford. But again, the wee here is us as Americans, and we live in the only country that has these kind of credit card fees. Europe, there's laws where they can only go up to like 2% or something.

And then the rest of the world, to we chat are bankless unbanked. Even this question of what we want as Americans, it's like we're a very limited segment for what crypto actually is going to be able to enable. which is why I get distraught sometimes when I see the obsession over American candidates in SEC. And it's like, yeah, of course this matters for me personally. I'm an American. But like the system that we're building is so much bigger than this. That's so true. It's really important to zoom out and be like, okay, we get really caught in this bubble of what we want and what we do here, but often forget the promise that crypto can afford to people all over the world that just don't even have basic financial. infrastructure. So you mentioned your co-founder. We've established that you are a founder. So tell us about

your company, your project, your protocol. So what Trond and our building is Jokrace. So Jokrase, I'll call it a platform. It's a little bit more complicated, but I'm going to call it a platform. For anybody to be able to create a contest on any EVM chain that they want. And what a content, what I mean by a contest is they put a prompt out to a community. community, and then people can submit responses, and people can vote on their favorite responses. And if they want, you can add a rewards pool on this to reward the top submissions as well, which I can go into. So within that framework of saying, okay, there's a submission period where people submit responses to a prompt. There's a voting people, people vote on their favorite

responses. You can design however you want, how long those periods run, what the prompt is, and most importantly, who gets to submit and who gets to vote. And so, So that could be the same people get to submit and get to vote. It could be totally different people who get to submit and vote. One could be a subset of the other. So if you think about like the example I always give, like traditional doubt governance. Traditional doubt governance is like a core team puts a proposal to a community to vote on. And so in that case, if they wanted to do that with us, they would have the prompt be the proposal. They would only allow lists themselves to submit and then they would submit two options. Yes, we approve this proposal. No, we don't prove this

proposal. And then the whole community would come and vote on those two submissions, yes or no. And so that's traditional data governance. You have like a very small team that submits and a giant team that votes. But you can imagine you can invert that. And instead of having a small team that submits and a big team that votes, you could have a big team that submits and a small team that votes. And then you have a hackathon. Then you have a grants process because now you have a bunch of people submitting applications or submitting projects that they've built, submitting grant proposals that they want. And then only a small team like a jury actually gets to vote on them as well. And so you imagine what this can be used for, it starts extending all over to any sort of

contests that we have in society. So you can have elections. You can have bounties. You can have prediction games. All of these become totally possible within this kind of framework. Grants, hackathons, award ceremonies, remix contest, co-created content, any sort of decision that communities want to make on chain, they can do through us. Can you talk about some of your favorite examples of how you've seen people use Jokers?

to date? Yeah, great question. So I'll give a few. Marketing has been a really, really big use case. So a lot of companies use this as like a marketing campaign. So I'll give an example like Nephi, put out $400, very little to four winners. So each winner got $100. And the idea was submit your best feature request for what you want us to build. So they got their community thinking really deeply about the product, using the product, sharing their feedback on the product, prioritizing what their top features were. So they're not only getting the top feature, they're getting dozens and dozens of features prioritized by what their users care most about. They're also then getting all of this on chain. So they're getting all the data from their

users about who's been valuable, who's participated, who's won, who had like an idea that really resonated with a community, who's voted, who tends to vote similarly. If they want, they can go through wallet histories. They can see, okay, these are our power users. This is the kind of defy protocols they use. This is the kind of NFTs they buy. If they ever want to do an AirDrop in the future, they actually have identified who their most valuable users are who have actually contributed the most interesting ideas. If they wanted to, they could add other incentives. They could say, to submit in this contest to win $100, you have to have deposited XYZ on our platform, or you have to swap a minimum of XYZ transactions on our

platform. And then people are incentivized to do that in order to participate. They could also give voting power to people. The more swaps you've done, the more voting power you get. So they can start creating all these incentive loops. And then, And finally, they can say, look, go on Twitter. If you want to win this, you have to advocate and campaign for it. And you could get people going on, really, to say, please vote for me. And then they're marketing and distributing, Levi as a product, as well as a contest. And you get this user-generated marketing effect, whereas the users who do the marketing

for you. A similar example would be like Eco, which created the Beam Wallet used us, and they added rewards, but their rewards are actually their own token. And so you think about what they're doing is it's like, this is a new type of airdrop where they're actually like air dropping their token to the most valuable people in a way that cannot be boughted. Because the people actually contributed the most valuable feature request that are now getting that token. And so they're slowly putting their tokens in the hands that people actually contribute value to their platform in a way that can't be airdrop farmed at all. So stuff like that I think is it gets exciting.

Other ways it gets really exciting is thinking because this is fully on chain, any decision long term could execute across another service. Once you have made a decision on chain, you're putting data out there. that anyone can read. So if people know how to read that data, they then can create their own services on top of us that start performing transactions and executing behaviors based on the result of a vote. So hats, for example, HAPT protocol, which creates role-based NFTs, built it on top of us a module to that if you have a contest to say, hey, who should be secretary in our organization, who should be treasurer. Whoever wins that automatically gets the hat because they built that on top of us. And you can imagine there being like a lot of other use cases for that, like long

where you could have retroactive public goods funding where people decide what the metric should be for allocating funds to projects, and then that's automatically run through a state-proof limit range or something like that. Or really simply, who should be on our multi-sig? They're automatically added. There's all sorts of ways that it starts to get really exciting

when you think about the ways that this can combine actual executability with financial, social, reputational incentives and rewards as well for participating in these. The really big contest right now is Arbitrum, Arbitrum set up four contests with us, determining their mission statement. And so really getting the community to drive the direction of where they're going. And if it's helpful, I can talk more about some upcoming use cases. I don't know if I could name names, but stuff for like governance that I think will also be like

kind of game-shundity too. Yeah, I think that would be a good segue actually because another question I had for you or another topic that I wanted to cover in this conversation is this idea of being in a post-token world. And I think this is a term that you've coined. And, you know, I think initially people misunderstood that you're anti-token, you're not anti-token, your post-token. So talk a little bit about what you mean by that and then maybe specifically in the context of how you see governance evolving over time. Thank you for saying that. Yeah, I'm not anti-modern and post-modern. Okay, Mom, I'm just really cool, all right? Also, funny using expression, like, you coined this

this anti-coin anti-coin terminology. Post, post. So what I mean by post token is tokens were these really powerful for many years, data wrappers. What they really served as, like, wrapping data in this easily legible way. So you can say,

I'm a member of a community with a token. You can say, like, I own X, Y, Z art with a token. And it's just a data wrapper. I've earned X, Y, Z credential as a token, NFT badge. And there's obviously utility for that. And the main utility is you can financialize it, which makes sense because crypto always starts from angle of financialization. The other main purpose, I think tokens really serve as like proof of stake models. Being able to use this as your economic security in order to effectively put this up to validate transactions has been like really,

really crucial. But of course, you know, most projects don't need a token for proof of a stake. You know, most projects don't have an actual blockchain that they're running that's proof of stake. and so they're justifying other ways to have a token to try to financialize. And of course, what we saw in the last bull cycle is like, yeah, you can raise a lot of cash from a token by launching one, but then there's nothing you can really get after that. For NFTs, you can sometimes get royalties. That's obviously contentious. For ERC20s, there's no model of getting royalties on that.

And so your users are getting all the subside where you're just depleting your treasury at best. And then what's happening is like the people buying the tokens are just the richest people. There's so much emphasis today put on like fair token distribution. which is totally fair, that we don't want to just put tokens of the hands of air-grop farmers. As I said, you can even use us to distribute your token as well. Even then, it's like, well, that helps at first that you're putting your token into the hands of these more useful people in your community. But once they have the token, are they still going to be useful? And even if they are, what happens when they sell that token to the richest

bidder? Over time, that's going to consolidate into the hands of the richest whales, assuming it's remotely successful. And then you have this problem that, like, when the richest people in your project, they're actually not the ones who are. are usually incentivized to build out the value of the project. They don't really want to do anything. They just want to hold it. And so, like, if you're actually hoping to have a community where you're giving more power and say to your members,

if you're just permissionlessly letting any rich person buy the token and make decisions, then is that person actually value align? Do they actually care about the project? Are they going to contribute? And then you end up in, like, the absolute worst case scenario, which is inevitable, and it's happening with nouns right now. And this will happen with Aragon. It happens with every project.

And that's that the value of the treasury represented by the token is greater than the value of the token itself. And so, like, at some point, there will be some divergence. If your token right is like the equivalent of $100 in the treasury, but the token is selling for $80, then it's worth it for an Arp trader to come along by the token and make $20 by like taking the token and then dispersing the relative share of the treasury to themselves. And this ultimately happens where you get these rich people when they see that ARP coming in, flash attacking treasuries, taking them over. And that's how you get the Nouns fork that's going on right now. That's why Aragon had to protect against pirates, et cetera. So ultimately, it's not only that the token isn't value aligned with their community. It actually brings in the worst people.

And brings in arbitrators are actually going to undermine you and drain your treasury once you let this experiment go on long enough. And then the question is like, well, why should that be the basis for governance in the first place? If you step back and you think, who should be making decisions, is it, do we just want plutocracy based on, like, someone who, like, air drop farmed? I tweeted this today. We're just in the stage now where, like, everyone's pretty sick of crypto because we've seen over and over again, the rich just always win. This system was supposed to be an alternative to our traditional economic system. And instead, we just see over and over again the people with the most bots, the people with the most tokens, the people who are able to hack you, rug you, like, with the most

followers, those are the ones who win. And so what we've been thinking about is, like, doesn't actually have to be this way. Like, tokens are not the only way of having data on a blockchain. And so actually, like, what we do, which is so simple, it's just a CSV. We let you just upload a CSV where you say addresses in column A, voting power in column B. We put that into a Merkel tree in a smart contract, and then that's it. And we let you deploy that smart contract of the chain you're on. That is your voting power. If you do have a token on Ethereum and mainnet, and you want to do governance through us on base or on optimism or arbitram or or polygon or scroll or whatever EVM chain you want. You can do it. You just make the allow list,

the list of holders and the number of tokens they hold, and they no longer need to bridge their token from Ethereum Mainnet. They can now do their entire governance on another chain. But you could also do, like, a lot of other interesting things. You could say, well, actually, and so there's a DFI project that's going to be using us for governance, what they'll say is you do have to have a token to participate in governance, but the token isn't the basis of voting power. So you have to have a thousand of our tokens to participate. But once you have a thousand tokens,

the actual voting power is based on the amount of eth that you have deposited into our system times the duration that you have deposited that Eith. And so this is so complex. And you're like, wait, what is this like Byzantine governance system that requires all these variables? But you start to think about it. And it's like, okay, now there's an incentive

to deposit Eith into the system because that's what's going to get your governance power. There's incentive to continue depositing it because you'll get more governance power over time. It means that any time a decision is making, the power is going to the current most active users. It's not people who want tokens in the past for previous things they've done.

It's the ones who currently are most active and helping. And it means you can't flash attack the treasury because anyone who came along and just suddenly deposit a bunch of ETH doesn't actually have that much power because they don't have duration. It's the OGs who have the power because they've been there for a long time.

And so it solves all of these issues. that you've seen traditional governance, while aligning the actual interest of the protocol with its users to say, let's give power to people doing the thing we want them to do, which is to deposit into our DeFi protocol. And that's the basis of governance. And that's only possible when you move to this post-token system of thinking, man, it really doesn't have to be this way. Like, tokens really don't have to be the basis. And you can still have this super financialized system that actually is creating better financial incentives for your community by moving to this post-tok. token model. You're basically creating a way for people to formalize financial or non-financial

actions that they're taking on chain and making that the basis for being able to participate in the future of the protocol, in decision-making about the protocol, and so on. That is going to be a game changer. I'm very excited for that future. What do you think happens to all? You know, all of these projects that launched a token, and they've said the only point of the token, is to be a way to enact governance over the system. I guess this feeds into a deeper question and one that I know you have thoughts on as well, is it's going to have value accrual because it allows you to participate in governance. That's why the token should have value.

Let's start there, and then I want to talk a little bit about value accrual in the space, too. And it's also important just to differentiate me as co-founder of Jokrace versus me, David, shitpost, or Jokrace. It doesn't follow my beliefs about what governance should be because it's a fairly neutral, totally customizable modular framework for anyone to design governance however they want. So if they want to design it with tokens, they can do that the way I describe you for, just make that your allow list. And actually, hopefully we make token voting a lot easier because now you can do it on any EVM chain you want without bridging. also. Me as co-founder will be like, I don't know what happens, but they can experiment, you know, and like, they should use us. Me as David, then I'm going to be like, well, I do think diversity is important in terms of like having lots of different experiments in the space and we'll see which ones work and which ones don't long term. But I'm personally skeptical that those projects are really going to win because like are they the ones that actually are creating the best system for coordination and decision making. You look at DAOs that do really well, they tend to be highly permissioned. It's stuff like Blackhand or it's stuff like Boys Club, where it's like, you got to get into that because the members have to vouch for you and know that your values aligned and that you're actually

going to contribute meaningfully. You can't buy your way in. And it's like, why would you want a system where you could just buy your way in? I guess like answering honestly, there are different types of communities formed off-chain that give us models for this. And it's like there are country clubs, right? And a country club is a place where it's permissioned, but it is also a buy-in system. And to some degree what you are buying is the ability to meet other rich people. That's why you're there. And I do think there will be Dow's that will serve that purpose and have served that purpose where there are online country clubs. They're a way for the Nouveau-Riche crypto people, those of us who do not play golf. We grew up playing World of Warcraft instead, but we want to now meet other rich people and maybe play

a nice round of World or Warcraft with them and their family on Sundays or whatever. And it's like, yeah, a Dow can serve that purpose. It can be a 21st century country club for rich people to buy their way in. I think there does still need to be some permissioning on there. Essentially, it can serve that function. They might do well with tokens to have that. But the majority of communities that exist in the world and increasingly exist in a more democratized internet era are not country clubs and they're not art gala. And so it makes sense we would start there because we had created a system that, you know, with $100 gas fees was even only affordable to the ultra rich who had made all this money and wanted to meet other rich people. Like it makes sense

we started with a country club model. But I would like to think the country club model, off-chain and on-chain, is really only 1% of the kind of communities that ultimately can be built. Another narrative that you've talked about, and maybe this ties in a little bit, is this concept of we've solved for attracting users to the space. We've solved, and via tokens or token sales, we've solved for attracting. Yeah, just buy them off. Yeah.

a one-time influx of revenue. But we haven't really solved, or maybe are in the process of solving for retaining these users or extending the analogy, creating a more recurring stable flow of revenue into a project or protocol over time. Yeah. How do you think about that? I'm going back a long way, so I'm probably butchering this.

But Ferdembridell, his amazing historian, has a book called The Mediterranean. And Mediterranean is a history under Philip the second of the cross-cultural transactions of the Mediterranean in the 1400s. And it's told to the geography of the entire land. And there's this amazing point where he talks about, if I'm remembering this correctly, that the people in the mountains would convert most easily to any new religion that came along. So any new one that came along, it was like they didn't have.

have anything else to do than worship, right, in the mountain. And so the new religion that came in, they would be totally transfixed. They would make it the center of their life. It would be like 24 hours a day. This was what they did. This was their culture. But because they converted so easily to this new religion, it meant any new one that came along, they would also then convert to as well. That one would then have total sway over them too. And there was nothing mooring them in any other kind of like value system than whatever was coming and being told to believe in. And people in the cities were the opposite. Like people in the cities were not that religious. They would not spend that much time on religion. It was not the focal point of their life. They would not care that much about it.

But they would stick with it for centuries. It was very, very hard to disrupt whatever the religion was because they weren't that passionate and because they were hard to convert. And so it's a lot easier to retain them and a lot harder to convert them. And I think like crypto is like very mountain people. Like, we are like ideologues who have easily converted with whatever new air drop is, and then someone else drops something into our wallet and are immediately converted to that. And we change to narratives all the time in terms of what we believe. We proselytize it for, you know, six months and then we move to the next narrative as well. And what we haven't created is like cities.

We haven't created the way where crypto is like not the focal point of our life, but just like one institution among many that we participate in and is very embedded in the life of the non-crypto life as well, crypto has a place in it. We haven't created those cities. And so this is like a long way of answering it. Because it's so easy to convert people with airdrops, it's very hard to retain them because you're just getting mercenaries. Like you're just getting people there for theirdrop. That's not the only issue. The other issue is that there's nothing else there besides theirdrop. Getting the token is the only thing to do with the token. And so we try to admit these systems like governance where we're like, oh shit, we have to

retain people. Now they have a token. Let's give it use. But the only use is voting, and voting is not really that powerful. Your ability to go and vote for things, that's not exactly how you want to be creating content on the internet. You don't want to be known as like the way that you want to create a tweet, have that appreciated. It's not the same as like your feeling of like, let me go vote for something and have that being appreciated because it's totally wrote and replaceable. It's a fungible activity.

It's not one that stands for your own unique contribution. And so I think like we just haven't created these ways for people to actually contribute meaningfully to share their ideas and to build social relationships with each other. And like, that really was kind of the foundational point for joke race was thinking all of these governance platforms have focused on voting. Like, what if we focus on submissions instead? What if we focus on the more creative input that people can have and make that just as important? What if you gamify this a bit? Like, what if there's incentives for people to socialize with each other to try to win? They have to form their own teams and that's going to actually build relationships.

You know, just something I think about a lot is like any good game you play is usually a game where you're trying to destroy your friends. You sit around like a board game and it's like, you want to kill each other. And then like that's how you become friends together is by like committing massive acts of like mock violence against each other. And that's like what creates unity among people. And it's like trying to optimize for people not to be anxious and to have totally collaborate is actually not a good way to get people to collaborate. You want to create staged chaos where people can fight each other, battle it out, aren't anxious about what's going to win. That's what gets people excited.

and much more committed to the game. I think we have a long ways to get ourselves and building that out. We're still the very, very beginning stages of that. It could be a lot more fun, but that's going to be increasingly, I think, a goal for what we're doing is thinking, financial incentives are great,

and they get everyone in the door, but you need to have social incentives to get people to stay. I really like that analogy that you started with, and I think we often get very myopic and think about crypto as the end goal, but it's not the end goal. but it's not the end goal. It's the means to and end. You actually had to tweet, I think it was

yesterday, about being a one-issue voter and the potential negative consequences of thinking of crypto as the end goal. We all face this issue right, in crypto, where it's, yeah, crypto should have way more utility. But do any of us actually want to use it? No, we want to hold on to it because we think it's going to be more valuable five years from now. None of us actually want to spend crypto. We all know we need to in order for this thing to take off. off, but it's like we don't want to because we believe in its long-term value, right? And so it's like, there is a way where those of us in crypto are actually the worst incentivized to think about what's best for crypto, because we all just want to treat it as an end. We're like, this is our bag. How do we help it

go up? Instead of thinking, man, let's actually spend all of this because that's going to give it a lot more utility if there's ways to spend it and use it. I want to touch on something that you brought up a little bit earlier in the conversation around automatic executability and composability. And specifically, you published an essay recently, this new thesis on proto apps, where you kind of explain this argument that we've been having about apps versus protocols needs to be reformed and that instead today's apps are protocols and vice versa. So can you expand on that? Yeah. So contentiously, I think the example I actually gave was outside of crypto, which a lot of crypto people did not appreciate.

And the example I gave was actually chat TPT. And being like, chat TPT is this incredible app. We talk all the time, like, why haven't been any major apps in the last 10 years? And it's like, well, suddenly there is one on our doorstep in the past six months. And we're not talking about it as such. And part of the reason we're not talking about it is because it doesn't really look like apps that we're used to. It was launched as like a web app.

It doesn't have a specific. use case at all. It's not totally social because you're really talking to yourself or like a higher version of yourself. And then I think like what's maybe most interesting for it is just a front end to a protocol. They spent years and years building open AI without in use cases. And then they just threw this like really simple front end on top of it called chat CBT. And then they threw another simple one on top of it called Dolly. And they could throw more on top of it. And it's like suddenly the whole thing was unlocked. And where they get really interesting is thinking, okay, this is a front end for the protocol. But what that means is it's also front end for any other service built on the protocol.

You know, now they have chat GPT has these plugins like Expedia or like Wolfram. So if you want to do math, you can ask it to do math. But if you wanted to book tickets for you to Tahiti, it can book tickets for you to Tahiti. And it's like suddenly, wait, this thing is a virtual assistant that can execute actions across the entire internet. Effectively, that means any other company can build on top of it, but be incorporated into its front end.

And chat GPT becomes a gateway to the internet. internet. You think about what eigenlayer is doing right now. It's actually not that different. What eigenlayer is doing is they're saying anybody can create a protocol on top of us for restaking, and then we will be a dashboard effectively for people to be able to assess risk and where they want to restake their tokens and get access to these other protocols. And so they're just a gateway, effectively. And of course, eigenleers built this really complex protocol to be able to handle all of this. Effectively, it'll win as a front end. Like, it'll win because it's the site you go to to be able to get access to all these protocols and to be able to transact automatically across all of

these. And so it's a way to say anyone can build on top of us. And this is not that new. Shopify, you could argue, is doing this before. Shopify is letting anyone build on top as a business and then being a front end for people to find those businesses. It's somewhat novel as like this app thesis, because it effectively means apps are much more like app stores now. Any good app, Roblox, you could argue, is doing this too. Any good app now is effectively a way. for users to access other apps that are built on top. And this is really, as cool as it is with chat sheet BT and OpenAI, the incentive is not totally aligned there.

Like, OpenAI is going to ingest all of the data from its users, potentially replicate those services, copy them itself, using its own AI. And the other side, businesses building on top are not able to get any data out of OpenAI. And there's no financial rails for this either. But in crypto, it's actually very aligned because it's built on financial rails and it's built on composability so that anyone, can build on top of any other service and read their data as well.

And then all that service needs to do is incorporate them on the front end. And so I think we're going to be doing that over time. Swap with their hooks, I think is a really good example of doing that right now as well. It's creating like this model through composability for anyone to be able to build on top of you and automatically execute that transaction. And we just haven't seen it take off yet. I had Toby Shoran get really angry at me in comments who hated the piece, basically saying this is just the DAP thesis all over again and the DAP thesis totally failed.

But it's like we haven't actually seen anyone really build apps in this way that are built for people to build on top of them because frankly it was pretty expensive to do that until now. And because people still work in these old mental models of wanting to silo all their data and thinking that's where the advantage is because that's where the advantage was in Web 2. Instead of thinking, no, actually I can build a front end moat by being a gateway to the entire internet and to all these other services while helping them build their businesses too. It's a new way of working that we're just starting to see now. take off. It's also just so refreshing point of view because it's so much more positive sum than we've been historically. If you win and you're built on top of me and vice versa, then I win. So the more you win, the more I win. And so I love that framing. It also reminds me of a very specific instantiation of this in Web 2. I don't know if you ever used, if this than that,

that I think used APIs of popular apps in connection with one another. So one example, I remember using it to port over. I think it was my music from SoundCloud into Spotify. So it would connect the two. Blockchains being so much more open and actually optimizing for composability and openness really allow you to do this at a larger scale. I think a lot about crypto being like the next extension they create our economy. in which devs are the creators.

Traditionally, we had user-generate content. It could be featured, and you would go access an app to get all this user-generated content. And now it's almost like you're going to get user-generated apps. A hook on Uniswap is like a user-generated app. Something that maybe some teenager took three days to build, and then everyone can use it.

And potentially, it could take a cut as well, and that teenager could live for life off of this business they built in three days, or at very least, swap, if they fund it, should be funding them or paying for it too. And the hook itself is also composable. It's like, well, now you could create a hook. You're taking, like, the profits from your liquidity pool on Uniswap and depositing that into Avey automatically and then taking those profits and distributing it to LPs.

Like, that's a hook that could be created. And so it's like, it just is, it opens up this whole wild wonderland for all these services to build together and to build off each other in this new way as well. Its user-generated apps is effectively what a hook is. I shared this with you when I read the piece. And it's this idea. The most viral, most widely adopted apps, social apps over the last decade have been those that unlock the ability to create user-generated content. Maybe like this is the unlock that we're waiting for.

Yeah. And it gets easier, right? Use something like Third Web. Man, people have already built all of these modules. And so you're just customizing the module. It should get easier over time to build these as well. You've talked about this concept of a content blockchain, specifically in relation to RWeave.

And I think you have a very elegant point of view where you articulate how RWeave provides all of the benefits of a traditional transaction-oriented blockchain, but for non-financial data, transactions, content. So talk about that framing and why you think that's important. Yeah. So the initial use cases for blockchain, if it's financial. And the simplest way to describe this would be to think, we have this thing called state. And state is basically just means the state of all accounts at this given moment.

That's what state is. I wish someone had to explain that to me before it took me four months to understand. The idea is if someone's balance across a blockchain goes up and they suddenly have four more dollars, that means somewhere else someone else has went down by four. That thing has to net out. If one person goes up by four, you have to check all the way across the blockchain to make sure that this is legitimate by making sure like someone else went down by four as well. And what it means is when you're verifying state, you're verifying the entire state of the blockchain at any given moment for these financial

transactions, which in some ways are like, I don't want to see zero some, but like, you know, they net out to zero, let's say. Of course, there's inflation and other things too. And so that's like why every block we're verifying the entire state. And that's also why we have this thing called state bloat where it's like the more successful a blockchain gets, the more painful and expensive it gets because there's more state to check. There's just more balances to simplify it. And what's really cool with content is it doesn't have that dependency. If one person uploads a video, that doesn't mean that you have to check that another person deleted a video or that someone else uploaded a book. Those are totally independent actions.

When you want to upload content onto a blockchain, you don't need to verify state every single block. You can just check every five or ten minutes and make sure that content's still there. And so it's way cheaper. It's so much cheaper. And that's why we keep running into how expensive it is to try to put like an image on a blockchain. never mind trying to put something like a video onto a blockchain. Because to verify all that data, it costs a lot. That's why we have all these conversations about dang charting and blobs.

And then those happen to be called this question also right now, which is like, okay, once we even have those blobs, where are they going to go? Like if we have to call that data every two weeks, where is it going to go? And the answer, in my mind, should be R-Weave, because R-Reave effectively is a blockchain, according to what I would consider a blockchain. And what I consider a blockchain, it's credibly neutral, it's immutable, it's decentralized, it can be verified by anybody. And when you have those key characteristics to say this is a way of processing data, you can be verified by anyone in the world, anyone can do it. And you have the closest

thing to objectivity, which is actually subjectivity, it's total social consensus of people all around the world verifying this thing is true. Then that's creating a really strong system for content data as well. That ultimately can be a lot cheaper than the way things have been stored in the past, but also really protect them from centralized forces that might want to censor them as well. And then ultimately, I think, provide provenance to say, here's the first person who uploaded this. They're the creator of this. And Bundler, the project I work with is really working on that side of things of really creating the provenance layer so that you can establish and attribute this content to the original creator as well, which then gives rights to royalties.

And then that, in turn, enables composability because anyone can take that content, rework it, remix it and not worry about getting legal permissions from the creator because those are already inscribed in the smart contract or automatically have royalties attached to them as well. I think crypto is in many ways like the next extension of the creator economy and user-generated content. That's really the unlock-up composability is like now anybody can remix anyone else's content without asking for permission because those permissions actually are set in the smart contract itself for what they're able to do with it and how much they have to pay them out. And so that's the dream. There's obviously a lot of technical challenges for getting there,

but I think R is really the project that's like building towards that future. We've talked about co-creation quite a bit. And in kind of the last few minutes, I want to get your take on when you think about co-creation and the ability of this space and these primitives that we're building to unlock and reward and formalize co-creation, what is one of your favorite use cases? It's interesting. Sometimes you get pushbacking, like, well, no, artists have to be geniuses. They operate in a cave and their own misery and haunted by their nightmares. That's how they create their works of genius. And it's like the Bible is co-created. Every blues song, like no one knows who wrote it's been passed down through covers over time, jokes themselves, right, or retold over ages, hip-hop DJs, all remixed content. All of this is like forms of co-creation that just permeate culture. There's actually very few examples of individual creators who are out there. The example I get really excited by is like thinking like what Fred again has done with building a community where Fred again has like gone out and like done

contest, right, to be like, hey, I'm dropping like a half completed track. I want you to complete it. And then everyone gets excited because now they get to co-create with Fred again. They all get to like create their own version of it, remix it, try to submit it, try to get attention for it. And you can imagine like doing that as a contest where it's like everybody could submit. Maybe the jury could even be like music producers. And so like regardless of whether you win, you're getting a chance for your music to

be heard by Fred again, right? Or by these music producers as well, you're getting distribution for it in this way where it's like, and if you do win, you've co-created a song with Fred again. He's like throwing this track at you. I think stuff like remix culture really such a good template for like what online communities should look like. And I think like you look at why Fred again is huge. The music's great, but it's not the music. It's the ability to co-create with fans over and over again and create interactive experiences with them. That is why Fred again just like wins is like the number one DJ in the world today. And I think giving creators that way to like co-create with their community, listen to their

community, get feedback from them. You know, even when you're talking about like a future request, that's co-creation. That's a community thing. Let's hear what you want us to build and then we'll build that. That's co-creation. That's dialogue back and forth with your users. Everything contest in some ways, I think does come down in some ways to this kind of co-creation of creating interactive layer between creative.

in their communities. I love that. I have a bit of a non-traditional last question for you. Going back, you used to be a film critic. Based on my friendship with you have just a lot of knowledge and have seen a lot of films. So I want to know, do you have a favorite movie that's informed your view of the crypto space? Good one. I would say Adam Curtis is Century of the Self. It's certainly one that I always think about when building businesses. The key example of that one for me is like Betty Crocker. Betty Crocker, like, created this, like, perfect cake mix in the 1950s for housewives who were like, harried and didn't have time to, you know, do everything at home and were expected to perform all this domestic labor. And it was like, you just added water to it.

And then you had a perfect cake. And they went to sell this and no one wanted to buy it. And they couldn't figure out why. They created this perfect recipe to save all these housewives time to create a cake. And what they discovered was that the housewives didn't want to do it because they felt like they didn't have their own imprint. Like they felt like it wasn't co-created. They hadn't actually made the cake themselves. They had just poured water into a batch, and then Betty Crocker had made the cake.

And they wanted to feel like they had made something of love that had been required some work. And so what Betty Crocker realizes actually, let's remove the egg from the recipe and make all of these housewives add the egg into the cake and make them do more work. Because when they do more work, they will feel more involved.

and provenance, more attribution to themselves as the creator of this work. And sales exploded. Wow. I think about that example so much. People actually really like doing work when they know it's valuable and they know what they get out of it as well. I think in terms of co-creation, in terms of anybody being able to take something and then add their own imprint to it, that's a lot of what's really exciting about,

like, the world of composability. That's great. Yeah, make it easier for people to express. themselves and their identity online. It has been such a pleasure to have you on. I could talk to you for hours, about a million other things. For the listeners, unfortunately, this is where we have to stop. Thank you so much for coming on.

My God, thank you so much for having me, Ria. I appreciate so much. Thanks for listening to another episode of On the Brink with Castle Island. To find out more about Castle Island, visit castle island. 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.

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