The Pomp Podcast - #931 Nader Al-Naji On Building Decentralized Social Media

Starting point is 00:00:00 What's up, everyone? This is Anthony Pompliano. Most of you know me as Pomp. You're listening to the Pomp Podcast, simply the best podcast out there. Now let's kick this thing off. Nader Olnaji is the head of the DeSo Foundation. In this conversation, we talk about decentralized social networks and why some of the incentives in today's society are misaligned with ultimately what people are trying to accomplish. I really enjoyed this conversation with Nader, and I hope that you enjoy it as well. Before we get into this episode, though, I first want to talk about our sponsors. This episode is brought to you by OKCoin. They are my favorite place to buy, trade, and stake crypto. They're the fastest growing US-based exchange serving over 190

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Starting point is 00:03:27 customers or a SaaS, DTC, or any business that has recurring revenue, sign up at pipe.com slash pomp. Again, pipe.com slash pomp to start trading today. All right, let's get in this episode. I hope you guys enjoyed this one. Anthony Pompliano runs Pomp Investments. All views of him and the guests on his podcast are solely their opinions and do not reflect the opinions of Pomp Investments. You should not treat any opinion expressed by Pomp or his guests as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his personal opinion. This podcast is for informational purposes only. Okay, we have Nader joining us. Talk a little bit about decentralized social networks. Nader, how are you? Hey, it's great to see you

Starting point is 00:04:12 guys. Absolutely. Dude. Awesome background. You're killing it with the background. Yeah. It's like half a green screen, literally. I need to fix it, but I thought we'll get there one day. Need more Bitcoin. Yeah. I hear you. I love it. All right. I want to start first with what you think the issues with the current social networks are. So we've got Twitter, we've got Facebook. These are obviously massive, massive multi-billion dollar companies. We're literally using some of them to communicate on a daily basis. What do you think the big challenges with them are? Like, what are they, where are their missteps?

Starting point is 00:04:48 Yeah, well, this is the funny thing, Pomp, is that if you look at social media today, it's actually more centralized than the financial system was before Bitcoin. I mean, you know, like, literally think about it, right? You have five companies that virtually control everything we see and do online. And we're over here trying to decide which billionaire we want to censor us. You know, it's, you know, who's going to own Twitter? Zuckerberg owns Facebook already. But Pomp, you guys know the real answer, which is that we want nobody in charge. We want to own our information like we own our Bitcoin. And that's something

Starting point is 00:05:18 that people really aren't talking about. It's funny because the solution to centralization in the financial system wasn't to put Warren Buffett in charge of money. It was to use technology, namely Bitcoin, to completely overhaul it and decentralize it. And so what we think is basically the same overhaul is needed in social. And we think that blockchain is the answer there too. And the reason it hasn't happened yet, we think is because we basically still need to scale blockchain tech to be able to handle storing content, not just moving money around. So those are very different problems, right? So just for example, it costs $80 to store a 200 character post on Ethereum. It costs 25 cents to a dollar on Solana, Avalanche, Polygon. That's not low

Starting point is 00:06:02 enough to compete at scale with Twitter, Instagram and Facebook. But if we could, then we could really change things. We could actually make it so that you can own your content like you own your Bitcoin. Yeah. So when you think when you think about these problems, how much of it is censorship versus there's other issues that are playing out like the censorship thing is very obvious. I think people understand that and control is kind of interfaced with that. Are there other things or or is it just, let's get rid of the censorship? Well, that's the interesting thing, Pomp, is when you decentralize something, you actually unlock the ingenuity of everybody all over the world rather than a small group of people running a top-down or centralized organization.

Starting point is 00:06:45 So just to give you an example, when you got Ethereum going and you let anybody build on top of that open financial platform, you got more innovation in DeFi in two years than probably like the last 50 years in finance, right? And so that's really what putting content on an open platform on a blockchain does is now instead of having one company or five companies really that are in charge of building the feeds, you can actually have anyone in the world spin up a social app and their own social feed with extremely low barrier to entry because they have access to all of that content. They can build a feed without having to go and acquire a billion users in order to be competitive. So essentially, it lowers the barrier to entry to creating a social app,

Starting point is 00:07:29 which not only gives you a lot more choice when it comes to moderation, like who do you want to moderate, but it also leads to better apps, better experiences, better everything. And so you're absolutely right. It's a problem of unlocking the entire world's potential and really moving from centrally planned development of social apps to decentralized development, which I think can be a lot more efficient. And so when you think about this idea of like a decentralized version being better, talk through a little bit. So there's the lack of control. There's this idea of like pulling on the community. What else is there that you see as the value of having it decentralized? Yeah. So, you know, generally speaking, you know, when I say decentralizing social media,

Starting point is 00:08:11 I really mean actually putting your content on a blockchain. Like we work on the DSO blockchains It's designed to store social data and build social apps on. And so what that means is, essentially, you make an account. That account's actually a public-private key, and everything that you do goes on-chain, just like if you were sending and receiving Bitcoin on the Bitcoin blockchain or doing DeFi on Ethereum, right? But again, it's for social, right? We're moving that disruption from just financial applications to social.

Starting point is 00:08:41 And so what happens is, when you follow someone, that goes on-chain. When you make a post, that goes on chain. And the benefit of that is basically that any app that wants to build on top of that chain can actually get access to that open firehose of content and start building more efficient apps, more efficient feeds. So that's what I'm talking about when I'm talking about decentralizing social media. It's putting the follow graph, the content, the engagement, the likes, and then all that other stuff actually on a blockchain. Got it. And so when you start to think about, let's take Twitter as kind of the current event situation, if you will. If you were Elon and you actually got control of Twitter, which is still unclear whether he will be able to successfully do that or not, what do you think he should do? What would you do with Twitter if it had all these users, but it's definitely centralized, hierarchical, and kind of as far away from what we're talking about as it could be? It's a great question. And I think the first thing you have to ask yourself is, do you care about the Twitter share price? Because if you care about the Twitter share price, then I actually think the ads-driven business model that it has today is probably the most efficient for extracting value from its network. So what that means basically is Twitter runs what I call an ads-driven business model. And that means that when you make a post on Twitter, they own that post and they don't let anyone else build an app on top of it.

Starting point is 00:10:06 The only way that other people will see the posts that you make on Twitter are if you use Twitter's app. And the reason why they do that is because if they were to allow someone else, a third party to run an app on their content, they wouldn't be able to monetize that app. They can't show ads as effectively on apps they don't control. And so the ads-driven business model results in extreme centralization. It results in Twitter needing to basically consolidate all of the content and only allow its app on top of it so that it can be a broker between advertisers and its users through that app, right? So if you care about Twitter's share price, if you care about profits, then breaking that model is extremely risky because it's kind of hard to make more money directly, or rather, you might be able to, but it's risky. So if you don't care about share price, the thing that creates more value, not about extracting

Starting point is 00:10:59 value, creating value for society, is actually if you open up that content and allow anybody to build on it. So in particular, Twitter doesn't have to say, we're going to be the only ones who make an app. We could actually let anybody build an app on top of Twitter's database. And actually, what's funny is most social networks actually started open in that way. So Facebook and Twitter started open to build their networks when they were in their growth phase.

Starting point is 00:11:22 But the problem is that open model, at least in the centralized world, pre-blockchain, wasn't very monetizable. So while it's good for actually building a large network and creating maximum value for users, you can't actually extract as much value when you're letting any app in the world, any developer in the world, build content on your database. base. The thing that finally changes that for the first time, and it's a new business model, and it's a post I wrote on nattertheory.com that just went out today. The thing that changes that is the fact that blockchains can integrate money with social. When you can integrate money with social, you can have a different business model than ads that allows you to have an open platform like a blockchain, but you're making money in a different way that actually can make you more money than you made before. And I know that's a little bit high level, but I've been talking for for a minute here. So I just want to give it back to you. So I think that I can go into it.

Starting point is 00:12:16 No, I think this difference between do you care about the share price or do you not is really important. Right. And Elon publicly did say that this isn't about economics for him. It's about free speech. And so that would suggest he doesn't care about the share price. Let's hold that as the kind of assumption here. But when you think about that, I also wonder how important revenue then is if you don't care about share price maybe that means that in the short term you can just you know tank it right you just don't care it's private whatever uh but is it important to have revenue so like you know one of the things that uh i said is if all you literally cared about was the free speech then like buy twitter bring it private fire you know 90 of the staff basically

Starting point is 00:13:00 outside of like the core engineering team uh and open source as much of it as possible and like good luck everyone let's go as a community and my guess is that like some pretty cool interesting things would come out of that the question becomes do you need revenue at all to actually make that sustainable or could it operate as a truly open source project where you know in the bitcoin community for example there's grants and things like that that help fund some of the development but there is no revenue model uh that goes to the the kind of core team how do you think about the importance of revenue in a world where you open source a product like Twitter? Yeah. I mean, so I actually think that you need a business model that makes money

Starting point is 00:13:41 for certain actors in the ecosystem in order for the model to be sustainable. So if nobody is making money, I think the thing is going to fall into disrepair, right? I think you have to have some people making money. And it's good to start with your example of Bitcoin, right? With Bitcoin, on the protocol, no one actively gets money for developing the Bitcoin protocol, but there's an application layer on top of Bitcoin that's exchanges that allow you to trade and all kinds of other things, lending platforms that do make money, right? They make money on fees. They make money on you doing stuff with your Bitcoin on that application layer. And that's actually gives them an incentive to make sure that Bitcoin works, that Bitcoin

Starting point is 00:14:24 functions. Obviously, the people who own Bitcoin have an incentive and some of the biggest development teams are funded by people who own a lot of Bitcoin. So you definitely need some kind of thing that makes money and brings it back into developing and investing in the network. The question is, how do you do that with a social network versus something like Bitcoin? And I think that that actually brings us back to what would I do if I were to own Twitter, right? Opening up Twitter's content and allowing anyone to build on it lacks that incentive to actually keep developing the network, right? Because how are you making money, right? You could charge developers for using your API in their apps, but that's probably, I actually doubt

Starting point is 00:15:09 that's necessarily going to make you enough money to even keep the lights on necessarily, right? So you really need something that's more efficient. And that's actually where blockchain comes in, right? So the thing that blockchains are really good at, and the reason why actually fully disrupting the architecture of Twitter from a centralized server to a blockchain can really pay dividends, which is that blockchains are really good at mixing money and other things, in this case, social, right? So when you build social media on a blockchain, you get access to completely new product features that you can transition to a fee-based model, a fee-per-transaction based model rather than just charging developers or ads like it is today. And the way that works

Starting point is 00:15:52 is you basically have microtransactions or macrotransactions that you couldn't do with traditional payment rails. So NFTs are the biggest example, but they're actually not necessarily the biggest, right? You actually want something that's more integrated with social. So there's creator coins that are tied to people's reputation, speculating on a post, speculating on how popular it's going to be. These kinds of product features, you could actually maybe charge enough fees, that you have enough of an incentive to maintain the network. Yeah. Joe, John, what questions do you guys have? My question would just be around the challenges that you think come along with this. Like what worries you about trying to make this happen? Yeah, absolutely. I

Starting point is 00:16:33 mean, I think that in general, you know, I'm just trying to do the most efficient thing for the world. And I think everybody is, you know, Elon included. And, you know, I think that, I mean, the good news is that I think that blockchain's kind of like disruptive march, at least technologically is almost there, right? We're almost, I mean, with Deeso today, you're at a point where you can store a post for one 10,000th of a cent, which you couldn't do even last year, right? So from a technological standpoint, we're there. I think the question is whether we have the products, the social products that we need to disrupt Twitter. So basically, my theory is that blockchain. So maybe just to go back a second, blockchains are really good at micro transactions,

Starting point is 00:17:16 macro transactions, and what I call regulatory arbitrage, right? So basically, if you're trying to build something on traditional Twitter, you're bound to the traditional payment system. And that's really bad at small transactions. There are very high fees on small transactions with credit cards, but it's also bad at big transactions. So, you know, there's a risk of chargebacks that makes big transactions really inefficient with the traditional payment rails. Blockchains can fix that. They can actually make both of those extremely efficient. And if you think about it, the lack of blockchain, the lack of good micro and macro transactions is a big part of the reason why the early internet went into the ads-driven model rather than something based on charging fees

Starting point is 00:17:53 or something even based on blockchain, right? And so I think that the question is, are there new products that you can build that leverage microtransactions and macrotransactions in a new way that are strong enough for users to want to use them instead of Twitter, right? And so I think the answer is absolutely yes. And I think in the next year, we're going to see products that mix money and social media in ways that we haven't thought of before. And that's actually going to break the network effect of Twitter's currently centralized model. But if we don't see those products, it'll be a lot harder to transition from the currently centralized model to a blockchain based one, which again, can be more efficient because it's open and anyone can

Starting point is 00:18:36 build on it. Yeah. So. And I have a question, excuse me. My question would be regarding around like lots of people are trying to build these decentralized social medias and all different avenues, normally just copying kind of what the tech giants are doing, I believe. How do you guys win? Yeah. Yeah. I mean, so I think basically with any blockchain, the way that it works is, and this is a really interesting phenomenon, but blockchains are actually very, I call it anti-fragile, because all it takes is a single killer app being built on a blockchain in order for it to actually dominate whatever field that it's in. So the way that that works is with Ethereum, for example, right? You started, you know, when Ethereum launched, everybody was kind

Starting point is 00:19:21 of like, okay, what's the killer app that's going to make Ethereum take off? It ended up being ICOs and in 2017. And the reason why a killer app is kind of anti-fragile is when you have a killer app that's built on a blockchain, what happens is that brings users and content and wallets that then entice other developers. They incentivize new developers to keep building on that blockchain, which brings more users and more apps in a virtuous cycle and creates a network effect, right? So Ethereum actually built this around financial applications, right? So when ICOs came, people were like, hey, I can raise money in a way that I couldn't before, do an ICO. That was the beginning. But then all the wallets that got onboarded in 2017 from all of that activity incentivized the creation of Compound and Uniswap and Yield Farmers and all that stuff, right? So the exact same phenomenon is going to play out with social and with a blockchain, a social blockchain like Deeso, where a single killer app that mixes money and social and interesting ways is going to create a seed of content that incentivizes other developers to start building on this platform in an unstoppable loop.

Starting point is 00:20:31 And we saw the beginnings of that with a prototype app we launched a year ago called BitCloud that got, now we have over 1.5 million wallets on DSO listed on Coinbase. But it was all because that single app, BitCloud, incentivized hundreds of other developers to build on the platform. Now, BitCloud's not even the most popular app. It's diamondapp.com, there's Supernovas, cloudfeedapp.com, all these other apps. But it was from that seed that that network started to grow. And once we have a more retentive app, an app that your mom is going to actually use, which is on the way, I think in the next few quarters, a lot of people are launching things, that's going to start the network effect for real. Gotcha. Nader, one of the things that I think is really interesting as well is talent retention.

Starting point is 00:21:15 So if you think about Twitter, I can only imagine just the kind of turmoil that's going on internally. Are we going to keep the existing executive team? Is Elon going to buy it? Now, all of a sudden, Toma Bravo, it sounds like Blackstone or somebody is trying to get involved or Carlisle, whoever, like all these people now are like, oh, Twitter's for sale. Like, let me I've got a bid. Right. And so if you're an employee, you may just be like, ah, I don't even know who's going to be run this place in six months. Like I may just exit stage. Right. How does that change when you have something that's decentralized and it's more of like open source? Do you get better talent, worse talent? Is it kind of the same distribution? distribution? Like, how do you think about the talent that is needed to build this stuff? And

Starting point is 00:21:58 like, which system is better, if there's one that's better? Yeah, and it's super interesting, because you can run decentralized organizations in lots of different ways. You know, you can actually have a team building a blockchain that looks a lot like Twitter, right, if you wanted to. With Deeso, the way we've chosen to structure it is we're fully remote. And obviously, everything is 100% open source, just like Bitcoin, so anyone in the world can build on it. And what we've found is several advantages from that open source model is, you know, one of them is that basically people, because they're just passionate about what we're doing, they start contributing to the open source code base. And then when they're doing that, we actually get to see how good they

Starting point is 00:22:38 are. And then we're like, hey, we'll pay you, you know, a combination of Bitcoin and Deeso, you know, to start working on this. And so I think it's just a way, way, way better funnel, a pipeline of talent. And you're really unlocking ingenuity from all over the world. I mean, you know, we have a couple of college kids who have contributed more code to DSO than, you know, some of our engineers, you know. So I think what changes basically, especially if you embrace the fully decentralized model for development, is the fact that your open source brings people in from all over the world to build the blockchain. And yeah, you're really just accessing a much bigger pool of talent. But then we're not even talking about the app layer on top

Starting point is 00:23:21 of the chain, right? So with Deeso, there's the Deeso blockchain, and then there's the apps built on top of it. Just like with Bitcoin, there's Bitcoin, and then there's all the exchanges that allow you to trade it in a centralized fashion. With Deeso, the key is that the app layer can actually be decentralized, right? So with Twitter, we're kind of looking at this one team that controls this one app that we all use. But when things get decentralized, anybody can build an app on the Deeso blockchain. And so instead of having one team, one app, it's thousands of teams, thousands of apps from all over the world. And what's really cool is that basically if someone, let's say in another country, like let's say in India, believes that he can do a better job of

Starting point is 00:23:58 running a feed algorithm for people in India, he can do that with no barrier to entry and no cold start problem by building on Deeso. So suddenly you get a feed built by someone in your local country, probably actually competes with a few other feeds built by other people in India, rather than using a homogenized McDonald's like interface that's built by people in Silicon Valley, not even in your own country. So the app layer gets decentralized, as well as the development of the of the infrastructure, right? So it's very interesting. Yeah, it's fascinating to kind of think through this. When you think out, you know, 20 years, is every single social network going to be decentralized and open source? Or is it likely we'll start centralized and

Starting point is 00:24:42 decentralized? It's a great question. I mean, so I think the speed at which we get to a dominant decentralized social network, let's say a decentralized social network with like a million users, right, let's say, is I think that that happens faster if there are really exciting combinations of money and social that blockchains can do that are hard to do in the centralized model, right? I'm very optimistic that that's the case. And for that reason, I think in the next year, we're going to see some really interesting stuff launching, especially on Deeso. So that actually determines kind of the speed at which a decentralized social platform becomes popular. And then the level of dominance, you know, if you have that one killer app, that new kind of

Starting point is 00:25:26 experience, I think it becomes very dominant very quickly, right? Again, because you have all these people all over the world that start building on it in this very decentralized fashion, you're really unlocking the globe's human ingenuity. So I think if we hit that killer app, the takeoff to being 100 million users or more actually can happen really, really quickly. So I would expect that in a few years, there's at least one social network built on a blockchain

Starting point is 00:25:56 that has 100 million users across its application layer. But I'm ever the optimist, right? So I hear you. What do you think, if you had to pick right now, what is the current social network that is most likely to end up getting to kind of open, decentralized, you know, new world first rather than the startups or the challengers? Yeah, I mean, yeah, I mean, you know, I'm obviously going to say Deeso, you know, which we're working on. No, no, no, no, like Twitter, Facebook, like the incumbents. Yes, yes, yes. It's a great question.

Starting point is 00:26:34 So I think an interesting thing, Pomp, is basically that Facebook actually saw this coming, right? Basically saw, hey, if you can build on a blockchain, there are all these different types of advantages that can lead to better products. And that's why they prioritized Libra, right? And Libra was, yes, it was a push for getting dominance over the money supply. But really, it's also building a better rail that you can then use to build better products. And so I think Zuckerberg said, hey, like, you know, we don't want to have to integrate with the blockchain.

Starting point is 00:27:05 We want to have we want to own the blockchain that we're going to integrate with for these new social products. And so he went that approach. Unfortunately, the government shut it down. I actually was kind of sad when that happened, because I think Libra could have really generated a lot of innovation and social, because it would have potentially shifted Facebook from that ads driven business model to that blockchain based business model in the most efficient possible way. And but, you know, that didn't happen, unfortunately. And it goes back to how difficult it is to do things that these heavily scrutinized companies like Facebook and Twitter. But, you know, I think that now the way that that existing dominant players decentralize is they integrate with a blockchain that's built externally. Right. Whether it's Deeso or something else, you know, whatever whatever becomes dominant, you know, for that novel social killer app use case, they integrate with it. If you're asking me, you know, to me, Facebook moves quite swiftly. You know, I think they'll be probably the swiftest to adopt whatever interesting killer app feature financial feature happens on on chain.

Starting point is 00:28:11 But but hey, you know, we'll see. Maybe maybe TikTok surprises us. I would be surprised if it was Twitter that leads the charge or pioneers integrating with a social blockchain. Yeah, it's fascinating. Where can we send people to find you on the internet? Yeah, thanks, Pop. Yeah, so you can go to Deeso.org. You know, that's where, you know, we talk about the Deeso blockchain and why it's important. And then aside from that, DiamondApp.com.

Starting point is 00:28:36 I'm at Natter on DiamondApp.com. And it's just that happens to be one of the most popular Deeso apps. Of course, there are hundreds of others listed on Deeso.org that you can use if you don't like it, but that's the one I use and you can find me there. Awesome, man. Listen, thank you so much for coming on. This idea of a decentralized social network and the battle between Elon Musk and Twitter is going to be one to watch. So we'll see how it plays out. I'm excited, man.

Starting point is 00:29:01 I think whatever happens, it's going to be good for the world and that gets me excited. So it's going to be fun. I think he's got an uphill battle, but we'll see what happens. I wish him, I really wish him luck. I really, I really want him to succeed. I agree. All right. Sounds good. See you later, buddy. Thanks so much for listening to today's episode. I really hope you guys enjoyed this one. Make sure you're subscribed on Apple, Spotify, or your favorite podcast player.

Starting point is 00:29:24 And if you're looking to try to transition to get a new job in the Bitcoin or crypto industry, we've got you covered. Head over to palmscryptocourse.com. We've developed a curriculum with the top teams across the industry. it's a three-week intensive training program with over 50 events packed into that three-week time period go to pompscryptocourse.com to learn more and i'll meet you guys for the next episode

The Pomp Podcast - #931 Nader Al-Naji On Building Decentralized Social Media

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