The Wolf Of All Streets - Why The Founder of Twitch Believes In NFTs & The Metaverse | Justin Kan, Fractal

Episode Date: January 13, 2022

As a young entrepreneur, Justin Kan dreamed of making one million dollars off of his video streaming platform called Twitch. Never in his wildest imagination did he suspect Amazon would acquire his company for a billion dollars just 7 years after launch. Now Justin is considered one of the greatest though leaders navigating Web 3.0, the metaverse, and NFTs. This future looking episode covers a wide variety of big ideas that seem far-fetched, but are actually unfolding behind our screens at this very moment. -- Arculus: Arculus is the new crypto cold storage wallet that combines the world’s strongest security protocols with an easy-to-manage app. Store, swap, and send your crypto all with a simple tap of your Arculus Key™ card. Order the safer, simpler, smarter crypto cold storage solution today at: https://thewolfofallstreets.link/arculus -- If you enjoyed this conversation, share it with your colleagues & friends, rate, review, and subscribe. This podcast is presented by Blockworks. For exclusive content and events that provide insights into the crypto and blockchain space, visit them at: https://www.blockworks.co ーーー Join the Wolf Den newsletter: ►►https://www.getrevue.co/profile/TheWolfDen/members

This episode is sponsored by Arculus and Bullish. Stay tuned for more information on both of them later in this episode. What's up, everybody? I'm Scott Melker, and this is the Wolf of Wall Street's podcast, where two times every week I talk to your favorite personalities from the worlds of Bitcoin trading, finance, music, art, sports, politics, basically anyone with a good story to tell. Now, 2021 was definitely the year of crypto, but we entered the year largely talking about Bitcoin and institutional adoption. But the narrative quickly changed throughout the year, heavily dominated by Web3, NFTs, play to earn, Metaverse. Well, there have been people who have

been building in that space and in the technological space in general for many, many years. We're probably not surprised by that development. One of them, obviously, is our guest today, Justin Kahn. Most of you probably know him for building Twitch and selling it, of course, to Amazon for a billion dollars. But he has a new platform and has been building heavily in the NFT and play-to-earn space. I really want to talk about that and what he sees as the future of the metaverse. Justin Kahn, thank you so much for joining us.

Thanks, Scott. That was a great intro. Yeah, I told you, I go totally off the cuff. Every once in a while, I nail it. And every once in a while, it's a butcher job. So I'm glad we did well today. All right, awesome. Yeah, well, thanks for having me on the podcast

and happy to talk about everything Web3 and anything else you want. Well, speaking of Web3, it's become somehow a dirty word already. We just rebranded it. We just rebranded it and now it's already a dirty word. What do you think about that? You know, I think that I've got to say, I was like my conversion to being red pilled on crypto happened over, you know, many years. And so I kind of understand, you know, if you had talked to me a year ago or maybe 18 months ago, I probably would have been like, well, I don't know what the use cases are. I don't understand

them. I don't get how this is valuable. You know, because I started buying Bitcoin in 2013 under the theory that like the FOMO, if Bitcoin worked, was going to literally kill me. So I needed to like have something, you know? And so I YOLO'd like something into Bitcoin. And then I was like, Ethereum came out and I still didn't really think it was useful. But then I was like, well, obviously other people think it's useful. So I invested in some crypto funds that were like covering because I was like, okay, there could be something here. And then some of my friends started crypto projects and I kind of follow along. but it was only like about a year ago where I was like really believed, like even as an investor, like I really believed as a more of an operator entrepreneur that there was going

to be the possibility of building more widespread apps that were kind of outside of DeFi. And I think that's what we're starting to see this year, like see happen in the last year. That's what got me really excited. Yeah. Yeah. Do you think that it's an unfair stigma around venture capital and Web3? Or do you think that those criticisms are partially correct? You mean like Jack's criticisms on Twitter? Yeah.

I mean, I think that Jack has somewhat made it a four-letter word, so to speak, Web3. And I think personally, it's a bit unfair. My opinion is at the end of the day, it matters not who makes the money on investing in the platform, but how that platform affects the user and changes their lives. I mean, I think that's a good heuristic. I think Jeff has a point, which is that a lot of VCs are investing a lot of capital, institutional capital into Web3 projects. And the devil's in the details, right? It's just like any thing that's like a joint stock company, right? Or something like that. It could be owned, there's many different flavors, right? It could be owned

by, it could be a co-op, all owned by the employees or the people who make the company all the way through a company that's owned by a single person, right? That's a complete dictatorship or family business or something like that. And so I think with a Web3 project, you see them started many different ways. Some of them are very community focused. There's some grant that's a token reward for the founders, but then there's like the majority of it is like distributed to the community in some way. And some are not right. Like some of them are more like, maybe more like a traditional company with investors and stuff like that. So I think it's, you know, this, it's hard to paint the whole thing with a broad brush. I think the

interesting thing about Web3 is, you know, I was here for the whole Web2 thing. Twitch was kind of maybe one of the successful companies that came out of that. The idea and ethos behind Web2 was like, and I have a lot of friends who benefited from this. It's like, you were smart. You went and built a website that aggregated a market of some kind, right? Like a bunch of people coming to exchange something, right?

It could have been Airbnb or Uber or like Twitch. Those are all forms of markets. And then, you know, you kind of, if you created it and you grew it and you worked hard, you get to like rent seek this market forever. So like, you know, the global vacation rentals market or the global like web streaming market, like these are pretty big markets. And so, you know, and that's not really, we weren't explicitly doing it at the time, but then you have to think like, is that the way you want the internet to work? And so I think the idea that there is a, you reward the people who make the community,

you reward the people who make the market in some format, that ethos, you know, which is embodied in a technology, but not necessarily, you know, you know, it's like, I think crypto is both the technology and the ethos. I think that's interesting. And I think that's, for a lot of people, they're saying, oh, that's the way the internet should work. And so that's what's driving these, you know, a lot of the crypto interest and enthusiasm, I think today. Yeah, that's interesting. It's to my point, I think that a lot of people's main criticism is that it's not fully decentralized, or doesn't live the dream of that full decentralization, but there's a sliding scale as you sort of touched on, right? And you can make massive improvements

without going all the way and maybe it eventually gets there. Yeah. I think there's probably different types of decentralization. You know, there's decentralization of ownership. There's decentralization of control. There's decentralization of, you know, like in a security sense, right? And I think that not all of them have to progress at the same rate inside of projects. You know, and decentralization is not binary. It's a scale, a sliding scale. And I think a lot of projects now are starting in a more centralized way so that they can do product development and iteration with the goal of moving towards a much more full decentralization along those scales. And it's like in any human relationship

or engagement, there's going to be some level of trust, right? So obviously here in some of these new projects where you might argue, oh, it's not fully decentralized. Yes, you're doing, there's some level of trust inside into the project owners, et cetera. But like, you know, it's, it's less than when, you know, in the full web two model, right. Where they're just saying, Hey, we can do anything what we want. We own your data. We can do literally anything to you. We can kick you off the website at any moment, you know? And so, you know, you can argue what's this degree of decentralization, but I think it's a good thing generally that we're moving to a world where there's more decentralization along all those

axes. I 100% agree. It's not as binary as do I trust Mark Zuckerberg or not, which is I think where people get lost in that battle. So you talked about going down this rabbit hole and starting to really become a believer in the last year, year and a half. Well, I guess becoming a believer as an investor or on the sidelines and then choosing to actually innovate and build in the space are two very different things. So can you talk about what you're building and why you decided with probably endless options of things you could do to build in this space? Yeah. So, you know, it really happened because I'm primarily interested in, you know, consumer apps, apps that people interact with, normal people interact with that

make, you know, that normal people touch on a, on a daily basis. Like, I think that as an investor, you know, investing in across the space and, and, and DeFi and things like that were like, okay, you know, that's interesting to make money, but it wasn't really my passion. Right. And so for me, I think when I, there were two kind of elements that convinced me that like, this would be something that's interesting to build on myself. Right. And those two things were one, like, I think there were a lot of innovations with layer twos or later ones like Solana, where technically a high transaction rate application is now possible, you know, with Ethereum layer, you know, with

Ethereum, it's like, yeah, if you're doing DeFi transactions that are tens of thousands of dollars, or you're buying like, you know, NFTs that are like, you know, fine art or something like that, that are, you know, high price point, then like the gas fees and like low transaction rate don't really make a difference. But if you're trying to do something like in gaming, where you might do many transactions, like I think that starts to become more important. So I saw what my friends at the audience project were doing with their music app. And, you know, I was like, oh, they made a music app that is completely transparent to the user, or opaque, sorry, to the user that it's a crypto when you first log onto it.

You don't have to install MetaMask. You don't have to do anything special. It plays like a normal Web2 app. And that was very interesting to me. And then I have some friends who started a company called Braintrust, which is a decentralized marketplace for freelancers, for programmers and designers. And for the longest time, I didn't really understand why it should be crypto. And I was talking to them, to Adam and Gabe, and they were like, look, this is a way to get, they onboarded 100,000 freelancers before they launched.

And they were like, this is a way that we can get this huge army of people on our team. And it's a, you know, if you think equity, like, and deploying equity to your couple hundred employees in the Silicon Valley company is a great way to motivate people. Well, think of this as a way to distribute ownership among a much broader base of supporters all around the world that make your community and reward them accordingly for doing all the work. And to me, that was like, oh, that's obvious. That's how, if we were creating Twitch today, we would have done it in a Web3 way because the people who do the work deserve to be compensated and just rewarded for it. Will we see a platform like Twitch that operates in that manner on Web3? So I've talked with my friend Balaji about this a couple of

times. And one of the things he thinks is going to happen, like there is a strong network effect among these existing platforms, right? Like now people go to Twitch, they type in twitch.tv in order to discover, you know, some stream. They go, you know, it's just like, I might go to Netflix, not to watch a specific program,

just to see what's on, you know, like turning on my TV or whatever. I think there is a strong network effect in the Twitters, Twitches, Reddits, et cetera. I think what you will see is these companies potentially embracing aspects of decentralization. You know, reportedly Jack was interested in doing that with Twitter. You know, there's probably, you've probably heard rumors of other companies. I think there is a lot of these CEOs are interested, you know, they came of age in the internet

when the promise was openness, right? And like, it turns out it's a really good business model not to be open, but like from a values perspective, I think a lot of people are interested in figuring out how to create a free and open internet. And so I think the opportunity is for some of these big companies to embrace decentralization and to, and there's a huge economic motivation to do that as well, I think.

So that might be one possible way that it happens or, you know, there are upstarts that are trying to do social and network effect companies. I think that's, it's hard, but you know, I don't know what will happen. Maybe the next social media will be in a Web3 format. It's interesting because I think a lot of people ideally would love to see a Twitch that operates on blockchain rails. But even with Solana and its speed, I don't think maybe you can correct me if I'm wrong. You'd know much better than me, but I don't think that you could operate the entire Twitch platform on a blockchain. I don't think any of them are fast enough or can scale, but you can still have

the aspect of incentivizing the users and the people who are actually creating it and have sort of that aspect of what we love in crypto. Am I off base or I mean, could this operate on a blockchain right now, or is it way too much information happening way too fast? Well, I believe that Theta, you know, one of the projects that I kind of advised early on is doing video live streaming and videos, and, you know, they have their whole blockchain now has, you know, built a lot of technology that can support scale. I don't know what that's, you know, I'm not up on it technically, so I don't know the full extent of that scale yet.

I think that it's kind of like you said, you could do it progressively, right? You don't necessarily need all the video streaming. You could do an incentivization model, which I think is perhaps in some ways the most important model and have that be on a blockchain without necessarily having all the bits from streaming, right? Like the streaming bits going through blockchain. We already have like pretty good streaming solutions that are high scale right now. So, you know, that would be, that would be one way to do it, you know? Yeah. So what are you building exactly? Obviously, Fractal, you co-founded, recently launched. Can you talk a bit about what that is and why you're building that? Yeah. So, you know, I watched over the last year, I watched this, you know, looking for projects to work on that I thought would be interesting, you know,

and bring something new to the world. And I've been thinking about digital spaces for a long time, obviously with Twitch. And then recently, you know, talked to a lot of companies as an investor of like, that are, you know, trying to build different parts of the metaverse and really just trying to understand and like, think about what, what that's going to look like, you know, in the, in the future, is it like, are we ready for like ready player one or, you know, what's, what's the, what's the digital world going to look like? And, um, saw NFTs happening. And for me, NFTs was this light switch of like, okay, it's, if people are valuing digital assets, you know, not, not just currencies,

but digital assets for the first time, like there's durable value in these digital assets. And, you know, if I just, as I thought more and more about it at first, these were mostly art. And so maybe community, like things that let you into a community or something like that. But it became very obvious to me, gaming is the next step. There's lots of people working on gaming. There haven't been that many games launched themselves, but obviously, you know, their gaming has a 20 plus year history of people valuing in-game items, right? Like whether it's back in Ultima Online, which is the very first MMO that I played or something like World of Warcraft or EverQuest or RuneScape all the way through to like Fortnite

skins and Counter-Strike skins. People care about these things that they have in game and are willing to trade them. And there's like economic value, black markets, like trading on eBay or these like random escrow sites that kind of prove that. And so to me, it became very obvious like the next wave that's going to be even bigger of NFTs is durable in-game assets that are for blockchain games. And by creating an open economic system inside your game, you could unlock a lot of value. And so Fractal is a marketplace for players to discover, buy and sell in-game NFTs or gaming assets. And the goal is really kind of run the same idea playbook that we did with Twitch, which was build a really community focused around gaming, specifically gaming streaming. We want to do the same thing for gaming NFTs and partner with the

best gaming companies out there to help them meet and match with players. You talk about community. I read that you guys built over 100,000 person Discord channel in a matter of weeks, maybe a week. It was, I think, about 10 days. Yeah. Clearly, clearly there's something happening there. Yeah, we built it pretty quickly. People were really excited about the project.

I think really there's a lot of excitement around gaming, blockchain gaming. And obviously there's been some big successes so far, but I think we're just in the first pitch of the first inning here. There's so many people who are from a gaming background now that are working on games and we're going to start to see really fun game experiences come out. And so I think there's this huge amount of excitement that we were able to kind of harness. Yeah. So let's suspend reality for a bit. You kind of touched on the fact that we're at the very first pitch of the first inning, which I a hundred percent agree with.

What does the metaverse look like in a year, five years, 10 years? Is it the ready player one reality that you sort of touched on, or is it each person sort of finds their game and that's their metaverse is it a way that the you know the real world comes to interact with us without being sort of sort of you know in our oculus or whatever what's your vision for what the metaverse will become yeah i think it looks a lot like websites right like you know there wasn't one monolithic website that like everybody used for everything there was it turns out that there's a lot of different sites that fulfill different functions. And I think similarly, there's going to be a lot of different, you know, metaverses or universes, digital universes where people are that fulfill different functions for people. And so there's,

I see all these different cool experiences coming out. You know, people are creating MMOs. People are creating digital spaces. There's a project I just did a podcast with called Portals, which is pretty cool. They're building on the Solana blockchain and it's like a digital house, you know, where you can digital apartment and they're all laid out in a city and they're going to do like the city, you know, downtown, you know, they're building a downtown so people can kind of buy their property and then host anything like a meetup or party, or they have their own like, you know, they're building a downtown so people can kind of buy their property and then host anything like a meetup or party or they have their own like, you know, digital space. And, you know, it's kind of like Animal Crossing or something like that. You know, people get that

creative like nesting vibe and they have a lot of amazing creation tools already. And so, you know, I think that we're going to see something like that. There's going to be more traditional games, you know, RPG games and, and things like star Atlas, where it's like a whole, you know, space universe. And the thing that about NFTs is like the economic value that you put in, you'll be able to take with you. Right. So like, if you invest all this time in like building star atlas spaceships and like you know earning game you know currency in the game or whatever you'll be able to um you know it's all digital and it's and it's it's all on blockchain so what people will be able to build experiences

on top of that you know it'll be able to be financialized you'll be able to sell it you know kind of all these people will be able to build new developer experiences on top of it. And that to me is like the most interesting thing is the idea of like, what kind of programmable experiences could be created on top of these atomic units? You know, go ahead. Sorry. Yeah. Like if you look at like, like if it's kind of like HTTP or HTML was invented, right? Like, and when, when, you know, the web was first invented, like you would never have been able to guess that that would turn into Twitch, right. Or Airbnb or something like that. Like you'd never have guessed that you're just like, at first it was just like web pages and links and very basic. And then people started to do basic commerce. And then there's like infinity amazing experiences now, right. On the web. And I think that same is true. It's like, okay, you're going

to create all these atomic units of value that represent things in games. You know, they can represent characters or items or, you know, digital property or land or whatever. And like, what are the things that people are going to create downstream experiences for people. And to me, that's like really exciting. Guys, I'm so excited to tell you about this new crypto cold storage solution called Arculus. Their cold storage technology keeps your crypto keys off the internet and on an Arculus key card. With no cables and no USB connections, it insulates you from the thousands of hacking attempts that happen online every single day. You can store, swap, and send your crypto all with a simple tap of your Arculus key card. And if someone were to get a hold of your card, it doesn't even matter

because they have three-factor authentication, ensuring that the only person with access to your crypto is you. Guys, you can check out Arculus at thewolf of all streets.link slash Arculus. That's A-R-C-U-L-U-S. Secure your assets, secure your future with Arculus. What are the wildest ideas? What are the wildest ideas of what that could become? Because obviously, I mean, we all like you said, I think we all have this sort of shared vision, understanding from existing games, right? And what it can be and what we can build, but what's the craziest thought of what that could look like in 10 years? That's the fun. That's the great thing is I don't even know. All my ideas I think are boring ideas, right? I'm like, there's going to be lending, right?

Like lending is like a, such a boring idea. It's kind of obvious, but like, you're going to be able to take your digital assets and then like lend them to other people. And there'll be, there'll become like assets, you know, yielding assets for you if they're, you know, something valuable. Just like you could put your car and get around or something like that. But I think that's a really boring idea, to be honest. Or you could imagine like a digital land, like there could be like people would create mortgages for like you to buy like a digital piece of property if it's like, you know, kind of mirrors the real world, actually. I think everything that happens in the real world is going to happen in the digital world, but then there's going to be new and crazy experiences that we haven't even thought of yet.

And I don't know what they are because I'm probably not the most creative person, but I'm excited to see what they are. We get to do it, but as aliens. It's like the real world, but we can be aliens and animals and creatures. But I wonder if we're going to really, you know, a few years down the road, maybe not my generation, I don't know, but younger, if you're just going to plug in and that's going to be the real life and sort of your now, what is your real life becomes your second life? Yeah. I mean, I don't, I don't know. I think there's a lot of things that real

life, you know, in the, in the, in the physical world have going for us still, you know, I've used Oculus and stuff and I don't think we're quite, quite there yet, but I think it's just like flavors of identity, you know, just like in your, in your real life, you have probably have different, you know, social spaces, like you might go to school, you might have a job, you have friends, you have your family and you present as a different person in slight ways, you know, not maybe, you know, not fully different, but like you're, you're different in the way you present as a different person in slight ways, you know, not maybe, you know, not fully different, but like you're, you're different in the way you present at work versus the way you present to your family versus the way you present to your kids or your friends, whatever. And the

digital world just expands that number of spaces where, you know, you might be a completely different person with different motivations and different relationships when you're inside of, you know, portals or you're inside of soul chicks. I mean, it already exists, right? It exists on Discord, on Twitter, inside of MMORPG games. So it's like, I'm not telling you something that doesn't exist already. It's just going to be further, deeper and more expanded. Yeah. What's interesting is these really aren't new ideas, right? I mean, the creators of Second Life and the Sims and stuff must be scratching their heads and just wondering if they were too early, right? Do you think that a lot of the ideas that we had before,

just the technology wasn't ready or people weren't ready and now we're finally getting to a time where like we can do it at scale? Yeah. I think part of it is technology enabling people to be in the right mindset, right? Like it's like, you know, all of this could be done with, if you trusted a centralized authority enough, like you could, you know, people did ascribe a lot of value to like Fortnite skins or something like that. Right. And like if Fortnite made it like an open economy, that would probably like work like 90% of the way or maybe 50% of the way. You could probably debate that, right?

In terms of people having a lot of faith on top of it. The US dollar is backed by centralized authority and works fine for a huge amount of transaction volume, right? You don't necessarily need Bitcoin, but the decentralization of Bitcoin gives people a lot of trust in a different way, right? And so I think the same is true of kind of like NFTs and Fortnite skins, right. That you could have a whole economy

on Fortnite. It's just like psychologically, both the owners of the company, they're, you know, Epic. And then also like the people probably weren't there yet. Right. And so now NFTs and like the technology behind NFTs and putting these assets on a blockchain is enabling people to be there mentally to say, oh, these digital assets have real value. You know, I could spend time earning them and that's like not a waste of time. I can like trade them and they're owned by me, you know? Yeah, I always seem to come back to this, but Axie Infinity is an example of what's possible to me.

It's really mind blowing what happened to it this year because it's not a great game right and it's very complicated for people to get into like your average person doesn't necessarily know how to open a metamask wallet buy ethereum transfer to a ronin wallet start playing this game but people find a way and people that maybe you wouldn't have expected because the amount of money that they can make doing this is just more than they can make in their real lives. So I try to imagine that when it's actually Fortnite or, you know, one of these much better games that people really love or what can be developed. I mean, if people will play Axie Infinity for a living and it's kind of like 90s Tamagotchi, right? Like what's possible when this does scale to the best games in the world?

Yeah. And obviously they're going to be at a much different scale that much, you know, and the economies will be huge. You know, the economies will be the size of countries. Yeah. And why would you ever work in the real world again, if you could go play a game and make more money? Well, you know, as a founder of Twitch or one of the co-founders, I'm not like the, I can't say that like, you know, making money online is bad. I think it's really empowering for a lot of people. But, you know, it's good to have a diversity of jobs where people can try different things that resonate with them. Like, I think some people will still want to work in the real world. Yeah.

Yeah. I certainly don't mean everyone. I just mean that there's a lot of people. There's going to be a shit ton of people who are going to want. Exactly. Yeah, I certainly don't mean everyone. I just mean that there's a lot of people. But there's going to be a shit ton of people who are going to want, exactly. There's going to be a shit ton of people who want to work in digital jobs in online inside games or a game. Who may not have even had access to opportunity in the real world.

And that may really be like where they're driven to go because they at least have a shot, which is pretty mind blowing. I mean, it's 100% true. The internet's been this amazing equalizer to bring opportunity to the corners of the world that, you know, don't necessarily have it. And I think it's very fashionable in some circles. Like when people talk about, actually a lot of people outside of crypto are like, oh, you know, it's like a Ponzi scheme or like people are just doing this like meaningless work or whatever, but you know, obviously they're doing something that there's a, it's a better alternative to what they were doing before, you know? And so now can that be improved? Can there be a diversity of

experiences for sure. But like, I think that it's an only good thing when you create more opportunity for new kinds of jobs that reach more people around the world. Twitch did that, right? I mean, I don't know if that was your intention when you started it, obviously. And I, you know, obviously I was never huge into gaming, but I was always superficially aware of Twitch. But then I saw, you know, crypto guys start using Twitch to do trading live streams and all these other sort of things. And I was a DJ for 20 years. And when COVID hit, every one of my friends started streaming live sets. And I found myself on Twitch watching all of my friends started streaming live sets and I found myself on Twitch watching all of my friends DJing every weekend, you know? And so I, maybe that speaks to the fact that you're

saying like you sort of, we build these things and we have no idea what they're going to be in 10 years. Did you ever think that that's what Twitch would become? Was that part of the vision? I mean, of course not. Right. I'd be lying to you if I was like, yes, that's what we thought all the time, you know, from the beginning. At the beginning, actually Twitch started off as a site called Justin TV, where we streamed everything. Like it was, anyone could broadcast anything. I used to watch. Yeah. The funny thing is like a lot of these, you know, hot tub streams or IRL streams or DJ streams, that's stuff that like people tried 10 years ago, didn't really have an audience. And then now that Twitch has aggregated this amazing audience and has diversified, it's kind of like we narrowed our focus to grow and then

now it's opening back up. And I think that's really, you know, personally, that's really cool to see, you know. I mean, I remember Justin TV, actually. And I remember following, I mean, it was you with a webcam on your head, right? I mean, basically, and you were like the real life Truman Show. Exactly. It started off from, you know, really starting from the bottom, but you know, it was a lot of fun. We had, it was an experiment. We did this experiment to broadcast my life live to the internet. Now it's 2007, so 15 years ago, and that's how it started. And then that's the company that eventually turned into Twitch, you know, and eventually now it's, it's a thing. Yeah. And did you ever, when you started Twitch, think that you'd be selling it to Amazon for a billion dollars? No, I remember the beginning where we're like, if we can each

make a million dollars, we'll be set like that. It would be insane. You know, that was like a 2006 or whatever, when we were starting off. So obviously it's gone pretty well since then, but yeah, like you'd never know what's going to happen like that's why i really love web 3 actually kind of closed the loop it's like it feels like the early days of when we were building web 2 it's like people are just experimenting with things we don't know what the atomic units are and we're just like trying different stuff uh and seeing what works and there's a lot of like excitement around building again, you know, versus I think the last 10 years of innovation on web two has mostly been

about business model innovation. You know, it's not been technology. It's like, okay, like we can put, you know, X service on the internet, or Y service works. So let's put X service on the internet. And like, you know, or this model works in this kind of enterprise SaaS. So let's like bring it to this other kind of like enterprise software that hasn't been SaaSified yet. Yeah. Just like not, not as interesting. Right. We obviously have this example where Facebook rebranded to meta and is effectively, I mean, arguably like the biggest, you know, one of the biggest web two platforms in the world is effectively saying, Hey, we're transitioning

to web three, right? We're going all in on this. Do you think that Web2 and Web3 sort of become separate and parallel rails? Or do you think that we eventually have this just transfer of Web2 sort of blends in and becomes Web3 because it's the better way? I don't know. I think there's an innovator's dilemma with Facebook where will they truly embrace Web3? You know, they kind of tried to with their uh libra project which

i renamed i can't remember what it turned into libra then dm and then they started using paxful stablecoin basically in their novi wallet yeah yeah so like um you know i don't know i haven't been you know like i said i don't like really i'm not like a d5 person i don't so i haven't really followed it closely but like it just seems like i I'm not sure that that didn't turn into anything. Like, can they, if, you know, they have like, they have this entrenched, you know, it's like, if you are a existing Web2 company, you have the opportunity to, you know, you could, I don't know, create a, like Twitch, for example, Twitch could do this, right? Because I know Twitch is the best, right? Twitch has these cells bits, right? All the bits are like, it's like a Twitch centralized currency, right? And those are rewarded used to buy things and reward streamers

in the chat. And like, you could make that whole thing a decentralized token and reward all the people who are participating in that ecosystem tokens for like being part of it. And then your, you know, your, your streamers would share in the upside of like, you know, if there was like growth in the value of these tokens and maybe create some sort of deflationary mechanism so that there's like built-in growth potentially. And then Twitch could hold back some like large percentage of these tokens for themselves as like the way to accrue value to the company for doing this. They could do that, but there's a huge amount of risk. And it's a massive innovator's dilemma to take that leap.

And you're putting at risk this business that's probably worth $10 plus billion. And so are they going to? I don't know. I think they should, but I think it's probably hard to make that decision. And so with Facebook, it's like, but their business is way better. Their business is two orders of magnitude better than Twitch. So are they going to do that? I don't know.

I think it's hard to make that decision. Yeah. Seems like a lot for somebody to basically give up all of their control and most of the monetary incentive to the people, which people is the dilemma that we have. And like, like you said, I mean, your average Facebook user probably doesn't care about putting on an Oculus and living in the metaverse, right? Yeah. I think, I think the Oculus, I think the hardware side is hard to do and they've done a tremendous investment in hardware. So I wouldn't underweight that. Like I do think that's potentially a very

interesting vector to me. It's like maybe starting to inflect, you know, I have more people who are, have an Oculus and they like use it like, as opposed to, you know, a year ago or two years ago. So, you know, that's something like, I even have one around here somewhere, but, but like, you know, it's just a question of like how much, what's the share of time that people spend within that versus on their phone or like on their computer or like outside or whatever. I don't know. I don't know how that evolves over time, you know? Yeah. But that would be the X factor because I think they have this, like, you know, this property that's the best version of it. And it's hard for people to catch up and

they're likely, you know, going to have this lead for a while. And so if it turns out that people want to spend all this time in, you know, inside of a virtual environment, then maybe they're really well positioned because they have like, you know, the app store and they can like decide who gets to be in there or not, you know, it's kind of like your iPhone. Yeah. I love my Oculus. I just don't love the idea of like Facebook knowing what I'm doing at all times inside my eyes. Not really ideal. And, but that, you know, and that sort of comes back around, like,

are you going to choose as an average person to live in the sort of Zuckerverse or are you going to choose to live in one of these more decentralized, even if not fully decentralized metaverses. Right. I mean, I think your average person is going to actually, maybe your average person doesn't care as much as I would like to think they do. And maybe your average person does go for the Zuckerverse. Well, I think that there's, you know, I would give people more credit than we think. I mean, I think it was very fashionable for the last five years, like during the Trump presidency,

people were like, oh, the average person is like getting their fake news on Facebook and doesn't give a shit. But I think the cool thing about crypto is like, it's an ethos and people are waking up to like, Hey, you know, there's this kind of like distrust of authority. That's I think a generational idea. And people are like, have, you know, interested in their own sovereignty and owning their own assets. And so I wouldn't be surprised if there was, you know, I think you're already starting to see that in the younger generations of like people who are like not as interested in Facebook or like big companies owning their shit. And so they want like want to alternative. So I don't know, you know, I don't know what happens,

but I do think that's a trend. Yeah. I think what you're talking about is the reason that so many of us are just so bullish on crypto in general, like metaverse, NFT, Bitcoin, it doesn't matter. I just don't think that people have the boomer, like buy shiny rocks and bury it in your yard mentality anymore. I just don't think they see a future like that. So listen, you've obviously, you've developed Twitch and then you became a partner in Y Combinator. So you've dealt with thousands and thousands of new ideas and companies,

I'm going to assume. Yeah. I think I funded 150 in my groups and then personally I've invested in 150 companies. We interviewed thousands of companies to get there. And over the years, Y Combinator has funded, I think, 4,000 plus companies. It might be more now. It's like 500 every six months. So it's a lot, you know. Right. With Coinbase being one of them, right, obviously. So, and being one of the most, the biggest success stories, obviously, in crypto. But we have a lot of people I know that listen and reach out quite often who have ideas in the crypto space and are looking to build them. What's the sort of very basic advice to a new entrepreneur who wants to

build something in the crypto space or elsewhere? Well, I think it's the same, like, you know, crypto versus non-crypto. I think it's really, there's the same, there's some tactically different advice maybe, but like, I think you want to start with figuring out what's the product of the, you know, what's the, what's the problem you're solving? Like whose problem are you solving? Identify the customers, talk to those customers and build a product that suits their needs. And then like create a very tight iteration cycle between those customers

and your product development process. You know, and obviously you need to recruit an engineer if you're not one to work with there. And, you know, I won't go into that because that's like, that's the question that everyone always has. Like, how do I find an engineer to build my great idea? But, you know, now there's lots of ways that you can learn how to program online. Right. And so, you know, by way of explanation,

like that's what we did with Fractal, right? We started Fractal, working on Fractal probably just over a month ago, so maybe five weeks ago. And we, you know, I recruited some friends of mine who were on the engineering and product side. We went, spec'd out like, what's a, you know, what's a very basic marketplace look like? We started building that. We started talking to game companies. We, and the goal is talk to game companies. It's the same playbook as Twitch. It's like at Twitch, we were like, let's talk to the streamers. How do we make your life better? That's what we asked them.

How do we make your life better? What do you want? It turns out they wanted two things. They want more fans or love, as my co-founder Emmett calls it. And they want money, right? Because they want to be able to do this for a living. You know, it's not greedy.

It's like people want to be able to do what they love as their profession. You know, so we focused our entire efforts on how do we get them more views, more streamer, more fans, more viewers, on how do we get the more views more streamer more fans more viewers and how do we get them more money and then twitch became i mean that just started the flywheel and then twitch became twitch right so here it's the same thing talking to the gaming companies what do you what can we build to support you how do we make your launch of your nft

collections better how do we support you with software that you might want to integrate inside your game? And then we're just building that and then repeat the cycle over and over. You touched on it. It's been five or six weeks you already started and you have a fully functioning business, which seems kind of mind-blowing if you think about it. I don't think anyone could really launch that fast

in previous generations. And I think that that's something that you can actually do now. But that means you're obviously at a very beginning level of what you're intending to build. So what do you see the future of Fractal specifically further down the road as you iterate further? Yeah. So it's really about empowering. I think with any business, you have to think, who is your North Star customer? For us, it's, it's really about empowering, you know, I think with any business, you have to think who is your North star customer, right? For us, it's gaming companies. Like I know

I don't want to be a gaming company because I don't think I'm creative enough as a gamer, you know, game creator to like know what's going to work. But I do think people are going to recreate really incredible experiences here. And I just want to build the software and community tools to support them. And so, you know, what we know what they want, they want to like drop their NFTs. They want to have a successful sale. I think in a lot of ways, the NFT sale is the new Kickstarter to launch a game, to raise capital for a game. One of my Twitch co-founders just launched his own gaming company and they sold, you know, NFTs as a pre-sale before Fractal launch, unfortunately, somewhere else.

But he sold millions of dollars of them to fund their company. And that's pretty cool, right? Like you don't have to raise venture financing necessarily or you don't have to raise as much to do it. So he started that, he kicked that off. And then now, so I think one of our, the way what we're doing is we're figuring out

how do we help people do, you know, impactful, create impactful marketplaces around their NFT collections as, you know, one part of it. And then eventually it's like, how do we help them bring those marketplaces into their games? How do we help them build tools to to you know manage their nfts and like support these nft collections um and maybe the interactions that players are going to have

with them um how do we help them market better to our audience um there's a lot of specific features i guess like that we've heard from people of like what they want but you know i won't go into those because they're kind of esoteric but like you, it's basically the idea is let's support the games, the game companies as best as possible to have the highest impact possible. Right. You don't, you don't need to invent or create the coolest game. You just have to, you know, give them the tools that they need, the sort of the picks and shovels approach for all of these games. Exactly. I'm not going to invent the coolest game. Like I already know that,

like I'm, you know, and so the picks and shovels and, you know, if we do right by the gaming companies, we do right by the players. That's the most important thing. You then you described the process of minting NFTs basically to fund a company. I definitely, you know, I'm a bit nervous that that will in some way at some point run afoul of whatever future regulation they're planning. I don't think it should, to be very clear. I just I'm curious as to how regulators are going to start handling that if it's really being used to fund companies. Well, I think fund a company might be the wrong word. It's really funding the development of game, right? And you can sell, I mean, imagine we were selling suits of armor, right? And you could buy a suit of armor, a commemorative suit of armor, it was $ and they sold you know whatever ten thousand suits of armor so they got ten thousand you know ten million dollars and then you know use that to build a fantasy mmo and if you bought a suit of armor you get to like have a character

in this fantasy mmo that would be like that's not a security that's a you're buying a collectible which is you know you're buying a collectible, which is, you know, the proceeds of which have gone to do the development of this game. And, you know, that gaming company should treat it like proceeds and they should pay taxes on it, right? If they don't spend that money in a year or whatever, right? Like, so there's a lot of like different rules around that versus selling a security. And, but, you know, if you just think about it philosophically it's not a security right it's i agree i also think 90 of the things that they think probably are securities philosophically

are not securities so i think i agree there and it's interesting because i mean one of the obviously one of the qualifications for being a security is that you're purchasing it with the intention of making a profit and you could definitely argue with a lot of these nfts people are just owning them buying them because they they want to own that NFT or participate in that game. And it really has nothing to do with selling it for a profit in the future. Yeah. I think that's, I think that's absolutely right. Right. Somebody could buy anything with the intention of making a profit, but I think you have to look, I mean, I'm not a lawyer, so take what you take for everyone listening. Yeah. But, but I think it's, it's pretty clear to me that a lot of people

are buying projects because it's like a collectible right like they're not buying and most the the the default reason to buy a baseball card or a comic book or a funko pop or whatever it's not because you're trying for most people it's not because you're trying to flip it right for most people you're buying it because you want to participate in this community. It's collectible. It's kind of cool. And that's the same. There's so many projects like Monkey Kingdom or something like that.

Or I just saw this one that I'm super jealous of that everyone has, which is the psychedelic NFT one. Yeah, it's pretty cool. And they're pretty cool pieces of art. And you want to participate in this project because it means something to you, you know, like this Monkey Kingdom one is like all about Asian heritage, you know, and like a lot of Asian entrepreneurs and stuff are supporting the project. So like, I don't know, that should be allowed. You should be able to sell digital assets, right?

And digital items. And, you know, maybe they have some in-game thing, but it's not like by default, it shouldn't be a security, right? Because you don't own any part of a company. You're not like, there's no proceeds being rewarded to you for like parties. Well, for the vast majority of projects, right?

Like I think some projects are trying to create something like that, but for the vast majority of projects, they're not rewarding you proceeds from that share of profits or something like that. So it's, yeah, you're just buying a digital in-game asset. Right. And you talked about being friends with the guys from Audius

and then sort of being a bit of an inspiration. And I think that that's one of the most interesting stories surrounding NFTs is the ability for creators, musicians, artists, whatever, to really take back control of the way that they monetize or engage with their audience. And I think we're going to see just huge movement in that space. I mean, I think NFTs have been an incredible boon for the arts, right? Like where else could a young artist, new artists without that much, you know, following into the like gallery fine art world, be able to, you know, sell millions of dollars or even hundreds of thousands of dollars or even tens of thousands of dollars of their art into their audience. The idea that NFTs are really an

infrastructure. Let's think about fine art. The previous fine art world was an infrastructure. It was like, there were all these different art galleries with inexpensive places like New York or London or Aspen or Tokyo or wherever. And then there's all these like highly paid salespeople who would like hype the shit out of like people that they picked, you know, oftentimes they would have a financial reward for doing that. And then they'd be shilling these, this art. And then, you know, someone could like get in that world and rise up. Right. But it was affected. It was like not accessible. It was like only promoted a very few number of artists. and there was like kind of this unspoken financial incentive among the you know the people who are participating in this economic market to like hype the shit out of like certain artists and you know the nft world

has basically done what the internet did for you know information it's like open that up to everyone right like anyone can just create their own nft collection they can pipe themselves up on twitter they can like you know if their art is cool and has merit, people will say, that's cool. I want to buy it. And it's created this new engine, alternative engine for artists to make money and monetize that hasn't existed before. And started off with like maybe more digital, you know, digital art, like JPEGs and stuff like that. But it's, you know, going to move to music. Obviously, video games is something I'm interested in.

And I think everything else. And what's interesting is as a musician, you could basically create an avatar and a career entirely online without ever playing a show in the real world, right? And it was always about how many shows you could play and how much you could get paid to do it if you really wanted to make money as an artist. And that paradigm is somewhat

going to shift. Yeah, for sure. For sure. I was talking to my friend, Sasha Gray, who's a, you know, she's a DJ touring musician. And she was like, being on Twitch is way better. Everyone says that. I mean, anyone who like I toured as a DJ for like, you know, almost two decades and you're basically just tired and uninspired all the time. Right. I mean, it's like you play, you get on a flight two hours after your set's done, you go to another city and you try again. Right. That's a, that's a lot better if you can create that experience from, you know, your studio, it really is, you know, and, you know, and I think that that's huge. And I mean, to wrap that up,

you know, we talk about whether those are securities, those NFTs or not. Like if you went to a Rolling Stones concert and bought a t-shirt, it's merch, right? It's not a security. You could sell it for more, probably way down the road.

But I think for most artists and stuff, that's really what NFTs is, right? It's just like, it's a piece of merchandise. It's a piece of the experience. It's a piece of ownership, it's a piece of merchandise. It's a piece of the experience. It's a piece of ownership for the fan. 100%. It's a collectible.

Yeah, absolutely. So where can everybody follow what you are doing after this conversation and check out Fractal? Yeah. So Fractal Twitter is at Fractal Wagme. And you can check out our Discord. It's linked from the Twitter. I'm at Justin Kahn, Justin K-A-N.

You can find me on Twitter, Instagram, wherever. Well, thank you so much for taking the time to do this. I love the vision and I can't wait to have you back in like a year and see what the metaverse has become and how probably off base all of my ideas inevitably will have been. That's all right. It's an open ecosystem,

so there's going to be so much creativity. That's what I'm super excited about. I can't wait to see it. I just said Wagme, right? Or is it Wagmy or Wagme? I never know the pronunciation, but we are all going to make it. Wagme. Wagme. For sure. All right. Thank you. All right.