This Week in Startups - Crypto Roundtable: Twitter payments integration and latest Yuga Labs NFT drop | E1688

Episode Date: March 2, 2023

Vinny and Sunny joined Molly on another segment of Crypto Roundtable! Highlights included how Twitter could have integrated crypto  (2:02), the benefits and controversy of a national ID system (23:00), and Spotify's NFT experiment. (0:00) Molly kicks off the show (2:02) The future of Twitter payments  (12:16) Vanta - Get $1000 off your SOC 2 at https://vanta.com/twist (14:21) What does an ideal Twitter identity system look like?  (21:16) Squarespace - Use offer code TWIST to save 10% off your first purchase of a website or domain at https://Squarespace.com/TWIST (23:00) The benefits and controversy of a national ID system  (32:20) Predictions about the latest Yuga drop  (35:41) Contra - Get $500 off your first hire at https://contra.com/twist (41:54) Vinny breaks down the future of Coinbase and its active users  (48:07) Molly sees the connection between K-Pop and crypto    Subscribe to This Week in Startups on Apple: https://rb.gy/v19fcp FOLLOW Vinny: https://twitter.com/vinnylingham FOLLOW Sunny: https://twitter.com/sundeep FOLLOW Jason: https://linktr.ee/calacanis FOLLOW Molly: https://twitter.com/mollywood

Hey, everybody, welcome to Twist. I am sitting down today for another great crypto roundtable with Sunny and Vinny. We're breaking down all kinds of things, the future of Twitter and payments because of news that the executive in charge of rolling out micro payments has been laid off. Then we're going to talk about the latest Yuga Labs, NFT, dropping on the Bitcoin blockchain. If you've already lost interest, don't worry, we're going to tell you how much you need to care about this or not. Coinbase is trying to diversify its business by building sort of a developer, AWS, for big businesses. And Spotify is doing what might be kind of a cool NFT experiment. It's going to be a great conversation. It's going to be a great show.

Stick with us. This week in startups is brought to you by Vanta. Compliance and security shouldn't be a deal breaker for startups to win new business. Vanta makes it easy for companies to get a sock to report fast. Twist listeners can get $1,000 off for a limited time. time at vanta.com slash twist. Squarespace, turn your idea into a new website. Go to squarespace.com slash twist for a free trial.

When you're ready to launch, use offer code twist to save 10% off your first purchase of a website or domain. And Contra. Contra is a commission-free marketplace for freelancers and independent creators. Get $500 off your first hire at contra.com slash twist. All right, everybody, welcome back to Crypto Roundtable. Every time we do this, it feels like it's been like more months since we did this. Is it just because we live every day twice in the interim with the news?

I think it's because everything moves so quickly that we have to consider maybe making this more frequent. Maybe, a spin-off show. Yes. We'll just make all the decisions while Jason skiing. Vinnie Lingam and Sunny Mondra, welcome back to break down what's been happening in the crypto world. I want to start. Thank you, as always, for sending us an amazing selection of stories to work with. Although I would like to start with Twitter because at the end of last year,

I think I pinged the two of you and was like, what do we think is going to happen next year in crypto writ large? And a big part of the conversation about what was going to give new, breathe, new light kind of into Web 3 or crypto or payments was whatever happens at Twitter with payments. And then now this week we found out that Twitter, has laid off the executive who was working on that payments integration. And I want to know what the two of you are making of that.

Well, I don't really know what to make a Twitter. Thank you. Thanks for having us, Molly. I don't know what to make off Twitter right now. I think it's a bit of a, it's a bit of a shit show. And, you know, it's like, I think it's clear to everyone. I matter whether you support Elon or not, it's not, I don't think it's in a good place. I've used it less now.

I find that I mean, I've got lots of complaints and issues I'm just going to be whatever. If it doesn't serve my needs I don't use it. I think the payment stuff is payments are hard.

People don't appreciate how hard payments are but there's just so many angles and ways to view things and look at it and you know, what I think Elon's trying to probably do is trying to build some sort of like, you know, Q-Q-style app, you know,

one app to rule them, all type product with Twitter. And, you know, that was thinking. I think, like, my thoughts around this was, like, he would integrate Doge and make Doge like a, you know, a key part of the strategy for Twitter. Have you had to see that? And I think that, I just think there's just too many moving parts of Twitter. And I think that it's just hard for him or anyone else to get the heads around and things.

And quite frankly, I'll be honest. I think that the Twitter, people that are working at Twitter these past this past decade probably weren't, you know, the ones that left recently, I think they weren't like probably contributing too much to, and that's what you don't, you know, I think, cut it down a bit. I think they went to new product innovation. Like, we just didn't see, yeah, I'd say there's one part as interesting is that the crypto stuff they were doing was actually pretty cool with like being able to have, you know, like a hexagon, NFT profile picture, that's the thing. There's some cool stuff happening, but on payments, I don't think Twitter got anyone payments. And so I don't, I don't, I don't, I don't

blame them for saying, hey, let's go with the payments person, because what are they actually done on payments? Sunny, what do you think? Are payments that hard? Look, I think we're going to see something with crypto and Twitter. I think there's some natural intersections, everything from tipping to, you know, creator payments to like the NFT stuff. I do think, you know, if you were to kind of sit back and,

And this would probably be a good transition to you, Molly. But if you were to sit back and look at all the things Twitter has to work on right now, payments probably and crypto is just not top of the list, right? They've had to really deal with all the advertising fall off, right? And they've had to deal with all the changes that they've made. There's some core product features with the algorithms, right? There's been a lot of news around that. Like even one day Elon made his Twitter private to see how it affected

the algorithm and came back to being public. And then he unblocked a bunch of people around the algorithms to see how that was impacting the algorithm. So what I think is there's probably just a need to focus on the core product. And if you think of the product in these like concentric circles with like sort of tweeting being at the core payments and crypto just comes a bit later. And so I do think we'll see it. I just, you know, they have to probably resolve the core product issues.

I will say, you know, something that read it with Vinnie said, and I'd love to hear what you're saying. It feels like the, the energy that, you know, around Twitter is down a little bit in terms of, like, I don't find myself, and maybe it's the tweaking of the algorithms as engaged as I was before. But, you know, I want to make sure that's not anecdotal.

Like, I don't have any kind of data behind it, but I'll kind of pass to you. That's sort of my take. I think they'll get to it, but I think they have core product features to figure out, that's my thing. Yeah. I wasn't trying to trick you guys into talking about Twitter, to be clear.

I really want to know what I think about Dogecoin in payment, so we'll come back to that. But I can tell you that purely anecdotally, I feel the same way. I have gotten back double-digit hours in my life per week because I'm just not. I'm never there. Yeah. And on the Dogecoin front, like maybe we'll just double click into that. It is a really nice, you know, potential integration because, you know, One, Elon, he has this really great thing I think he did with, like, maybe when he did the time interview for time person of the year.

And he calls out like sort of the two cryptos. He calls out, you know, Bitcoin as a store of value and Doge as a transactional system. And so, and the Doge team has done a lot of work in the last few months, right, in terms of continuing to innovate on the platform. They now have an integration where you can do payments or, sorry, they can support transactions through. like the SpaceX network. And so there's some really interesting things that they were going to Starlink Network, it's probably more accurate.

So they've done a bunch of really interesting things. There's offline transactions and such. So I feel like we'll see it happen. I feel like Doge will be what it is because Elon has just pretty much said that very clearly for a number of years. Just not right away. Right.

Vinnie, why are payments so hard? And how important are, I guess, you know, secondarily, like how important our payments as we build out functionality. It just feels like at the end of the day, everybody wants to understand what the functionality still of crypto is other than store of value.

I know you're big on identity, but where do payments sit in that kind of Maslow's hierarchy of utility? Yeah, the payments, you know, getting in the payment flow is the very lucrative business because the amount of money gets moved around.

And the payments world, to be look at, you know, first data, FISA, I mean, they're a gorilla, $2 or $3 trillion a year in payments that they process on credit cards and other transactions. You know, it's a good business. And once you're in that payment flow, you effectively control it. I mean, Apple, look at Apple Play, look at the App Store. I mean, they take 30% cut in the App Store.

They got Apple Pay where they make some interchange there as well on transactions. It's a booming business. So everybody wants to get into payments because it's just a very lucrative business. And the thing about payments is that like the marginal cost of a transaction is zero. So you're just making free money once you get to scale. And so, you know, the downside of payments is it's really run by the bureaucrats, right? Because it's highly regulated. And so if you have a situation where you're, I'd say, trying to get into payments,

if you're a big company like Twitter, your revenue prevention department in the company, is going to stop you from making money out of it because they're going to put a whole bunch of rules in place. And I always call the legal department, the revenue prevention department, because that's what they do. And so, legal and compliance will be all over it,

making sure you can't, and then also, you know, that informs how the products built as well. If you look at successful products like, you know, cash app and that was, you know,

built by Mike Brock and Square, you know, that was a very successful product. And I think they got to scale quickly and then they sort of tightened up the regulatory side of it. VEMO did the same thing. VEMO was flying, you know, very low to the ground before when they got bought by PayPal for $20 million. Same story, right? They broke, you know, they even paid fines after.

PayPal for paid fines after they acquired it because they broke so many, you know, money transmission laws, whatever else. But that's why startups are better suited to doing payments than big companies because, well, if VEMO messed up, The investors lose some money. And if they succeed, well, they get bought by PayPal, it wasn't a huge outcome at that point. But they were able to disrupt payments in a big way. And then, you know, obviously the regulations and taxes and reporting on VEMO now has come in years, years later. But they've already used the time they've had to build a big lead. So it's really hard for a company like Twitter, which is a public company or was a public company, to go innovate in payments and beat the existing players out there without having to comply with all the onerous regulations.

and the risk to the mothership is just too big. So the revenue prevention department steps in and stops you from getting escape velocity. Yeah, I double on what Vinnie said there. Like, I think there's a lot of promise around the simplicity around payments that exist, you know, through crypto infrastructure. Right. But the reality is, like, once you kind of start interacting with, you know, regulators and everyone else, like, less of the technology around making payments happen is the actual rails of moving

money around. It's more around like support and I didn't get my money and all the infrastructure around that and like, hey, was this a fraudulent transaction? Did this go to someone that shouldn't go? And so, you know, conceptually on a blockchain, you can build a peer-to-peer payment system very simply, right? With like, you know, probably under 200 lines of code. Just the peer-to-peer payments bit. And there's some apps that do that really well. I think the minute you try to turn into a large company and you have a revenue prevention department, as Vinny calls it. Then you end up with millions of lines of code that are dealing with all the customer support issues, all the regulatory issues.

And then you end up having to build all this additional infrastructure, which is, you know, what exists at PayPal and every other place that. And unfortunately, somebody sues you eventually and then you have to call in one of those revenue protecting guys. Or just someone calls in and says, I didn't get my payment, what happened. Absolutely. Yeah, exactly. Yeah.

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You've got to write that down. Put it in your notes, V-A-N-T-A.com slash twist for $1,000 off your sock tube. Well, this is the biggest problem that Twitter hasn't solved yet is identity, right? And until they solve identity, they can't solve payments. And I think there's just, I've spoken to people at Twitter over the past decade about identity, eight years since I've been involved in Civic. And I just say, I mean, I'll be quite insulting.

I'd say most of them are just a bunch of low-grade people who don't understand how the space works. And they've bubbled along for way too long at the company. and I've never been impressed with anyone I made at Twitter who told me they understood identity. It was always, you know, trying to like, you know, the bunch of hacks.

And I can say that now, because they're probably all fired. But they never really, they never really got identity. You can say that no to add insult to enter. You can just, like, get your bag of salt and rub it in the wound. I was never impressed with anyone.

And I met a bunch of them, and I was never impressed to them. They never really quite got it. They, like, pretended to get it. They did the whole corporate thing, which people and corporates do. But they never got it. And, you know, Twitter never solved identity.

They just didn't. But for the reason. Can I tee up something to you? And I think this is a quick. It's outsider show notes, Molly, but I think it'll be a good one. Vinny, help us understand, like, what an ideal Twitter identity system looks like because I know it'll involve crypto from your perspective. So can you give us, like, your pitch on, you know, identity on Twitter,

or not even be on Twitter, but just give it to us. Twitter should end. Twitter should move to ingesting verifiable claims and credentials in a decentralized way. They can even go as far as saying, hey, here's an example, if you've got, if you've got your ID established with even Experian or TransUnion or whatever or a bank, usually you should export those credentials to Twitter and Twitter should be able to rely on third-party credentials to verify who you are. Twitter shouldn't be trying to verify every single person in the world because it's a global service. They don't have the ability to go and dig into every single service. What they should do is say, if you want to get verified, these are the tools we use.

We use open source. We use duds. We use verifiable claims, whatever it is. And these are the providers you can use. And then just basically look at that entire web. This is a global basis allowing people and companies to do attestations for people. So, for example, Sunny could come to Civic or his bank and say, hey, can I just get a credential that says I'm Sunny, and we could issue it to him, and you can go to Twitter, and Twitter

could read that credential and verify it. And the thing about this system of verifiable credentials is that when Twitter reads that credential, Civic doesn't know that's being read. And so the privacy is, the loop is between Sunny and Twitter. So you solve the privacy issue because you're not letting people, like, for example, you're logging with Google using OAuth. Google knows every time you log into everything using Google because the service is pinging Google asking for the token, it's going back and forth, and Google knows that every time

sunny logs into Facebook as well. Every time Oath is used to log into any single website or service, Facebook knows about it. They're a centralized authority. With verifiable claims and credentials, you can basically present stuff and as long as the cryptographic proofs are there and it hasn't been

revoked, then you can assume that if he's still in possession of those keys, that 's sunny, and you could ask for additional challenges or whatever else around that. But Twitter, I think, they don't think about things that on a global perspective is very much a US perspective on identity. And then also the second thing is they were very focused

on getting as many active user accounts as possible, even if they were bots, they didn't care because they were just charging advertisers for tons of page views. And there was no real incentive to stamp out the bots and reduce page views. And so it was just like, let's not have a high friction service. Now, I think that what, what the algos should do with algos is this.

You should say, if someone has a verifiable credential or claim or an identity attached to their account, that gives them a boost in the rankings. Now, that means it's, you know, I will see your and Sonny's tweets way before I see some random tweet account of following that hasn't been verified. Doesn't mean that their account isn't being surfaced. It just means that it's a lower priority. And what happens then is it forces people to say, hey, let's verify ourselves to get higher rankings in results, in Twitter results pages. And everyone who is a legit, reasonable person would

say, okay, if I can do it in a private way and I can verify my identity and I get more engagement, I get more exposure to a bigger audience, there's a good economic reason why I would do that. So I will verify myself. For those who want anonymity or do not, you know, and you can, by way, you can do this an anonymous way. You can do an assertion. So you could say, you know, you have a verifiable credential, which proves I'm a U.S. citizen. uniquely and I'm over the age of 21 and that's it. And then using those credentials, I can never reassert those credentials on another Twitter account without being marked

as the same person, but you don't know who I am. So these are things. We can do things like drop tokens into wallet. So we can, you know, Civic does it with Civic Pass right now. We can drop a sole bond token into an ETH wallet or a Solano wallet and verify that person's unique. And any other wallet they try to create wouldn't have it. You can't have to replicate that same token.

There are ways to do this. There's just no will for Twitter to change the way things work. They're just doing it like if always done it. And that's the issue. Well, to be fair, it has always been and arguably even is now, even though we're in the middle of a messy transition away from it, an ad-supported social network. So like numbers were always, I mean, you know,

there's plenty of evidence that Facebook, specifically the product, has overstated its metrics to advertisers for, a decade or more because the important thing is scale. Molly, we knew this. This is not news. I tweeted about this many times. That's what I'm saying. I feel like maybe saying that all of the people who you talked to didn't understand it,

maybe what they were actually saying is we have this business model. Your thing seems to involve a pretty big lift in terms of implementation and understanding on the part of our users. And yes, all of our engineers. And we have this other business model. So this isn't really necessarily worth our time. Oh, absolutely. You're 100% right.

There was a total conflict with the way they were making money. So the issue of Twitter I have with them is that they were not interested in, first of all, delivering value to advertisers. As an advertiser previously on Twitter, it was the biggest waste of money I've ever spent because what they count as interactions and engagements and views is just bull. I mean,

it's just basically bought fodder, right? So I didn't bother with that. I mean, to be there you're talking about the entire publishing ecosystem at this point? Like, I don't know where you're getting value, honestly. Like,

Where are you getting value as an advertiser? Google AdWords has always been fantastic. You can set your price. You can track it all the way to conversion. Twitter always was selling this sort of like amorphous, arcane, oh, we have engagements and impressions and people are talking about you and blah, blah, not tracking direct sales, okay? When you look at direct sales,

and at the end of the day, too, right? It was a display ad at the end of the day, too, right? Yeah, yeah, yeah. And then they can't even bring. blocked views as impressions, which is rubbish, right? You're right. The incentives didn't exist, but the bigger picture, yeah, Molly, sorry, let me just finish the point. The bigger picture year is that Elon's not wrong. Okay, if you move to a advertiserless service or lower advertiser service and you can build real value in the system, the platform by having real people

engage, you will have high engagement rates and the advertisers that are left behind will actually you spend more money because they're going to get better ROI. You may have a smaller user base because you can't tout these big numbers which aren't real anyway, but it would be a higher quality advertising platform. Hey, everybody, we're back with another show us your space contest in partnership with our friends at Squarespace. We did this last year. It was a huge hit.

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money. Keep it. Here's your call to action. It's so simple. Head to Squarespace.com slash twist to start your free trial and when you're ready to launch, use the offer code twist to save 10% off your first purchase of a website or domain. If I could build a little bit, taking it back to like ID systems for a bit and we can transition from this one, but this is a good topic. So I dropped something in our chat. Like India launched this national ID system called the Adar system. I think it was launched like back in 2009 or 10. It's been a bit of a lot. It's been a been a long time. I think they have, you know, over a billion people on this system now, and it's incredible. It really implements a vision of what Vinnie is talking about. And so,

you know, every system in India, whether it's banking, your telephone, whether you're getting subsidies from the government, it all runs through this national ID system in the way that, you know, Vinny described. And I think the opportunity for Twitter, because it is sort of the one worldwide product is to adopt something like this at sort of a worldwide scale. And say, hey, let's let all, and Twitter just has this unique position more so than Facebook or Instagram or any of the other at-skill networks, that they could implement sort of a worldwide ID system for all services. And that would be super powerful. And I think it'd be really cool to see them leverage a blockchain to do that and build on top of it. And there's a, again,

I sent an article here. We can share it in the links about like what all the benefits that have come from India's national ID system. It's also not without controversy because there's a question about the aggregation of that much data. Wasn't there a project that was trying to do that? It was like it involved a globe that would scan your eyeball and then you'd be issued a token. World coin. World coin. I think Sam Altman was involved with that one too, right?

Yeah. Yeah. I mean, it's to say, so Sunny's right. So this is my point. Okay, Twitter never actually put out a, you know, developer framework, a developer kits or anything like that and said, hey, this is a framework we're going to adopt for ID verification. All the providers out there, feel free to plug in, give credentials to your users and they can reuse on the Twitter platform and we'll ingest them.

They've never done that. And that's the first thing they should be doing because then they can say to every country in the world, if you've got a home affairs office or you've got a state department or you've got IDAR servers, just make a, you know, you know, use a W3C compliance spec with verified private credentials, we can use, you know, you can use IDDAI.com, which is non-profit for, you know, for the gateway, we have a gateway protocol there we can use. There's lots of things you can use to decentralize this and make sure it's private and secure and that users can get access to their data. Right now, we're in a world where literally most IDs are issued physically

and not digitally, and we need to get to a world where digital IDs are pervasive, where a bank can issue a digital ID to your phone. And by the way, they can do this today, right? So you can give a bank in SDK and they can make the credentials available inside their app. And then just, you know, basically, you know, app to app switching basically feed the credentials into Twitter privately, securely or the user can have their own wallet to store it, whatever. There's different ways to do this. The issue is that there's, so one of the problems with decentralized identity, and again, this is the thing I've been working on for a long time, is that none of the big players have ever

had the, you know, the guts to go and say, we're going to adopt this. and I think Twitter should be that player. Because without that big massive pool, right. So your assertion is before, after core issues with the product, then identity, payments way later. Well, I think identity is cool. I think identity is core to Twitter. Twitter has so many problems with fake identities, fake accounts, whatever, like, you know,

hacks, et cetera, et cetera. But it seems like it fundamentally depends on what the business model of Twitter actually is going forward, which is still an open question. Well, I think we can at least agree that the business model of selling ads that displayed to bots for advertisers is just a bad business model. It's still happening. I know. I mean, it's terrible.

I hate it. And I've built ad tech platforms. I think it's disgusting. I mean, everything is changing in that front. I don't know if you guys heard my interview with the NEVA CEO, but it's But like once you change, I actually think you even step back from identity all the way to search. Like once you change search and the incentives around search and you start to have an ecosystem that is based on answers and not add supported answers, then all of a sudden this entire universe of things that rely on, I'm getting a little off topic here, but that rely on that ad supported initial contact starts to go away. like the recipe pages that are 30, you know, pages long because they want to serve you a thousand.

Anyway, I do have a thing that I really want to ask you guys about because I just want to understand it and know if it's a big deal. This week, Ugo Labs is back. This week, Ugo Labs is dropping this NFT collection on the Bitcoin blockchain using this Ordinals protocol, which I have been hearing about a lot. In fact, the eight times I've been on Twitter in the last like four weeks, somebody's been talking about Ordinals. So help me understand. It's the creators of board apes. They're working on this project called 12fold. And it seems like the deal is that it maybe for the first time is an NFT project

that actually interfaces with the Bitcoin blockchain? I think it's the second one. Okay. So like let's kind of talk about it. 12 fold is or ordinals is? Ordinals is the protocol that they're using. Right. And then 12 fold is the product and you're saying it's the second product.

using the ordnals protocol? Yeah, got it. And so let's understand the protocol. Yeah, so let's kind of take a step back and start from Ethereum and then we'll go why it's important on block on Bitcoin. So most NFTs, which we've spent a lot of time talking about in this podcast in the past, have a combination of some information stored in the blockchain and then generally some information stored off the blockchain and maybe in some decentralized storage like IPFS.

or file coin or take your pick. And so the interesting thing there is that you require kind of those two pieces to come together to get the full information about what is a representation of the NFT. So that could be in that like there's the data behind the NFT could be put into the blockchain and then the image itself or something like that lives in a storage system. There was one project. I mean there's several projects, was one project a reference that moved everything onto the blockchain in Ethereum was called on-chain monkeys.

And what's interesting there is the entirety of the NFT is fully included into the transaction on the blockchain. And so what Ordnals really created was a similar thing on Bitcoin, where an entire NFT is encoded into like a Satoshi. And so all of the metadata, all of the information required, so there's no kind of secondary system required to recreate that. And I think that's what's exciting about this. Obviously, it's on the Bitcoin ledger.

And so it kind of creates some excitement that there's some more utility on that ledger other than just transactions which have been there. That said, you know, that ledger is much more expensive to transact on. And so Vinny, I'm going to toss to you here. And, you know, when you think about, doing these things at scale, you want to move to a place where the transaction speeds are high,

the transaction costs are low. And so, overall, it's a very exciting development, but I don't think it's like an innovation forward in any way that, like, creates sort of a new advancement for the space. But Vinnie, I'll toss to you there.

I mean, it's a too little, too late type of thing. I mean, this is that, we've been through this with Bitcoin 2017. The Bitcoin is supposed, the argument for Bitcoin to be more than a store value, that battle was fought and lost in 2017. So this Ordinals thing, it looks cool, but it's not going to scale because Bitcoin's not

going to increase the block size. It doesn't matter. It's a kind of a flash in the pan. Maybe it becomes a layer two type solution so it runs on lightning or stacks or whatever, whatever. It's not going to be something that natively runs on Bitcoin forever where, you know, it's not going to get to scale. It'll be a niche thing, which maybe a few people want to use and some hardcore Bitcoin

people want to use, but it's not going to go, but Bitcoin can't handle. It's seven transactions per second, Bitcoin, you know, for the entire Bitcoin network, it's not going to be able to handle this. And the MMP pool, they're going to clock up the MMPL with the stuff. The fees will go up and up and out. It's basically in a hype cycle right now. The fundamental issue here is the Bitcoin blockchain is a one megabyte block every 10 minutes. There is no capacity for providing the world or even a country with the ability to create

NFTs on Bitcoin. It doesn't work. The math doesn't add up. And so unless the community is willing to increase the block size, which we know it will not, then, you know, it's not going to happen. Like, there's an argument that this thing, this will probably work better on Bitcoin Cash or Bitcoin SV because they've got much bigger blocks and they can scale it. But that's not, you know, that's not going to matter because, you know, Solana.

Solana and Ethereum and Polygon really have such an lead on all the others. I don't think. Yeah. Yeah, I think this is the dead end. And the Uga drop is only like 300, right? And so you can see that they've kind of had to navigate around that as well. So I think between the transaction price, the speed, I don't think this becomes anything much bigger than sort of a little bit of a news splash here.

Yeah, it's very nichey. It's very nichey. Not to cast any aspersions on Yuga Labs, but is it a news splash slash quick bag grab? I mean, like you meant 300 or you, you know, create 300 of these things. they get a lot of press and attention because it is inherently limited in all the ways that you've just laid out presumably they're going to be really expensive

so it feels like they just made three Rolls Royces or 300 Rolls Royces and sell those move on. You're going to have a liquidity problem here and people aren't going to be able to you know, there's like what marketplaces are going to support this? Who's going to buy it? Why are they going to buy it?

By the way, this is the same argument for NFTs or everywhere else. I'm a big NFT fan. But the value of NFTs is limited to the utility or the collector value of NFT. It's like art, right? So the perceived value is what it's worth. So really, they're just creating a bunch of Rolls-Royces that no one's going to want to buy? Like, I'm having a hard time understanding why do it then?

I agree with you, Ma. I think it's a bit of a cash guy. I think there's 300 people out there in the Bitcoin ecosystem that will buy these. Yeah. That's it. Because they'll be like, these are the only NFTs that are actually etched onto the Bitcoin blockchain. Well, actually, actually, let's go back a second. It's like a diamond.

These are not the first, these are not the first entities issued on Bitcoin. The first ones were, I think there were some rare pepies and whatever else done on counterparty. You've got spells of Genesis. You had the Satoshi card back in 2015. This is not new. Now, Ordnils is a new protocol, but, you know, they used counterpity back in the day. So this isn't new. Like, you can't tell me that this is a new way of, this is a new, you know, that NFTs never existed on

Bitcoin, they did. I still have keys to my counterparty wallet that has, you know, NFTs on the Bitcoin blockchain. So it's just basically a new cycle. It's a rehive. But we, you know, Kahnaparte failed because Bitcoin fees are too high. Okay. And, and basically, NFTs moved to Ethereum and obviously not Salon as well. So the fees are being. It's not helping. It's not helping the NFT reputation. It's really not. Because like, I think there's been this sense and this argument that like, well, it's all evolving, right? The scammers come in. But then there's like a real thing and then you build on the real thing and then you eventually get to the internet

as we know it today, for example. But this doesn't feel helpful. This doesn't feel accretive to the ecosystem. Yeah. I'm never, I'm never against experimentation. So experiment, go forth, prove me wrong, have this thing

work out, great. I don't see how the elephant in the room, quite frankly right now is this big one megabyte block limit. But how we get past that, I don't understand it. Right. I think Molly, you're a good example of Rolls-Royce, right?

There are people out there that collect these very expensive sports cars, right, that are, you know, they make a hundred of a year or less. And so it's just one of those things. They're not very practical. It's very desirable by very few number of people, right? Invecotties, conisegs, right? There's a whole bunch of these. Your money, man.

Yeah, go for it. Hiring freelancers and doing that on a project. based work is a brilliant way for you to grow your startup sustainably, right? You can't just hire everybody in every little vertical. And listen, there is a ton of top talent right now out there looking for work. Do it all the layoffs in tech. You know that. So you need to check out Contra, C-O-N-T-R-A. Contra is a commission-free marketplace for freelance and independent creators. So all that money that's going back and forth between you and your freelancers, it's not going taken by some marketplace. No. There's no percentage-based upcharge when you do hire somebody.

And they do all the vetting. They find the best people on the other side of the marketplace. Hey, if you're one of these laid-off tech workers and you got tons of skill, I'll sign up for Contra. It's an amazing platform for you. And remember, like I said above, creators on Contra keep 100% of what they make. There's no fees. They specialize in design, engineering, social media, video, writing, and of course, AI. This is a really easy way for you to get great talent and to do it quickly. If you need project-based work, you need to check out Contra. It's that easy. And you know what? The best thing about freelancers is you only spend what you need to spend. You might have a really important social media project, but it's only for six months of the year. Or you need some videos,

but you only need 10 of them, not a hundred of them. They're going to do it fast. They're going to do it right. So here's your call to action. I can't believe it. $500 off your first hire at at contra.com slash twist. That's right. Five crisp hundies waiting for you at Contra. C-O-N-T-R-A. com slash twist. Anyway, yes. What's going on with this like Coinbase protocol situation? Yeah. So at the highest level, it's an Ethereum L2.

And so, you know, that gives the ability to have pretty low transaction costs, high transaction throughput, and then, you know, ultimately you can settle on Ethereum. Why are they doing this? Let's take a step back. So we've talked about this before. If you actually look at Coinbase, right, as a company, for the most part, you know, it's a, it's a custodial system.

And so a lot of, a lot of what happens in Coinbase itself isn't really happening on the blockchain. Like they may enter, like, so if you go to Coinbase and buy, you know, any type of asset Bitcoin Ethereum,

you're most likely not buying it from, like a, like a blockchain transaction. Uh, you're probably buying it from a pool that exists within the Coinbase custodial system. Um, so I think one,

you know, there's, uh, an interesting push to kind of create this system. where a whole bunch of other applications and services, whether it's their own or others, start getting created. What you get by Coinbase putting it out there is you get,

you know, there's a lot of these L2s that exist. There's even, you know, other blockchains. You get the backing of a public company running this system for you now. And so if you're thinking of, so if you're a company and you're thinking of building, you know, on blockchain for whatever that may be, could be NFTs, could be, you know,

loyalty systems, anything along those eyes. Coinbase is like the AWS in this case, offering a blockchain that's run by them. Hopefully their services are put on it. They maintain the development and growth around it. And so it's a sort of a choice for enterprises and companies to build on. I don't think we see startups go there

because I think startups are closer to, you know, what's happening more at the core of, you know, the crypto and blockchain ecosystem. whether it's in Solana or Polygon. But I do think if you're a big company and you're looking to leverage blockchain for some type of service you're building, it becomes sort of an answer that you can go after.

Now, that said, all the big clouds also offer services. They don't have their own L2 that they're running. But, you know, I believe, you know, AWS has like an Ethereum service that they run if you want to, you know, interact with it through that system. So it's, I think it's a, play as part of like becoming an infrastructure provider. So looking more and more like an AWS,

although I'm not sure, you know, how much energy from enterprises right now, given everything that's happening, is going to go towards this. And unfortunately, like, you know, with Coinbase, they had their own marketplace as well, like an NFT marketplace that didn't really take off. And so the track record here on these kind of expansions

from their core offering hasn't been so great yet. But, you know, it's a trusted place for an enterprise, Vinnie. Got it. And it's so funny, I was on a call early on where I actually said the exact same thing. Like, for Coinbase, outside of their core offering, nothing has really worked well. And it's not, you know, for lack of trying. They just, I think, you know, the core offering is what carried them. And the greatest value of Coinbase, they were over 100 million users worldwide.

So they're trying to find ways to, like, give their users other things to do. It still goes down to the debate. Like, first of all, the L2 space is overcrowded. The L1 space is overcrowded. We haven't seen clear winners emerge outside of Ethereum and maybe Solana in the L1 space. And in the L2 space, it's still very subjective because they're very highly centralized. All these L2s are, I mean, this is a very centralized L2. It's an L2 run by Coinbase.

So you can't get it more centralized. So it's not in the ethos of crypto, you know, from like an old school OG perspective, but it may be something which uses some practical. But I think we're struggling to find, you know, develop. is spread thin across too many projects and too many layers and there's just not enough users out there that are in the space. Like people are just, you know, not, like, people are just not using crypto projects much. And so, you know, you're selling to the crypto community, which is a small community.

And like, you could argue there's a hundred, I mean, if Coinbase only has a only, I say the word only, because it's not a lot. if Coinbase only has 110 million users worldwide out of 7 billion people, that's a very small number. If you look at all of those 110 million people, how many of them are really hardcore crypto users that use on a regular basis? I would say maybe 20% to 30%. I think the rest are like, you know, when the market's flying, they're going into their accounts, they go buy some Bitcoin. When they lose money, they leave, they don't come back. So how many of those are real active accounts or maybe they're storing some crypto?

So then you're selling tools and apps to 20 million users, 30 million users worldwide, who are really, really active and hardcore. And then you're competing with a dozen L1s, a dozen or two L2s that are meaningful out there right now. And you're Coinbase, and you own the user and you have all these users that are being verified. But now I don't think they've solved identity either. And so I don't know how this plays out. I mean, this seems like it seems like too much competition for a bear market. I have not.

I'll tell you what, I'm just going to confess right now, Vinny. I also have not solved identity. Help me. Just kidding. So it sounds like two things are happening here. In the case of Coinbase, specifically one thing that's happening is obviously a need for diversification. We know that if your primary business relies on trading volume and you're not seeing a lot of that, you definitely have to diversify.

Creating some version of AWS with Prince Cash for Amazon seems. kind of smart. Create a dev environment to help popularize the kinds of things that will bring more volume to Coinbase. The concern is, did you just create a dev playground and there are no kids in your neighborhood? Yeah. On the AWS example, Molly, you know, I know this quite well.

Like one of my co-founders, my last company was one of the early creators, wrote one of the first papers on AWS. That was created for AWS. Sorry, for Amazon. The reason they had to create it is, you know, they had to scale their e-commerce business and, every time these certain seasons came around and they wanted the ability to do that sort of with their own control. And so, you know, I think for Coinbase, what they really have to show, and that's why I started with that is maybe if they move their 100 plus million people and a set

of additional, like their core services plus some additional services to this blockchain and show the benefit of using it sort of like as AWS did, we may see some innovation happen there. But I think in advance of that, like I haven't seen anything about Coinbase moving their entire, you know, trading system and everything else to this protocol, to the site to this L2. And so, you know, that's also a more difficult one. In the case of Amazon, there was a, well, we run our entire business on this thing. And so, and we get some leverage for doing it. You should do the same thing. Got it.

So this is more like we popped up a four pay playground in a neighborhood that doesn't have any kids and we're not even going to send our own kids there. Yeah, they haven't made that clear, but that's what it seems like right now. It's a dangerous swing set. Yeah. I'm pushing up to him. I'm taking this too far. I love it. I'm going to use that one.

I like that for play playground. You know, I only have one skill in life and it's translation through metaphor. What, who would they hope, be hoping to attract outside of that 20 million hardcore users that you mentioned, though? Like, would they be wanting to become the development platform of choice for like the next time a Starbucks wants to do? an NFT-based reward program? I would think, yeah, exactly. Like, you know, some of the examples we've talked about before. So, like, big corporates that want to make a choice around a blockchain.

And, you know, they've probably seen, and I think on this, you know, we've got to give the Polygon team credit, right? Polygon is getting a lot of wins recently with, you know, companies, definitely like Fortune 500 companies. And so they're probably looking at that saying, hey, how do we participate in that, right? And so we stand by this blockchain. To Vinny's point, we run it. And bring your loyalty system here, bring your NFT project here,

bring, you know, whatever, bring create marketplaces here. But they really now have to have a creation of an entire ecosystem, which is, and that's also vastly different than AWS. When you create something on AWS, it's kind of usable everywhere. If you create something on this particular blockchain, it's not usable everywhere else, right? So it really, you know, feels much more like walled garden than it does sort of an open platform. Interesting. So, okay, before I let you go, we just have a few more minutes.

What else is happening? That's cool. We have other stories in our lineup, but let's do a little like a lightning round here. I thought the Spotify testing, you know, playlist that could be unlocked by NFT holders was pretty cool. This goes, you know, we've, we always kind of search for these use cases. and I thought that was very, very interesting. So what did you guys think of that? So token-gated playlist.

Let's do a little explanation here. According to a series of tweets by Kingship, I'm reading from TechCrunch, a metaverse band signed to Universal Music Group. That's happening already? Okay. Anyway, according to Kingship, the streaming company, Spotify,

is piloting playlist that could be unlocked through NFTs in certain geographies. So under this pilot, Kingship has released a special playlist that could be accessed only by Kingship key card NFT holders. So is this like a more complicated way to buy an album? I think it's maybe a way to have a collectible, right,

that's associated with the album. So, you know, if we think back in the days, I don't think it ever happened in the CD era, but definitely in the vinyl era, the, you know, weren't the, I guess, what did you call it, like the vinyl covers, collectibles for people? Yeah.

And so this is a way to kind of recreate that in a digital environment. Like, why, why take that joy away from folks? Right. And so I view it as that. It's kind of recreating something and it feels exciting. I feel like this could totally work with K-pop. Like, I don't know if you, I mean, all of the kids who are into K-pop right now are,

they buy CDs to like crazy so that they can have the album art. And most of them don't even have CD players. Like, they don't, like, they literally have a piece of dead media that most of them don't listen to, although I did get my son's friend like a super cute stand-up CD player. It's like pink and she can, you know, K-pop it up. I'm like, okay, great, you've unlocked a series of accessories that can go along with this, but this is very physical. Anyway, I could imagine K-pop kids are very excited about this or people who are really Spotify, just side note, kind of experimenting. They're also doing the AI playlists. Yep. They are pushing really hard on a lot of these. That's great, great to see that.

innovation in the space. But yeah, so I kind of chalk it up to collectibles, right? I still have, you know, my dad was a big fan of Pink Floyd, and he has like an original dark side of the moon. And so that lives somewhere in my parents' house. So I can see the value there. Yeah. I have the, I have a Purple Rain poster from the, you know, from the actual vinyl album. Really? Yeah. Oh. Where do you keep it? Actually, it's in my kids room right now. Awesome. I should probably protect it better, but yeah, I have that. Yeah.

Oh, see, there you go. All right. I get it. You know, I get it. Okay. All right. I'm picking up what you laying down. I'm not super into collectibles, but like, you know, yeah, I could, I could see it.

I could see it. Finney, what do you think? He's like, we're not talking about identity anymore. I've lost interest. I, I, I, I, I just, how do you feel about Spotify's identity service? Have they nailed it? No, well, that's, they don't need to do identity. Do you have collectibles?

Are you a collectible person? I just invested in collectibles. dot com. I don't think they've announced anything yet, but it's coming in what's at

collectibles.com coming spring 2023. Yeah. So I'm actually big into collectibles. So you're all in on this space.

Well, I'll imagine the gathering cards from 2003, I think. I got like 20 year old cards. I collected tons

of those. I've got, I mean, I collect physical bitcoins. I have, you know, and they're not

don't worry. They're not my house. I put them away safely somewhere. Don't come over. Don't come over trying to look for them. But, you know, it's, it's, I've always been into collectibles, comic books. I've got some comic books. We've got some, you know, I like collectibles.

I like digital collectibles. I mean, I'm a big NFT collector. I've got, you know, hundreds of NFTs over the years of collecting over ages. I think that digital collectibles are going to take off. Collectibles as applied to music is definitely. a longstanding way to make money. Dequency as well, which is Keithley's company and they're

I mean, it's not really collectibles yet, but they're doing some cool stuff in the music, NFT space. So NFTs are not dead unless, it sounds like today's takeaway is NFTs are not dead unless Yuga Labs continues to give them the worst reputation. No, actually, I wouldn't say, I say, I'd say, Yuga can keep doing what they want to do. Like, I think everyone, the more experiments we run in

NFT is the better. I have an NFT project launching later this month called Explorers. You've got to actually, I think the website is up, ExplorersNFT.com. Sunny, do you have anything you want to pitch today? We've had a long civic pitch. Explorers, Explorers. Explorers. There you go.

And we're using Civic for identity, of course. This episode is sponsored by Vinnie Lingam. Amazing. On that note, the only thing that's happening in the crypto space right now is Vinnie-Ling out.

I'm bullish in NFTs. I'm bullish in NFTs. I think it's just that we're in the trough of disillusionment right now for NFTs. If you look at the Gartner curves, we're in the truck part

and we'll come out of it. You know what's really positive to see them, Molly, like through the arc of everything that's happened, you know, since the formation of this podcast is there are some awesome things being built right now.

And the spot thing is exactly that. You know, it's not, you know, like, what are all the criticisms? A scam, no utility, right? And you're seeing all that come together. There's a real utility here, collectible, you know, people can understand it. It's tied to a real world thing. Hey, I want to listen to this album from this team.

It's not like this thing that just, you know, people criticize like a picture of a monkey and, you know, what does it really mean? And so we're actually, if you take a step back, like, this is pretty cool. Like, it's a real utility. And, you know, we know the physical analog for it. it and let's run with it. It's being promoted by a company that's doing a lot of innovative things, right?

In Spotify, so I think this is, all these things are really good for the ecosystem right now. And frankly, if it's a way for these artists to make money more directly and not rely on that crappy little split from Spotify streams, I think that could actually be really powerful. Yeah, and you can support your favorite artists through that.

You have something connected to them. They can create future things associated with this NFT. I think it's really, really great. Yeah. I think he'll see audience. Audius will probably innovate a bit more in the NFT space, hopefully. What do you think they'll do? Yeah, who knows?

But I've seen, I've seen, I think it was Royal, which is Justin Blau's companies. Yeah, between, you know, what he's doing with like creating these NFTs that have the royalties attached to it, what, you know, what Audius is doing. I think there's something, yeah, we just, as a community, we just need to support these guys and have them, you know, keep experimenting. And guys, like, tech is only where it is today because of thousands of failed experiments, right? And in fact, tens of thousands and probably millions of failed experiments over the past, you know, 20, 30 years. And we, we, we, every time we fail, the people who fail learn something and then they either go build something new or someone else learns from their learnings and innovation happens that way. Innovation isn't a function of, you know, getting it right every single time because that's not historically what's happened. We've gotten it wrong so often.

It's that we learn from mistakes and then we find what does work and we double down on that and we actually make it work. And that's what I like about this segment. We tell you what stuff is Rolls-Royce and you don't have to care unless you have that kind of money and what stuff is actually going to be useful to you in the future. Thanks, Benny. Thanks, thanks, Sunny. See you next time. Awesome. Thanks, thanks, Molly.

All right, thanks for listening, everybody. We will see you back here tomorrow. If in the meantime you have suggestions for topics or news you want us to cover, email the producers, producers at this week in startups.com. And make sure you join us on Twitter if you're still there at TWI Startups. Have a great week.