Welcome back, this week Lucas and Anita discuss turmoil and heartbreak in the crypto markets as Bitcoin and Ethereum get hit hard, a number of other popular tokens get crushed, and crypto-aligned public stocks like Coinbase and Robinhood see their share prices tank. What caused this bloodbath? Well, a major catalyst was the disastrous implosion of Terra’s Luna token as a result of ongoing stablecoin woes. In their interview this week, Lucas and Anita chat with Kevin Rose. Kevin is a serial entrepreneur who founded Digg in the early 2000s and is now an investor at True Ventures and a co-founder of the Proof Collective. His startup recently raised $10 million from Seven Seven Six and launched its NFT project Moonbirds, which has quickly become one of the most popular NFT efforts out there. Listen along as we discuss the crypto crash and its fallout, and the challenges up ahead for NFTs. Subscribe to the Chain Reaction newsletter to dive deeper: https://techcrunch.com/newsletters
Welcome back, this week Lucas and Anita discuss turmoil and heartbreak in the crypto markets as Bitcoin and Ethereum get hit hard, a number of other popular tokens get crushed, and crypto-aligned public stocks like Coinbase and Robinhood see their share prices tank. What caused this bloodbath? Well, a major catalyst was the disastrous implosion of Terra’s Luna token as a result of ongoing stablecoin woes.
In their interview this week, Lucas and Anita chat with Kevin Rose. Kevin is a serial entrepreneur who founded Digg in the early 2000s and is now an investor at True Ventures and a co-founder of the Proof Collective. His startup recently raised $10 million from Seven Seven Six and launched its NFT project Moonbirds, which has quickly become one of the most popular NFT efforts out there. Listen along as we discuss the crypto crash and its fallout, and the challenges up ahead for NFTs.
Helpful links:
https://techcrunch.com/2022/05/10/bitcoins-backers-trying-to-turn-it-into-one-blockchain-to-rule-all-crypto/
11:09
https://techcrunch.com/2022/05/11/ust-founder-do-kwon-shares-plan-to-save-its-stablecoin-from-mass-destruction/
11:09
https://techcrunch.com/2022/05/11/terras-ust-crash-will-make-life-harder-for-crypto-as-regulation-looms/
Subscribe to the Chain Reaction newsletter to dive deeper: https://techcrunch.com/newsletters
Lucas Matney 0:00
Hi everyone. I'm Lucas Matney.
Anita Ramaswamy 0:08
And I'm Anita Ramaswamy.
Lucas Matney 0:10
And this is chain reaction.
Oh my god, lots to talk about and crypto this week. And we want to get to our interview with Kevin Rose. So let's dive in. We recorded this on Wednesday in the midst of market mayhem. So things may look different by the time you hear this, but it's a wild ride at the moment. I need to see what's going on out there.
Anita Ramaswamy 0:37
I hear that winter is coming. There's a huge crypto crash that's happened in the markets today and yesterday and investors are feeling pretty antsy this week. And we're looking at a market downturn that honestly could potentially turn into a recession. It's not just within crypto but in the equity markets more broadly. But when public markets got hit, crypto was particularly impacted and most of the top cryptocurrencies have declined like 20 to 40%. At least. Yeah, it's definitely a bloodbath. I mean, people have been pretty antsy about the public markets being a little too frothy for a while now, I think there's just been so much energy around crypto, that it's kind of been insulated. So you've seen a lot of crazy unicorn rounds for crypto startups, even as Bitcoin and Aetherium have kind of been like dragging a bit. There's still been a lot of intensity. But I think as the public markets started to get hit a little bit more broadly, people just panicked. So a lot of like the crypto involved, public stocks are like tanking, Robin Hood is down nearly 20% In the past week. Coinbase is getting hammered. You know, we talked about them a couple of weeks ago, being an all time low, but they're down 60% Over the past week. So like this is this is not a new all time low. Yeah, exactly. I mean, they're, they're hurting. And I think that there's some signs that even private market investors are going to be pulling back as well. So yeah, it's pretty wild out there this week. Lots to talk about there. Yeah. And it'll be interesting to watch how everything plays out. But I think in the past, when these public stocks have been down and have been hit hard, like we talked about a couple of weeks ago, the same hasn't necessarily applied to the private markets. And this time, it seems like this is for real, there's been a lot of exuberance, and people are definitely taking a step back from their investments in crypto. And, you know, some of the larger cryptocurrencies might make it through but yeah, like, what about everything else? Right. And I think it's interesting because so many people frame crypto mentally like the crypto bulls frame it mentally is this hedge against inflation or something kind of decoupled from the broader macro economic environment. But the fact is, when the Dow Jones Industrial Average drops like a point and a half, all of a sudden, all these investors who have a ton of assets across the board are looking at their riskiest bets and deciding where to pull back and kind of put into something a little bit more like conservative like bonds or something like that. So when you see a point and a half pullback in the s&p 500 or something like that, like you're gonna see a handy, you know, 15 20% pullback in crypto stocks, which is just like wrecked the market. And I think that Bitcoin Ethereum, they're seeing some some losses, but like, they've weathered a lot of storms, Nobody's expecting them to go to zero. But you know, there are projects that have really come into their own in the past few months. And I think there's the potential that some of these might head to zero. And this week, there was one that was particularly seemed particularly set on that track. Yeah, so let's, let's dive into that. I mean, one of the more popular emerging cryptocurrencies just imploded. So if you invested in Gizmodo had the story this week, if you invested in a lot of the top cryptocurrencies six months ago, in November, when a lot of the all time highs were, you know, you're taking a bath right now, like it's like, very bad. The one exception to that, like a few days ago, was Tara's Luna token. And in the past, like two days, it's completely all of those gains have been erased. It's like imploded like nothing else. Terror is Luna token has gone down. 95%, our colleague Jackie has been reporting a lot on this. What's what's all going down here, Anita? Yeah. So I think first, maybe let's take a step back and talk about what this terror project even is. And what is USD USD is the token that everyone's talking about. And it's a Stable coin. So Stable coins are super important. And I think maybe if we take a second to sort of break that down, that would be helpful. So Stable coins just track the price of another currency. It's sort of like imagine like when the dollar was backed by gold, that's an example of one currency being pegged to another asset. So that's what Stable coins are, but they're the crypto equivalent. So essentially, the reason that they're used is that it makes it easier for converting between Fiat payments and crypto payments, right. I mean, Lucas, we were talking about this earlier, you asked me the question about why would somebody want to invest in a Stable coin when all it does is track the value of a currency that already exists when it just tracks the value of the US dollar? Sure. You know, there's no like money making opportunity there. And I thought like philosophically, that was a really good question. So the reason that Stable coins are so important is first of all, yeah, it makes the conversion easier. So it makes it easier when you're trying to sort of transact between your you
USD and crypto for example. And the second reason is they're a lot less volatile. So if you're really looking at the blockchain as a use case that can be used for payments and for Faster Payments for more efficient payment systems, some of the volatility in the price of Bitcoin and Aetherium can be really stressful. So instead, why wouldn't you just sort of transact in a Stable coin that's already pegged to a more Stable currency that exists. So that's what a Stable coin is an interest case, the relationship that was supposed to exist, which has, you know, there's some technical considerations going on in the backend, but essentially speaking, one ust which is terrace currency is supposed to equal one US dollar, one USD, and that relationship is supposed to hold. And there's all sorts of algorithms sort of working in the background, different sorts of currencies that are being used to make sure that that happens. But one USD is supposed to equal one USD, and this week because of the volatility in the crypto market, that relationship got broken. And basically, I mean, Lucas, you can tell us more about what happened here and why that descended into chaos.
Lucas Matney 5:57
Right? I mean, you know, there are a ton of coins that kind of like, have their pop and then dissipate. But I think, for listeners, Tara and Luna, and ust were huge. They had built a lot of incentives in to get people to invest into the Stable coin, there was billions had a market cap of like, I think it was at least almost 20 billion in this. So like this falling apart is a huge, like liquidation of value from the crypto ecosystem. But more broadly, I mean, this has been something that a lot of people in crypto been trying to do for a long time Stable coins exist. And typically they're backed where like, you have 10 million Stable coins, well, somewhere you have $10 million, securing those 10 million Stable coins. What ust was trying to do was basically use the blockchain use kind of crypto math, in order to have it be an algorithmic Stable coin, where maybe they didn't have all the money sitting there. A lot of it was in cryptocurrencies, not dollars, but they were trying to make it so it was essentially less centralized didn't need to be managed by a central entity, and could kind of keep up with the market itself, which obviously didn't happen. So
Anita Ramaswamy 7:06
that was supposed to be the alternative to like having a vault of gold sitting somewhere that backs your currency or a vault of US dollars that backs your currency. They were trying to achieve the same end result, but doing it algorithmically, instead of with an actual physical reserve.
Lucas Matney 7:18
And it's like, easy to see why someone would want to do this if you were like a big crypto Maxi, but this isn't the first project to do it. And a lot of them have blown up in the past. So
Anita Ramaswamy 7:28
yeah, more on that in a little bit. But obviously, to be fair to Tara, I mean, they're trying to tweak their system. And they're trying to get back to this peg where it's one to one with the US dollar. But in the past few days, there's just been so much volatility, and the price has dropped pretty significantly. So everyone in the crypto community is talking about it. And I mean, Lucas, you can tell us a little bit more about why does this matter? Why do people care? Why are people freaking out about this?
Lucas Matney 7:49
Right? Yeah, that's kind of the key part to get to here. I mean, this is just another cryptocurrency, theoretically, but it's what a lot of people are paying attention to right now, like Janet Yellen was was talking about specifically this situation in regulatory terms, I think like, generally, that's been something that a lot of people in crypto been concerned about, like this wave has been so strong and so overwhelming, and they're a little concerned that regulators are going to have no choice but to like put some laws in place to manage the crypto space. And a lot of people have just felt like crypto isn't ready to be aggressively managed, because it's not very mature. But when all this tariff stuff happened, Janet Yellen was essentially using this as an example for saying Stable coins should probably be regulated by the end of the year, which that's a pretty big success for any crypto failure in order to lead to a very top US regulator saying that this is a recent we need crypto regulation. Yeah. And
Anita Ramaswamy 8:45
it's interesting because Stable coins, I mean, they've been around for a while, but they've really only come to the forefront of the crypto discussion in the past year or two. And they've become such an integral part of the ecosystem when it comes to payments when it comes to transactions and making everything's sort of function and work. So it's this like niche quirky kind of specific part of crypto and a very specific product that now the regulator's are super concerned about, and I don't know, I think that's always interesting, like sort of when the regulator's decide, we gotta get in the weeds. There's this one really specific part of the financial system that isn't working. I mean, that's worth paying attention to.
Lucas Matney 9:18
Yeah, and I mean, there's just so many different elements of this that are fascinating. I think one last point to hit I was saying how other algorithmic Stable coins have failed in the past. You know, just a couple hours before we recorded this coin desk did a story saying that the founder of Terra was actually the pseudonymous founder who used to like a user name as their name of another algorithmic Stable coin that blew up called basis. And it's just there a lot of questions about pseudonymity, like Satoshi Nakamoto, not the founders real name assumedly. But just someone who created a project but didn't want to have their real life identity tied to it. And I think that there's a question that needs to happen in terms of okay, obviously, this is good for the founders to be able to kind of get rich and not have to have it tied to your real world identity
Anita Ramaswamy 10:04
not not taking accountability is great. Right? Exactly. But
Lucas Matney 10:07
it like is this good for retail investors and I think it doesn't matter. Sometimes if you're somebody buying up NF T's who really cares who you are, that's probably okay. But if you're like, managing a multibillion dollar cryptocurrency,
Anita Ramaswamy 10:21
right, right, it definitely raises some questions about what all the pseudonymity that's been so specific to the crypto space is going to result in as the downturn probably continues. I feel like so many other projects and founders are gonna come to light where it's like, Oh, we didn't know that this person who's involved in this project now was actually also the pseudonymous founder of this other project that failed. I mean, I don't think that this is going to be the first time that we see this with dokkan. And Terra,
Lucas Matney 10:44
completely. Yeah, we'll just see what happens here. I will be I'll be incredibly curious to get back to our new segment next week and see where all the dust settled
Anita Ramaswamy 10:52
here. Yeah, or maybe not settled.
Lucas Matney 10:55
We'll talk about ones we'll talk them.
This week, we talked to Kevin Rose, Rose co founded the social network. Digg is a partner at True Ventures, and most recently raised funding for proof collective and NFT media startup behind the popular Moon birds NFT project, which currently costs about $45,000 to get involved with.
Anita Ramaswamy 11:21
Hi, Kevin, it's great to have you on the podcast. Thanks for having me. Appreciate it. Yeah. So it's an interesting time right now, how are you feeling about potentially being on the cusp of another crypto downturn?
Kevin Rose 11:32
Yeah, it's a good question. I, you know, fortunately, I would say at this point, I've been through quite a few of these getting involved in crypto back in gosh, it was, I guess, it's been like a decade or so it's been a long time. So you know, once you've lived through a few of these, you kind of just get to this point where you realize that it's not about the day to day, week, over week, month over month, it's more about the larger year over year growth and progress. So you just put your head down to keep building? That's all you can do at this point. Yeah. So you're not as faced? No, no, I'm not really that faced. I'm a long term holder of eath and Bitcoin and NF T's, so I just don't even it doesn't even bother me at
Lucas Matney 12:08
all. Yeah, I mean, easier for people who've been in, I guess, not easier. But for people who've been in the space for a long time, kind of seen the rolling and also invested when these things were worth a lot less, it's kind of a different situation. But I guess like when you look at consumer retail retail investors, like they're kind of there's no doubt absolute words do you have for them? Well, I
Kevin Rose 12:25
mean, if nothing fundamentally about the mechanics behind the scenes has changed, which I guess obviously is not the case when it comes to something like ust or Luna. But if everything else is sound, in terms of the technical infrastructure behind the scenes for Bitcoin, or Aetherium, or whatever it may be, then I'm just of the mindset that I don't ever really think about going back out to fiat at any point, like I'm a holder of ease. So when I see things like this, it's feels like they're on sale to some extent, and it's a good time to buy. So once you've crossed that chasm to say, Well, I'm in this for the next forever, basically, there's never going to be a need to go back out to fiat currency, then just it is what it is. It's just risks showing itself. That's how you know, there's still more upside to be had its risk, its risks, rearing its head and letting itself be known. If everything was Stable and flat, that's almost more concerning. In some sense. We're not trying hard enough. So I think that this is the early days of any new emerging market is going to be lumpy. bumpy, has been a roller coaster, there's loop de loops, there's all types of things that we need to go through to get to get to the end of where we want to be in meaning mass adoption. So that's to be expected to some extent.
Anita Ramaswamy 13:32
Got it. Yeah. And that should be comforting to investors to hear that. But I'm wondering about founders, I know, there's been this huge exodus of people from tried fi and like other jobs into web three, who are starting companies for the very first time in web three. Do you have any words of wisdom for them?
Kevin Rose 13:46
Yeah, I mean, if anything, we've seen this departure from these anonymous or pseudo anonymous folks out there to kind of a flight to known founders, credible entrepreneurs that are building the space, and just ones that are open to full transparency, communicating early and often to their audiences. I think that's going to be such a important piece of this puzzle going forward. I mean, when there's liquid financial instruments that are being built every single day with that there's room for bad players to come in, and we either rug people or do horrible things to their communities. So we have to really put this emphasis on a type of transparency and communication to ensure that doesn't happen to more people. For me, it's you know, it's always been how can I bring the committee along for the ride of what we're building and not doing it in a vacuum? So that's, I think, is really important piece of, of how we get that comfort and security that the consumers will demand. Now that some of these things happen to them.
Lucas Matney 14:43
Is it a little stressful like having started a project fairly recently, it kind of blew up in some ways is it stressful knowing that chances are a decent amount of your community is probably a little newer to the space potentially and is going to be sweating a little bit more seeing this downturn and might walk away from the project To sell off their NFT at a lower price to somebody else or something like that. Yeah,
Kevin Rose 15:03
I mean it's it's really hard to everybody's financial situation is different right so it's kind of hard to get prescriptive in terms of whether you should hold or sell or buy. I had a friend of mine that bought one of my proof collective NF T's at one eath. And then they traded it's a one point up too close to $400,000 for a single proof collective pass. And he was like, Kevin, this like buys me a new literally buys me a new roof for my house, like I was wanting to buy a roofer his house like no joke, like, like an actual physical roof. I'm expensive. Well, it wasn't, it wasn't at 400, then it would think it was like 200 and change or something. But he's like, like, really helped me out. Yeah, I was like, this is your when this awesome handed off to someone else. Like, I'll never be upset about that, when I think of what we've set out to build and how ambitious it is, in terms of the different projects that we're going into over the next handful of years, I think for this to fully be realized, it's not going to be something that are you just moons, you know, quote unquote, moons in a few months, but it has to be durable products that are built over the course of the next decade. And that's what excites me. I mean, I say this is in many ways, a combination of all the many things I've built in the past. And I come in together in a way that uniquely suits me and my team to execute in this particular space. So that's what I'm most excited about is really letting people you know, really ship products and let them see that there is something much deeper to this than just speculation and price like I don't we don't talk about floors in our discords. We don't talk about them publicly. We don't comment on them, we avoid all the flipping conversation, like even our hardcore collective community, the proof collective, it's not about alpha, we're not an alpha group. We're not a flipping group. It's about what you want to collect and hold for the next decade plus in terms of artwork, credible artists in the space, unique and novel mechanics that are being created on the smart contract level. That's where the important discussion to me is, it's about finding the next blue chip project that's going to be collectible long term, and not just about how can I you know, make a 5x in 30 days, like there's plenty of groups for that. That's just not our deal. Yeah,
Lucas Matney 16:54
there's a freedom that comes with having your own money be the only money at stake. There's also a lot of stress involved with that. But I guess putting on your institutional investor hat, as you look at all these, like crypto mega funds that exist out there, obviously, some of their LPs, you know, maybe some of them are like, Hey, I thought this stuff only went up like what's going on here? How do you think that some of these funds are going to respond to this pretty sizable downturn? So far, it seems like especially just across the startup board, but also in crypto? Yeah,
Kevin Rose 17:21
I mean, I think when you talk to individual LPs, they wouldn't be investing in a crypto fund if they didn't understand the multiples that they were hopefully aiming for. And the risks that they were taking on a True Ventures where I'm a partner over there, we have several 100 million dollars in crypto related assets, including in a piece as well. And it's always right size to all the other things that we do in our funds. So it is a small subset of the overall fund size. So we think about this in terms of buckets of risk. This is by far and away, if you take a look at everything that's venture is dipping their toe in the water of crypto is the risk is bucketed them all. So you know, like with anything, investors expect returns to start coming in around the five year mark and to be completed around the 10 year mark. And it's early days, you know, these bumps are bound to happen. We've seen them before. So we don't get freaked out about that. It's more about creating a diverse bucket of investments for the fund rather than just holding all of our in one particular it's a coin or something where we'd be super centralized in some sense. And that's just not we have over 70 Some companies true now that are in the crypto space were insanely diversified. When it comes to that,
Lucas Matney 18:25
how do you balance kind of doing what's best for the fund and doing what's best for the founders, because I'd imagine if there's like a substantial crash, like for companies that maybe didn't raise in the past year, like moving some of that funding towards tokens have more staid and true projects would probably be better for the fund. But those founders wouldn't exactly be super happy
Kevin Rose 18:41
about that. Yeah, we've never sold a token. So that's the one thing that's awesome about our funds, we can look founders in the eye and say we're not in this to flip it. So I don't care if we're sitting on a 20x or 50x, or negative 50% discount to whatever the token price is like, we believe that it's going to take you a decade to build something really substantial in this new space. So if that's the case, like we can't even start thinking about that it's far too early to even think about start selling or moving assets around, we don't know what they're going to pivot into next, or what they're going to do can be massive. So to bail on the founder is the absolute worst thing you could possibly due and it's just like not in our DNA.
Anita Ramaswamy 19:14
So Kevin, you've talked a lot about the long term. And I definitely want to hear a little bit more from you on that, particularly with regards to moon birds and proof collective and what you're building, I read that the proceeds from the project are going to go to building a new media company. Can you tell us a little bit more about what opportunities you're seeing in the media space in Web3?
Kevin Rose 19:30
Yeah, absolutely. I mean, this is a beautiful thing that's happening it first obviously everyone it was easy to grok that if you're a creator of NF T's artists could actually now be paid in royalties, right which is just a beautiful thing. I have a quite a few artist friends now that were you know, living on $30,000 a year and now they're actually making a decent real wage and they're pretty happy about that. So that's just a fantastic shift. But that is also now happening when it comes to the IP level of things as well. You know, when bored apes do the really smart To the idea of basically giving away the commercial rights to any of the artwork associated with the project that allowed these people to not only hold the NFT, but also commercialize the NFT in new and interesting ways. So in my mind the future of this, and the reason why we did the same model or similar model with Moon birds is that we believe that the future Disney's of the world or pictures of the world, or whoever it may be the next generation of media companies, it's not going to be about this big, overarching corporate entity that says, here's my brand, here's the next X Men series, consume it, buy our goods, watch our movies, and you don't participate in any of that upside, the upside is now being transferred over to the users, which is fantastic. So they actually their assets appreciate along this ride as well. So I think that's a new kind of unique take and flip on old media companies and something that we absolutely want to embrace. And we did so with members and when we will, with some of the other derivative projects we have coming in a bit, but then also adding a ton of additional utility on top of the NF T's themselves. So having it not just be about collecting a piece of art that is obviously a very core piece of it, but also coming in and saying how can we make this more about community about people getting together and making lasting connections about the celebration of art and culture, just all the things that we kind of represent in terms of the content we put out at the media level on our podcast, and celebrating all artists and just really trying to help make this movement grow even beyond the small group that it is today? Because it's a lot of hardcore crypto enthusiast, but we haven't hit them the masses yet, you know?
Anita Ramaswamy 21:23
Right. Right. And clearly, there's a lot of long term opportunities that you're seeing. But I know, there's also been a lot of talk about some gray areas and ethical questions that have been coming up around NFT founders and people who are starting projects, right now, I know that you yourself sort of navigated some of this drama with your CEOs, sort of buying Moon birds before all the information was available to the retail investor or, you know, other buyers of the project. And so I'm just curious, how do you sort of navigate those ethical questions in running a project
Kevin Rose 21:48
100%? Well, I mean, with Ryan, in particular, our previous CEO, he all the information was out there publicly to the best of my understanding from all the transactions that he's posted, he's posted all the ether scan information so that the drop and all the data was on chain, I think the issue we had there is that he should have waited longer in terms of not buying the same day as the drop, right, it should have been multiple days after the drop to let things settle and then being able to buy in. So what we have to do is internally just put some safeguards in place that prevent people as company policy from trading and anything that we do up to a certain amount of time after we do any new release, that's going to be the standard protocol going forward. You know, at the time we were four people have a whole lot of other company was founded February 2, we didn't have a whole lot of anything in place to be honest, including payroll, which was just getting off the ground. So there was a lot to do. And there's a lot to learn from there. I'm very confident he didn't do anything weird in terms of using any of the information advantage that he had as being an insider, kind of because he did wait that length of time. But you know, we can just buffer that even further out. There's no sense not to, you know, I bought one member for my wife, which was like two days later or something like that. So, you know, it's it's, we just need better policies. Yeah. I
Anita Ramaswamy 23:00
mean, that's how it happens in an IPO. There's the rules of holding period, and all of that, which sort of doesn't exist in crypto for now. But maybe it will at some point.
Kevin Rose 23:07
Yeah. Yeah. I mean, absolutely. Should there's insider trading. I mean, it's the same thing, right? It's like you don't want people to go out and trade on pump nonpublic information. And that's something that we're confident didn't happen, but we need to make sure it doesn't happen in the future as well.
Lucas Matney 23:19
Yeah, I mean, even kind of putting Moon birds aside for a second, we were talking a little bit earlier about the azuki founders. So another very popular NFT project, one of the founders released some information that showed that they were behind a couple other projects, a couple of which they kind of pulled back from and abandoned the community a little bit, which has sent the price of that project declining quite a bit. I mean, we know who you are, we know your name, I guess like how do you feel about pseudonymous founders generally running projects that other people are depending on?
Kevin Rose 23:46
Yeah, you know, it's a good question. It's one of the reasons why, in some sense, when you think about venture capitalist getting involved in companies, there's a larger concern that comes to how they forced the hand of entrepreneurs in terms of their long term vision and what type of outcome they need to have. That's like one piece that a lot of people consider, but I think that on the positive side, actually, when I'm involved in, they're using some type of defy protocol, and I'm out there about to like, lock up some eath there's something crazy on there, I like it, when it says coin Base Ventures is behind this, or Andreessen Horowitz is behind this are true True Ventures is behind this, because you know, they've done a certain level of due diligence on the founders, even though they may be anonymous to the general public, that would not be the case to those venture firms. So that gives me a little bit of comfort there. But you know,
Lucas Matney 24:29
but they only feel confident because they know who the people are, which the retail investor don't get to
Kevin Rose 24:33
write, but is a proxy there, right? Because they can see that logo associated with it, then you know, someone's comfortable with the information. I know that's not the perfect answer. But for me, when I use it, when I use a defy protocol, I look to see who's behind it in terms of investors. And then who's done this smart contract audits like those are the two most important things for me but that said, I don't know it's hard for me to say because I know some people especially when the world of crypto in finances, they like to carry this anon I'd like to hide behind this, and I've met with a lot of them. And largely, it's due to the fact that they just worry about their safety. Like, if you're in charge of a protocol, I've had some founders telling me that when you are responsible for hundreds of millions, if not billions of dollars worth of assets, you know, that's a scary thing for a lot of people that are just engineers, right? So they don't know how to properly protect themselves, their families, like a whole slew of different things. Typically, when you get to a certain stage in your career, when you talk about high net worth CEOs, they know how to protect themselves in those ways. You know, they buy houses under corporate entities, so people can't find their home addresses. They, you know, I remember when Mark Zuckerberg paid for all of his walls of his home, I don't know if it's public information. But there was I was working with a security firm at the time, because I'd had some weird threats that had come my way. And they were the same from the head done Zuckerberg house, and they lined the front side of the home internally in the walls with Bulletproof material. And it was they just, that was just what they did. They did a construction project. And probably no one knows that. But that's the case for most CEOs. So a lot of these founders, you know, they're being thrust in the middle of like, Mubi docks, their home address on the docks, who knows what could happen? So it's a scary world out there. Right. So I feel for them on that front that said, I would like to push for more transparency around who some of these people are, especially after the more recent incidents that we've seen, you
Lucas Matney 26:20
know, yeah, I think there's like a tendency of people to just be like, well, Satoshi, we're okay. This is the experience, it all started with. But at the same time, like, it kind of feels like people are okay with, you know, quote, unquote, Daxing people after they do something bad, but then you kind of realize that this all could have been avoided in some capacity. You know, had they been more transparent, the beginning? And I suppose like, yeah, what you're saying about the safety part is definitely that's a real thing. But I guess it falls into like, what's the risk reward profile for these people, Kevin heightened upside for controlling the project? But yeah, it's an ongoing conversation that I'm surprised hasn't maybe moved further in the past year. So
Kevin Rose 26:55
yeah, it's a great point, it's, well, I think the next few weeks might move that conversation quite vague, given everything that we've seen going on. Yeah, it'll,
Anita Ramaswamy 27:03
it'll be interesting to see how that plays out. I mean, it's a scary world out there, for sure. And that's true. That's something we all know. But I think that's true of a lot of people. It's true for journalists, it's true for people working in other industries. And you know, a lot of us like, we have to put our name out there. And that just kind of is what it is. So it's a, I guess, a quirk of crypto in my eyes. But anyway, I wanted to transition to another topic, which is you were talking a little bit about how traditional VCs and taking money from VCs can provide a stamp of legitimacy for some of these projects. And I know that you also raised a bunch of money just from your moon birds, men, but you also raised from 776, which is Alexis Ohanian, and venture firm. So just curious about why you chose to take money from a traditional VC in addition to what you raised in the min.
Kevin Rose 27:43
Yeah, absolutely. So while I was thinking about this, even before some of the more recent docs and stuff came out, but again, with the stamp of approval of firms that have backed you, one of the common questions we get from a lot of people is where is this money going towards that you've raised from this meant you raised whatever $80 million, like or 60 Plus royalties and whatnot, like who takes this money? Is it going in your pocket? Is it paid out as bonuses, and the beautiful thing about raising venture is it gets rid of all those questions, because you don't do that you have to have financial disclosures to your investors, and they see that you're getting paid a salary just like everyone else. And there is no big payday for us, we're not bonusing ourselves out millions of dollars. Like we're in this to build a big, massive, brand new kind of media company from the grounds up. And so I liked taking capital, obviously, we didn't need to raise from Lexus or True Ventures. But the reason why we did that is so that people could understand we were serious about building a lasting business here. And it wasn't just about, Hey, pay us for this drop, and we may or may not deliver in the future, or we may take a little side cut payout or something. It just helped us get rid of those questions. But more importantly, that was one nice to have. It wasn't a necessity. Alexis and I were competitors for like a decade when Digg versus Reddit back in the day on social news sites. We have become friends over the last couple of years. And I love product ideation with him. It's fun to sit down and be like, what if this what if that and then just kind of go back and forth and just talk through this new world that's being built in web three. And we had done that in an unofficial capacity for a few months leading up to this whole investment. He's like when you get to take money, man, like I just put a little bit of money in and it's like, okay, well, we should talk about that. And the other pieces. So key with Alexis is he's done such a fantastic job building out an LP base that has, I believe, 40% women, and is that a ton of people of color. And he is just committed to diversity and inclusion in a deep, deep way. It's something that he not only just speaks but he lives it and breathes it when I jumped on a call with his team. He was the only white guy on the call and there was four of them on the call and I was like this is refreshing coming from having raised venture capital from almost every major top tier VC in the valley. I've been in those boardrooms where there's 15 white guys sitting around a table. Yeah. So it was just so nice to see that and I it's something I care about a lot too. I'm a dad of two little girls. And that's it means a lot to me to approach that and build that in your company culture from Day one. So I want his help there as well. And so that was a big piece of why we I mean, there was just so many wins here with with taking the money wasn't that substantial? It was like it was $10 million. And yes, that in stark terms, it's a lot of money. But in terms of what we're set to build, and the overall capital we had raised from the sale, it wasn't that much. You know,
Lucas Matney 30:17
Alexis seems like he's made a lot of NFT related investments, like he's big in the space talking about kind of the elephant in the NFT room. He's also a backer of UGA. And UGA just has, you know, seemingly have like a monopoly on amongst the top 10 Project Blue Chip NFT projects, they obviously are expanding their ambitions quite a lot in the past few months. They've got their Metaverse, they've got their eight coin currency, they're kind of talking about whether they want to make their own blockchain, you know, I guess when you like, think about a big NFT project as you want to scale Moon birds into is that the route that all projects have to go or they have to take every part of the stack? And is that something that you want to do?
Kevin Rose 30:51
Yeah, definitely not. I don't think everyone has to go that route. I mean, for us, the metaverse is a pretty loaded term is a very busy world out there. Everyone's building an expansive 3d universe that you have to fight to get your mouse cursor back by hitting escape and some weird thing that you're stuck in. It's largely in my mind, it's, you know, a hammer looking for a nail. It's like trying to find a use case, these open ended worlds don't do a lot for me. I mean, I'm old enough to been around during the Second Life days back in the day, I've been playing in 3d worlds for many years now. And the gaming side of it is really interesting. I think what sandbox is doing and some of the others around building games in this world, there's no doubt high quality games in a massive multiplayer environment is going to be a success, and it will be a hit with people, if done correctly. I don't want to play. I'm not a gamer. I don't come from a gaming background. So I don't want to play in that world. More of what we're going to set off to build is tools to connect community around the passion of NFT. So whether it comes around discussion, conversation display, there's just a bunch that we can build there that no one else is going to tackle all through this lens of this social layer that we want to add on top of all of it. And I think that's where when we build something, it'll be special and unique and novel, and it won't be just us doing another mici project. That's what we're set out to build our version of the metaverse is it's not really a Metaverse, I think you could call it more of a it's closer to a better built discord than it is a Metaverse if that makes sense.
Lucas Matney 32:11
Do you? I guess just following up on that? Do you feel like balancing NFT holders with liquid token holders with equity holders? Those are a lot of incentives. And like generally, if things are going good for the company, they're all going in a similar direction. But they're different holders at the end of the day. Is that a complicated weave to maintain over time you feel like
Kevin Rose 32:30
yeah, the good news is a lot of them don't the equity holders don't necessarily intermingle with the other folks, not many people know about the equity side, except for your, you know, close investors or your employees on the actual token mechanics and everything that's at play there. You know, the token stuff for me, it's boring when it comes to just issuing another ERC 20 token and saying, hey, hold this, or hey, vote on these proposals. Like we've kind of done that. I don't know if it's that meaningful, right? What's more interesting to me is something that's performance, fast settlements, low transaction fees, something that can actually be used as a real fun currency, much more akin to the early days of DOS, which I was involved in. And so you know, Doge was all about tipping, it was all about one dose equals one dose, it was less about price speculation and more about rewarding people for good behaviors in the community. So when I think about what we set out to create, like with Moon birds, for example, we have a mechanic with our PFP that you can nest them, and then nesting them prevents them from being sold like physically can't be sold once they're in the nest, but you start accruing rewards and time nested and you kind of graduate to these different levels of nests. But what that allows us to do is say, hey, let's reward the people that have been with us and committed to us since day one, our most hardcore community. Now, if you're just in this for the capital, you actually don't want that mechanic because you want turnover. Turnover means more royalties and means more money to your bottom line. But if you're in to build a durable lasting community, you want people to be engaged and communicating with each other. And really kind of using the IP that is generated by they're holding the actual PFP themselves and celebrating what's being created with that IP. As a community. We have a lot of little small projects that have already cropped up that are using the moodboards logos or their actual PFPs into physical brands and products. And so the more that we can kind of double down and bring the community together to celebrate those wins in that brand building, the better. So for us, it's less about turnover and more about commitment, if that makes sense. Yeah,
Anita Ramaswamy 34:26
it does. And I definitely see what you're saying about sort of incentivizing holding long term, but I'm just curious, does that disadvantage the artists in any way or the creators because like you said, they're not getting the royalties of having like constant transactions.
Kevin Rose 34:38
We are the artists Right, right. So it does we make less money,
Lucas Matney 34:41
that idea applied to other projects. Oh, I
Kevin Rose 34:43
see that idea. plenty other projects? Um, yes. And no, I guess it really depends on how successful the project is like, you know, I remember I don't want to disclose who the artist is, but there's a well known top 20 artists that gave up his rights to the royalties because he's like, I actually hate taxes, and I
Like he said, I don't need this much money. He's like, I'm happy, like, we did like an awesome job. And he actually turned his rights over to a foundation, which was was awesome. You know, snowpro, the creator of our blocks and the Chromie squiggles to the very similar thing, you know, he's all this proceeds go to charity now for this secondary sales of this project, because it became so successful that he was able to then say, well, let's turn this into a gifting mechanism, which I think is a beautiful thing. So I don't know, you know, when you have NF T's that are trading at a very high dollar amount, and then you're getting, you know, three to 5% of royalties on that just a few sales a week can be meaningful, enough money to live off of, you know, totally. And just one other thing that we've sort of learned from UGA and what they're doing. And obviously, it's very clear, there's some huge differences between how you're thinking strategically about Moon birds versus how they're thinking about their ecosystem is just that a big lesson, I guess, was the lack of scalability or the challenges in scaling on Ethereum. So I'm just wondering if you're planning on keeping Moon birds as a project on the Etherium main net? It's a great question. There's bits of data that need to be stored, that can be stored in the short term in a centralized fashion, and then eventually moved over to a decentralized world. When we think about the projects that we want to build that expand out the members ecosystem, when it comes to the actual entities themselves. Ethereum main chain makes the most sense for now in terms of we're doing fully on chain as well. So we put all the data on chain, it does involve extra gas, you know, we carbon offset that currently, which I think is an important thing to do, and push for your your other PFP projects to do the same. We use aerial for that whole system. But we're we're kind of in a sit back. And let's wait and see. So for us, there's a lot of promising layer twos, there's also other promising chains altogether, I think we'd like another six to eight months of data to see really what's going on on the layer two front and then make a determination from there. But certainly, we're not opposed to layer two storing a lot of the data that isn't as precious. And we can use roll ups and other things to help with that. I think when you guys announced that the mint was going to be two and a half eath for moonbird. Some people were just like, that's obviously that's a lot of money. But I guess and you guys were like, well, this is the market price. And like we're kind of struggling with a overwhelming wave of interest. But I guess like is the market price always the right price? And I guess what do you lose when you price and NFT in the multiple 1000s of dollars, yeah, you lose a lot of diversity and inclusion there. And that's not lost on us, I think future drops of ours now that we have the capital to go out and build this was like a random financing. For us, we kind of see more or less, even though we may be able to demand higher prices, we're gonna make sure to price it to where it's more affordable and approachable to the average consumer. And then for this particular one, we didn't work with any outside allow lists. So we didn't give any guaranteed spots to any dowels or any other projects out there, we in the future will give another example we have one that is coming up where we're going to be doing a collaboration, it's going to be going out to our members audience. And there's a certain subset of people that just aren't nested because they're selling them or they're flipping them or doing something else, they won't be eligible for that particular drop. So you can imagine, let's just say there's a couple 100 that aren't actually eligible for that drop, rather than go and sell those on the open market and profit is a company, we'll be working with a couple other providers that we're nailing down right now, which is going to be a couple of dowels that are focused on women and people of color that we can provide these that next to nothing like so that we can just get a more diverse group of people that are holding our nfts. And for us, that's the way that we win long term is building that, that those types of communities and that type of connection, and that just doing what's right for the world, rather than our bottom line, I think I always tell that the team like we don't look at floors, we don't focus on floors, or price or turnover or volume, we focus on doing what's right by the community, first and foremost, and then just putting our heads down and shipping product and our hype levels at a 10. Right now our product levels that one, it's our job to close the gap. And if we do that, everything else will take care of itself. So that's kind of like the internal culture that we're trying to build is it's not about every single release, bringing in an extra 100 million dollars. It's like let's build for the community in the connection. And when people see that, and they feel that and they experience it in real life, then you know, these things will go to amazing places. So that's kind of our thinking, kind of wrapping things up on a little bit of a different point, talking about people who've kind of made the transition from web to to web three, there was a lot of talk, I feel like about gaming in the last few years about it being addictive or whatever, being someone who follows the NFT space pretty closely. It's not lost on me how I'm not necessarily the most connected with people who are really collecting these things as a way to become rich, essentially. And that idea becomes fairly addicting when you can kind of think of something as I can buy something today and tomorrow I can retire or something like that. But I guess how do you think about the NFT space and think about some of the issues that are there like there are people are very critical of NF T's in general. And I think it's because they see their friends who are just shilling you know, shitty projects, like how does it How does the NFT space move past that? Yeah, it's a good question. And it's something that we spent a lot of time trying to work on that a lot of the content that I put out whether it be the podcast, the proof podcast is about interviewing up and coming artists. It's about
really putting the emphasis back on the artwork itself and not just making it about the shilling piece of it. It's about preventing that type of conversation in our discords not creating, there's a lot of discord that have a dedicated floor channel, it's just talking about the floor talking about the price, like that's something that we avoid doing altogether. I think that as in any market that has tied to finances, there's always going to be this problem. I mean, people talk about penny stocks still, I mean, we've seen what's happened in some of the Wall Street beds, channels. And just like, anytime there's something is tied to finances, it just goes it's always going to have a certain subset of people that that is their focus, right. And I think that's okay. I don't know that. I think it's it's bad when someone's left holding the bags at the end of the day. And it's really damaging that sense. But I don't know that it's our job to prevent it, what I see is first I don't know how I'd go about preventing it, but I know what I can do. And that is go out and talk about the most important piece of this. And that is this new art form that has been captured for the first time, whether it be generative art, that is the first time actually being able to be traded and sold on chain or the unique one of one digital artists that are crypto native that are animated art that just couldn't exist in an oil painting, right that have only produced stuff for the blockchain, like the X copies of the world, like some of these amazing artists that are out there. I think X copy is gonna be the next bank. See, I mean, work is works already selling as much as banks used to so I guess maybe already is but like, I think that's like the focus. And they put that on the back on the creativity. Creativity has been done the smart contract level, like there's a whole difference in really focusing on the education and hopefully growing that audience. And we've seen that happen, like proof now is the podcast, we're over 100,000 people that listen to every episode, which is like in that those are people that are really curious about the art side of things, you know, we don't talk about flipping. So if I can grow that to a million people or more, I'd be pretty happy, but it's gonna take time. Awesome. Well, thanks
Anita Ramaswamy 41:50
so much, Kevin. It was great hearing from you. Yeah. Thanks
Kevin Rose 41:52
for having me on the show. Appreciate it. Yeah, thank you.
Anita Ramaswamy 41:58
Thanks for listening. We'll be back every week with the top crypto news and interviews with experts in the space. You can catch us on Spotify, Apple Music, or your favorite podcast platform and subscribe to our companion newsletter, also called Chain reaction@techcrunch.com. Forward slash newsletters. You can also follow us at chain underscore reaction on Twitter for the occasional Twitter space about breaking crypto news. If you want to read more about what's going on with Tara. You can check out the latest articles from Jacqueline Melnick. And if you're curious to learn about bitcoins bid to become the one chain to rule them all. You can read about it and my latest feature links are available in our show notes. We'll see you next week.
Lucas Matney 42:35
Chain Reaction is hosted by myself. Lucas Matney along with my co host and Anita Ramaswamy. We are produced by Yashad Kulkarni and our associate producer is Maggie Stamets with editing by Cal Keller Bryce Durbin is our Illustrator Alyssa stringer leads audience development and Henry pic of it manages TechCrunch his audio products thanks for listening