Kyle Samani (Multicoin Capital) on breakout applications for Web3 (EP.137)

Nick, good to be on. Longtime listener. Good to be here on the show.

Just a couple.

Yeah. So, very fun question. Let's start off with the most polarizing tribal question just to make this fun.

So, I think it's actually easier to start with Ethereum than Bitcoin. Ethereum, like I want to love it. And Ethereum is what made me fall in love with crypto. I was never, I never had like strong libertarian views or had strong opinions about monetary policy and government printing money and all those things. So, Bitcoin kind of never appealed to me. But Ethereum did as this development platform to do cool things. And as it became increasingly clear that financial applications were going to matter, it was very clear to me early on that smart contracts were going to be a very important thing for the future of money and finance. I've become somewhat disillusioned with Ethereum over the last probably 18 months. Just because I disagree with a lot of the kind of long-term technical decisions that have been made in terms of how we're actually going to scale this thing to be meaningful in terms of users and dollars. Although the dollars on Ethereum are somewhat significant. I mean like 10 billion of TVL and there's like three or four billion dollars of loans outstanding. I mean these are real numbers. Now the number of actual users is almost zero. I think the best way to think about that is look at the Uniswap airdrop. There were 250,000 addresses that received UNI tokens from the airdrop. So that tells you that no more than 100,000 people have ever used DeFi. Right, I personally have like four addresses that got those tokens. I'm guessing you probably have one, two, three yourself. Right? It's hard for this math to get over 100,000 users. And I look at gas fees and everything and it's just like we're so many orders of magnitude away in terms of scaling that I've become very disillusioned with how the current Ethereum roadmap is going to get us there. And I've developed a lot more conviction that A, the network effects are not insurmountable because the number of absolute users is so small, and B, that there are much fundamentally better architectures. And I've come to believe both of those things with pretty high conviction.

Yeah. I mean, I think for these systems to really work as we really want them to at global scale, we're off by right now about a million x. Like we're not off by 10 or 100x, we're off by a million x. And if you think about it in that lens, you have to completely throw away all conceptions of what is the current performance and any notion of tweaking the current architecture and you have to go back to the basics and just say okay, how do we just compute more stuff faster? And I don't think the kind of current propositions being discussed are going to get you anywhere even close to a million x.

Specifically in how to scale computation. Yes.

Yeah, so I've definitely gone back and forth on Bitcoin from me being a full smart contract kind of believer to losing a little faith in smart contracts and now kind of appreciating Bitcoin for the simplicity of what it provides. The more I think about Bitcoin, the more I think the fundamentally interesting question for Bitcoin is what's going to happen in like five years or so from now when you've got some sovereign wealth funds or pension funds or whatever and they're like okay, we're going to finally buy these non-sovereign money things whether it's Bitcoin or Ethereum or whatever new layer one it is because it has some cryptographic properties and some monetary properties. Of all of those options that are available, let's say there's going to be three or four potentially main real competitors, Bitcoin is almost certain to have the strongest Lindy effect in terms of just it's the oldest, right, proof of work, it's been around the longest, it'll obviously have those properties, it'll probably have the hardest most simplistic monetary policy of all of these things. But is it going to be 10x better in those fronts or is it going to be like 15% better in those fronts? And I think it's going to be closer to 15% than 10x. And so if you kind of assume that's what that's going to look like, which I think is actually a pretty reasonable assumption. And then you also think like, hey, are one or multiple of these smart contract platform things going to be facilitating trillions of dollars of trading and commerce and whatever all these fun bank widgets and stuff. At some point if you're the no-coiner in 2025 or 2028 who's got to deploy a trillion dollars or hundred billion dollars into these things, where do you put your money and why? And today it feels very easy to say Bitcoin is the only answer and I agree today that's clearly a much better answer. But when smart contract platform X or Y is trading that kind of volume, that's a lot less clear because again, you're getting the same cryptographic properties and you're getting almost all the same monetary properties.

Yeah, so again, if you believe that monetary policy is binary and either it's Bitcoin fixed supply, set in stone 10 years ago and has never been modified, right? But if you're going to take that pretty extremist stance on monetary policy, then Bitcoin being on Ethereum is good for Bitcoin and bad for Ethereum because Ethereum's monetary policy is obviously not as strict as Bitcoin's. I'm not saying strictness is good, but it's just clearly not as strict and that's not really a question. And the same is going to be true for any of the other smart contract platforms as well. They have more governance and they're newer and more people yelling at each other and so their monetary properties are not as good. But now if you look at the other way around and say monetary policy maximalism and the strict fixed supply thing is not binary and it's a feature but not necessarily the only feature. Then I think it kind of lends itself to the other argument which is Bitcoin can't even support itself. It's just going to end up somewhere else and ultimately the other thing over there is going to be more valuable. I tend to lean towards the latter view more than the former. It's okay to be off by one or two or three or even 5% in terms of monetary policy. You don't need that level of precision to provide the world the order that it needs.

I'd say this is one, this is a piece of advice I share with all of our portfolio CEOs. Which is that the most important feature of a token is its market cap. And I don't mean that in the I want to make money as an investor kind of a way. I mean that in the social legitimacy that having a high market cap provides. It still to this day perplexes me how Chainlink has a $10 billion market cap. Like I don't know who owns all these things. Same with Litecoin. Like pick another many other assets in the top 10. I cannot explain to you where those dollars are, but I know they're real dollars. Like somehow somewhere they're real. But I've also realized that the social legitimacy of being higher on CoinMarketCap is real. People take things seriously because they're higher on CoinMarketCap and CoinGecko and Binance and all those other things. And that is immensely powerful and underrated. And so we really emphasize that to our portfolio companies is you need to be higher on CoinMarketCap. It makes you real.

One really big mistake I made early on was I got into Ethereum because of the ideological belief and the power of decentralization and openness, absorbing I'll call it the Bitcoin Ethereum view that the primary metric of decentralization that matters is node count. And the longer I've spent in the space the more I've realized that that is too simplistic and that also that view is a manifestation of an ideology that may have been necessary to get crypto off the ground but doesn't mean that it has to be necessary for crypto to continue to move forward from where it is today. And I'm increasingly of the view that at this point every libertarian on the planet owns Bitcoin. You can't really be a libertarian and not have heard of Bitcoin and not wanted to buy it. All the ideological buyers for these things have been exhausted. And so, to get to the next 10x of growth in market cap, we need buyers who are not ideologically driven. Whether that's open finance or whether that's open software building on a decentralized network or whatever. Or just libertarianism. You need market driven, utilitarian driven buyers. And so I think in a lot of ways the strong ideological beliefs that are the basis for many of these networks are increasingly hindering them.

Yeah, I mean something that has cash flows of form is you can run a DCF and identify the yield and people can play a cost of capital game on if they think the asset is overvalued or undervalued. And I believe that is a fundamental law of finance. I don't see a way around it. So I'm excited to see a lot of those capital assets starting to do the things that they said they were going to do. The DeFi community today tends to exaggerate what a lot of those ratios are in pretty intellectually dishonest ways. But they are starting to accrue. I think the biggest actually open question for most of these DeFi things is long-term value capture. I've been kind of poking at this debate online and I usually get kind of yelled at when I bring it up, but it's not clear why Uniswap needs to have a token or why Balancer or those kinds of things. 0x, you know, kind of already went through this life cycle of debate. And I actually have a blog post I started working on a couple days ago. I'll give this the sneak peek preview here on the Castle Island podcast. But basically my theory for the framework I've come up with on how to think about which DeFi tokens can actually capture value are the ones where the token actually has to manage risk in the system. So the easier way to think about that is like Maker versus Uniswap. In Maker, MKR holders are the equity backstop of the system in a very real way. But in Uniswap there's attacks on the system. And it's not really clear that there's a way to evolve that Uniswap protocol in such a way that there's actually any fundamental risk in the system. If you look at Compound, dYdX, those again have clear notions of fundamental risk in the system. So that's kind of the framework I've been thinking about. I think it's intellectually coherent. I think it makes sense, right? Which is just look, if you are the final backstop in the event of some liquidations or some assets being stolen out of the vault or whatever, if you are fundamentally backstopping the system you are effectively the bottom of the capital stack. And therefore you have a right to cash flows out of the system and you can price that risk. I believe that view is coherent and I think we'll start to see the market get there over the next couple years.

Yes. Correct. And in exchange for bearing that risk, people who want to obviously, DAI creators, they have to pay for the cost of leverage, you have to pay to borrow money and so you are justified as an MKR holder of receiving cash flows.

So the one I want to bury is easy. That's the long EOS paper we wrote in April of 2018. We were just wrong. We just totally missed the mark on that one. We had a bunch of theories. Most of those theories were just plain wrong. We even laughed at plenty of times for it. We lost plenty of money on EOS. We moved on and it is what it is. But the paper is still on our website. If you dig at Multicoin Capital EOS, you'll find it. We have not taken it down.

Not on any podcasts, internally. We do a quarterly decision review where we look at kind of decisions over the last three and six month periods and figure out what we did right and wrong. So we have a lot of internal grief and learnings but not in a public setting.

So I'd say the most hidden thing that was very non-obvious but that I have a deep appreciation for and that actually really shaped my views on Ethereum and DeFi was the correlation between price and transaction usage. So one theory we had was if you look at the Ethereum transaction gas consumption chart over the course of second half of '17 or first half of '18, it's generally trending up and to the right. And our view was that basically the system by basically June or July of 2018 was going to become saturated like 90% plus gas consumption. And we were pretty convicted that was going to be the case and prices started kind of going down after like April May or so and never kind of recovered from there. It just got very apathetic in the market and gas consumption started to fall and we thought that the gas prices were going to cause people to basically look at EOS because EOS was launching in June of '18. And we were ultimately right about the thesis if you look at what's happening now, that's literally what's happening. But we didn't appreciate the power of the correlation between price and gas consumption.

The blog post that I am the proudest of. I'm going to go with the one I wrote about six months ago. It's called On Forking DeFi Protocols. And over like everyone was talking about DeFi, all the Ethereum maximalists latter part of 2019 and first few months of this year and you could feel the bubblings in social media and I was very well aware of what was going on and I am an avid snowboarder and whenever I go on a solo trip, I'll just shred all day and what I'll do usually on those trips is listen to podcasts on the way up and music on the way down and I have a lot of time to think and I listened to literally 15 DeFi founders over the course of like two weekends and so a bunch of stuff is just bubbling through my head and as a result of that I consolidated all my thoughts on DeFi into that forking protocols piece. And if you look at it now six months later, the funny thing is when I wrote that, all the DeFi people were throwing tomatoes at me being like, no, these things are so defensible and whatever. And the funny thing is actually I was off by an order of magnitude of how undefensible most of them are. And how easy it is to fork them. And what I realized is latent capital is so plentiful and so fickle that the forkability and defensibility in these things is quite low. And I think a year or two from now we're going to look back on that post and I think it's going to have directionally nailed everything and it tried to directionally cover seven or eight different things and although I think the order of magnitude of each of them is wrong, I think directionally all of them were correct. And so I'm looking forward to reviewing that post in another year or two.

Yeah. So, I'll give you a both more and less nebulous description. So I think of the web 3 maximalist type people. Those folks tend to talk about data sovereignty and data ownership and not being subject to Google and Apple and Twitter and Facebook and those people. And I think that's one potentially interesting outcome of web 3 in some distant future state of the world. But that's pretty far away and we're not even close to that stuff. I think the more interesting way to think about web 3 which is also a little bit more nebulous is just the foundation to create trust minimized applications. And so the largest class of trust minimized applications today are DeFi applications. But there's lots of other trust minimized applications. Things like Helium for example, things like Audius, things like Oxio, a whole bunch of others. All of these things share some common properties and underpinnings with DeFi and with Bitcoin. But they also have kind of new unique things as well enabling them. But the core of all of these things is facilitating trust minimized economic value transfer between two parties in some way.

Relative to four years ago, I'd say it hasn't come as far as I expected. Relative to 18 months ago, it's in line. I've come to the realization that the most common expression of the web 3 thing by the kind of web 3 ideologues is again the own your own data self-sovereign internet applications and that stuff is just we are still very very far away from that, not even close. And so I'm just less interested there, but I also think that's okay. And we are, there are now some things that are possible that I am pretty excited about. And I think we're going to see a lot more of those things rise to prominence over the next 12 to 24 months. And I think they'll get probably undeserved media attention because they're basically the first ones that work.

So, if you're pitching web 3 to a complete skeptic, what would be the applications that you would call out to them as the most kind of immediately addressable and relevant ones?

Okay. So, let's dig in Audius a little bit. So, tell us a little bit about it. You described it on our call as censorship resistant SoundCloud. What does that mean? What's the purpose? What's the reason for existence?

Been largely squashed by record labels who have been able to dictate terms over centralized platforms. The goal with Audius, then, the kind of target user base, number one, are all those people who want to kind of unlock that creativity of music by recomposing in different ways. And then the second major use case for Audius are people who want to be able to stream audio into games, social environments, whatever, but in some sort of automated software application, and they don't want to deal with copyright issues as the game developer themselves. And so actually, there's like I think five or six games that recently started using the Audius API, which launched like I don't know six weeks ago, and those game developers, like the great thing is they can clean their hands and say, look, we're not streaming audio, right? It's coming directly from audio servers to users, and they don't have to worry about copyright issues for their games, which actually for like a long tail of game developers and other types of comparable things is actually a pretty big deal.

So, I mean, Audius, so you have to understand Audius is a protocol. Audius is not a company. Audius protocol leverages IPFS. It's kind of has a, it's not a fork of IPFS, but it kind of wraps IPFS with some other stuff. And then anyone in the world can run an Audius node just like Bitcoin or Ethereum or any of these other things. And when they run an Audius node, obviously these things all find each other and connect to each other. There is an Audius front-end application to, you know, browse music and have a profile and, you know, share with your friends and do all those things. The Audius front end is open source. Every line is open. You can take it today and fork it. Actually, I think the first couple developers have started to fork the Audius front end now and do other stuff. And obviously the Audius front end system will, you know, find audio nodes and, you know, stream music from them, right? But Audius, the team that built all of this, is just a team. They have no revenue. They don't intend to have any revenue. They don't host any files. Like they just publish open source software.

Yeah. So there will eventually be payment flows in the Audius system. Today there's no payment flows on any form. But you can imagine like people may want to say, hey look, if you recompose my music and you get a million listens, please pay me, you know, X dollars or whatever. So the Audius protocol will be adding payment type of features in 2021. So that will obviously live on-chain. And then the other major class of thing that will live on-chain, this actually lives on-chain already, is basically your social profile. So whenever you, you know, open up the Audius client, you sign in with Twitter, and whenever you like a song, repost a song, play a song, share a song, do all those things, those obviously all get tagged to your public key which lives on the blockchain. And that is used then for recommendation algorithms and all those kinds of things. So all that lives on-chain, and what that means though is that because all that data is on-chain, that means if anyone else wants to create a new Audius client with new recommendation algorithms or, you know, that then like they can have new algorithms on top of the same open data set.

Correct, yes.

Yeah. So, the Audius token is not a medium of exchange. The Audius token is has kind of a couple of functions. One is I think once payment features are implemented I think it's likely that there will be some sort of fee payment to the Audius nodes for hosting all the audio and streaming it all and stuff. So there's some kind of capital asset angle there. And then the other one, and this is actually the more interesting one, is dispute resolution. So the Audius system is obviously permissionless. I could today just like download a whole bunch of MP3s of Taylor Swift music and upload all of them to Audius. And I could like create a profile on there and say I am Taylor Swift. And then try and claim credit for those, write those songs, saying that they're mine. Once payment flows turn on, you can imagine that's like very problematic. And so you need some sort of way for basically people to verify their identity and say, look, this Twitter profile actually belongs to the artist they say it belongs to. And then you also need to be able to a way to say, look, this artist who owns this Twitter profile did in fact publish the song, and any payment rights need to actually flow to the underlying person. And so you need some sort of decentralized way to solve that problem. And so the Audius token will be kind of the sybil resistance or part of the sybil resistance to solve that problem. The exact mechanics of how it's going to work are still unclear, but if this is ever going to actually matter, you have to have some way to solve that problem.

There have been a few others. There was a thing called Library Credits. I know it came around 2017.

I don't know what ever happened to them. I know it was supposed to be decentralized YouTube, but I don't know what happened to them. There was DLive, which we spoke to them for a while about a year ago fundraising. And ultimately, Tron acquired them. So I know they have some users, I don't remember what the blockchain part was for. Then you've got Livepeer, which we are an investor in, and those guys aren't really focused on like the user interface platform but on kind of a new way to connect people with GPUs to people who need to transcode videos. And so there have been a handful of teams playing around with this kind of a thing. Audius is probably the most ambitious and I'd say well-funded effort, which is like a very comprehensive team that they have real traction now. I think there's something like 600,000 monthly actives on Audius and they should clear a million by the end of the year.

Yeah, that's correct. I use Audius now probably every two or three days. I listen to audio. They have good curated playlists on there. It's still early, like this is not going to replace Spotify for anybody. But for the folks who are into kind of like long-tail music discovery, there is a pretty vibrant Audius community now today around that.

That is correct, yeah. The other thing worth noting is that the DMCA, which is kind of the Digital Millennium Copyright Act, the way it actually works, there is no federal agency responsible for enforcing it. The way that DMCA works is if you own copyright to some piece of music and you identify someone on the internet who you believe is violating your copyright, you can send them a takedown notice. They have like 24 hours or 48 hours or something to comply. And then basically if they don't, then there's kind of a series of enumerations which ultimately end up in suing them in federal court. But there's no like enforcement agency, right? And so as you imagine, as you imagine you like start escalating through the kind of the series of steps here when the servers hosting all the content are not in the United States, it quickly becomes exponentially more difficult to enforce any of this stuff.

Correct. In fact, there are lots of hosting data centers around the world, not in the US, that actually publicly advertise to developers like, look, we do not comply with DMCA takedown requests and other analogous types of requests.

Yeah. So, I mean, the other one that we're really excited about is called Helium, which we invested in about a year and a half ago. And Helium is a new way to think about deploying a wireless network. So today, you know, you've got AT&T or Verizon or whatever you got. If you think about like how do you deploy a wireless network, you can imagine there's a group of people, they sit in a room somewhere, they look at a map of the city, they say, ah, we want to put towers in, you know, all these different locations. They call the people who own the land. They, you know, negotiate with them, rent some land. Then they go hire a bunch of guys with hard hats, have them drive around, install a bunch of towers, run a bunch of backhaul, right? Like do all that work. That's obviously very capital intensive. Then they build massive marketing arms and agencies, massive sales and retail arms and customer service departments, right? And then like just collect, then fund it all by a bunch of debt. And then collect a bunch of subscription revenue, right? Amortize the cost of capex over like 10 years or whatever it is. And that's kind of like the general model for deploying a wireless network. One of the key challenges with a wireless network is that if you don't have, you know, a large area of coverage, people basically don't want to use the service because like people travel, right, and drive around and fly, and so people expect to have coverage everywhere they go, and so having small regional sectors of coverage is very difficult. So the Helium team has had this vision for a long time of basically saying, look, like we want to have sensors all over the world that can like pick up things, you know, is the grass watered? Are the trash cans full? Do we need to send someone out to pick up trash cans? Is a car parked here in this parking spot? We're tracking GPS like items through the world. If you think about agriculture, like, hey, is the ground, you know, getting enough water in all these different places. Fire sensors, all these kinds of things. But there's all kinds of things in the world you may want to detect and have some sensor and then relay, you know, the state of that thing to some internet server somewhere. So there's a whole kind of category of radio waves that are actually very good for these use cases called LoRaWAN. And these radio waves are super long distance, super low power, but have very low data rates. And so the Helium team started in 2013 trying to popularize this concept. And like they built all the wireless stuff. It all worked really well. What they realized as they tried to scale the business was that they didn't have five billion dollars to go become a nationwide telecom. And so they kind of came up with this idea of saying, hey, what if we can create this crypto blockchain network and what if we can incentivize rational people all over the country and all over the world to just buy a little hotspot, plug it into the wall at home, create radio waves, and then charge people basically per byte of data for using the network. And so that's what Helium is. It's a new business model for deploying wireless networks. The first iteration of which is focused on these low power IoT devices. The network went live in August of 2019. I'd say there's about 9,000 hotspots all over the United States that are running, covering something like 75 or 80% of the US population is covered today. And there's now about 100,000 IoT devices connecting to the network and submitting data every day and that number is growing pretty quickly.

Yeah. So I mean the answer is we really don't know, like this is largely a new market. For anyone who's like followed IoT or dug into IoT over the last six or seven years, you've seen all these very bold promises about like smart cities and smart globe and all these things. For any of that smart stuff to work, the like key input is a sensor that detects the current state of the world, whether that's the temperature or the humidity or the location or whatever. And so the problem with all of these like big bold IoT initiatives has been how do you blanket the entire nation or the world in radio waves that are good for devices that need to have very small batteries and very long battery life, right? Because like you can't have people changing these batteries every 24 hours. It's just too expensive. And so that's always been like the fundamental problem. And Helium, you know, is really today the first large-scale LoRaWAN network that's ever existed. It's just never been economical to roll such a network out. So you know now that the network is starting to exist, it's really been the last four or five months that serious companies have started to look at this and say hey we can actually build our business on top of this. So like for example, Lime Scooters is now doing all kinds of work with the Helium network. There's about another dozen or maybe two dozen Fortune 500 companies that are now working with Helium on integrating the LoRaWAN system into their various business practices. If you go to helium.com, they have all the publicly disclosed customers listed there.

I would say it's both. The first round of people, folks like ourselves for example, thought it was just really cool and there's a pretty large niche of geeks out there who are like IoT geeks who just like think this stuff is cool. But like in order to get from, you know, we have 9,000 hotspots today, like I would love there to be a million hotspots all over the world, and you know, in order to get to that level of scale it has to be purely economically motivated. And so the key to doing that is to have the price of HNT go higher and have the cost of hardware go lower.

Correct. So if you think about again like deploying a wireless network, there's like two distinct forms of value being created. One is I am on the network right now transmitting data and obviously that's creating some value for me. And then the other is I know I have the option that if I travel to any of the other places I will be able to transmit data there. And so those are two distinct forms of value. And if you think about like how do we incentivize people all over the world to deploy these things, right, we want to have coverage even in places where usage is 1/100th or 1/1000th the median location. And so the algorithm for, you know, the HNT is mined much like Bitcoin, there is some determination made by humans of like what percentage of rewards should go to people who are actively transmitting data versus people who are providing coverage that may not be utilized at the current moment. That is kind of a fundamentally subjective trade-off. And you know, governance rights in the Helium network will I'm sure adjust that over time.

Yeah, so the Helium network mines 5 million tokens per month. That's just embedded in the protocol. So there's something like 70 million Helium tokens outstanding today. You know, Helium trades on Binance.com and on FTX.com today. I think the price is like $18 or something. So, you know, like there's a real market cap here for this to work with. And like if you are mining HNT with a hotspot, you can definitely go sell it and make dollars.

Yeah, so we helped the Helium team kind of design their token system. And one thing we realized early on was that wireless data is a commodity, fundamentally is a commodity. In the same way that oil, you pull oil out of the ground then it's a commodity. And now it's a different kind of commodity in that like, you know, if you don't use data last second it's no longer useful this second, but there's obviously some fixed bandwidth of, you know, there's some fixed amount of bandwidth available at any moment in time that can be consumed. So the way that we thought about this was that like we wanted this to actually be useful and that this network clearly provides some obvious utility which is relaying data between point A and point B. And so we thought the best way to design the token network was to actually make Helium, make HNT into a commodity. So the system prints 5 million tokens per month regardless of anything happening. In the same way that you can just imagine oil shooting out of the ground, obviously the people who, you know, set up hotspots earlier have been rewarded more proportionally. Which again I think is pretty equitable. And then the flip side is as people use the network, so I'll just use Lime Scooters as an example. So Lime, if they've got scooters, they want to broadcast data with these things. They have to pay per byte of data. I don't remember what the price per byte is. Let's just say it's a tenth of a penny per megabyte for simplicity. So if they want to transmit a megabyte of data, they basically have to buy that amount of HNT and then they have to burn that HNT. They actually light it on fire and destroy it. And by doing that they basically earn the rights to receive, get the data broadcast from somewhere in the real world to live servers. And so by doing that basically there's always this downward supply pressure. As more and more companies are buying and burning HNT, meanwhile, the network is always printing new HNT at the rate of five million per month. The system does have an oracle in it. So there's something like 15 or 20 nodes that are grabbing the price of HNT, I think every 24 hours and relaying that to the network. And so that ratio determines the number of HNT you need to burn or rather the amount of HNT you need to burn in order to produce a single data credit for let's say one megabyte of data and that's kind of how the system is mediated.

Yes.

Yeah, so we definitely drew on inspiration from a lot of other networks. The one actually that I think had the most amount of inspiration was Factom. The Factom network had a similar idea where it was saying look you want to embed data in this blockchain and anchor it here forever. There's real economic value to that. And they had an idea. They called them entry credits, but it was a similar idea basically pegging the Factom USD price and having a conversion ratio between the two, have it be a one-way conversion, have the entry credit be non-tradable and non-redeemable and non-transferable so that you don't want a secondary market for these things. You want ultimately the enterprise customers here to not have crypto on their balance sheet that's speculating in value, you want them to just think they're buying AWS credits or something equivalent to that. So we drew a lot of inspiration from Factom on a lot of those core ideas.

Yeah. So, I think the own data thing is still pretty far away. I think that the first class of those applications will probably not be feature parity with Web 2 for still probably another three or four years. I think we still have a little ways to go for messaging apps and chat apps and photo sharing apps and those things. There's a lot of harder problems with whenever you want to do sharing while also like managing keys and like who has access to them. Those problems become just exponentially more complicated. The first class of applications that you will start to see happening now are things that can leverage truly public infrastructure. So Audius is a great example. Audius, nothing is private, right? The point in the system is that all the audio files are completely open. And I think we'll see a large class of those kinds of applications. So you could say media broadly falls into this category of people who create stuff. They want to share that stuff with the world. They want to have a direct relationship with the customers or consumers of that content and they don't want to have any platform risk or be intermitted by middlemen of some form. So you know, after music the kind of next obvious class here is probably just like email newsletters. A lot of people today rely on Medium and Substack, right, for distribution. And there are obviously good services. But there's a lot of kind of platform risk and people complaining about those actually quite a bit. So like I think you're, I know for a fact we're going to see a handful of people committing in that space pretty soon and they'll be able to deliver, you know, consumer grade Web 2 experiences that have maintained Web 3 trust properties in the next probably six months or so. And then there'll probably be more public domain stuff. Getting into the element of private domain stuff that runs on public web infrastructure is just, that's further away.

Yeah. Right. And you can see that the right number of things are just starting to hit critical mass. So like Brave is about to cross 20 million monthly active users. And you know the Brave guys, they're thinking hard about crypto. Like they know crypto is going to be a big deal and they're figuring out what to do with it. You'll see the first, you know, crypto-native publication platforms proliferate over the next 12 months. I think those things will start to intersect with each other in some pretty cool ways. And I think once you have a couple of high, you know, at some point you're gonna get some famous artist or writer or something is going to like publicly endorse one of these things and it's just going to like light a match under that kind of whole industry and it'll just start moving really fast. So I feel pretty good there. That all that stuff's going to happen. Where does that, you know, evolve into is murkier. But I think once you've got some high-profile consumers endorsing this stuff and saying, look, like it's great and everyone loves it, that's going to really accelerate all the Web 3 stuff.

I think the answer to both those questions is no. In order for any of these Web 3 things to work, the kind of key, the reason they're relevant to blockchains is you need some sort of logically centralized coordination point for all the systems to work. So Audius is actually an instructive example here where you just, if you want to have recommendations and curation and social profiles and all that stuff, right? Like you need a place to put all of that information. And if the system is open and decentralized, then you need some sort of credibly neutral, politically neutral open database. Turns out blockchains are kind of the first instantiation of that. So there's nothing about Web 3 that is tied to Ethereum and EVM. It just, Ethereum happened to be the first, you know, openly programmable database thing, but there's going to be, in fact there are already many others. So I expect to see the majority of Web 3 stuff happen elsewhere. For example, Helium actually is its own blockchain because they determined if Ethereum would not support their scaling needs, and I think you'll see a lot more of that in the pretty near future.

Yeah, so I am on Twitter, my name, so Kyle Samani. Pretty easy to find me there. We also have a blog. We like to write stuff. I don't write quite as frequently as you do, Nick, but I like to think that I'm still an active writer. And so all of our written content is on multicoin.capital.

Hey, Nick, this was super fun. Yeah, these are all kind of wacky weird things. So, glad to have a chance to share with the castle out of an audience.