The Creator Economy: NFTs and Beyond

In today’s episode of the a16z Podcast, we’re talking about the Creator Economy, and how NFTs (but not just NFTs!) are making it possible for artists, musicians, videogamers, game developers, and writers to create entirely new markets to make money from their work and engage with their fans. Part of this emerging picture is social tokens, which share a crypto foundation with NFTs, but unlike NFTs (which are non-fungible tokens, in which each token is unique), social tokens are typically fungible, meaning each token has the same value. (Listen to our explainer episode "All About NFTs" with Sonal Choksi, Jesse Walden, and Linda Xie, or see our curated NFT Canon for much more info on NFTs!) This hallway-style chat features a16z General Partner and crypto investor Chris Dixon, talking with Kevin Chou, who founded Kabam, and is the founder of Rally, an open network on Ethereum where creators can launch social tokens; and Jesse Walden, the founder of MediaChain, a music rights protocol that was acquired by Spotify; he’s now the founder of crypto venture fund Variant. They’ll talk about how musicians, artists, and writers can think about NFTs and social tokens as well, and how those different types of assets can interact to create models that haven’t existed before. But Chris starts off the discussion by talking about the emergence of crypto tokens, and a look at how videogames and gamers were early to the idea of community engagement and digital assets, and how that model is beginning to spread outward.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Speaker 00

  Welcome to the A16Z Podcast. I'm Zorin. In today's episode, we're talking about the creator economy and how NFTs, but not just NFTs, are making it possible for artists, musicians, video gamers, game developers, and writers to create entirely new markets to make money from their work and engage with their fans. And part of that picture is social tokens, which share a crypto foundation with NFTs, but unlike NFTs are typically fungible, meaning each token has the same value. You can listen to our explainer episode all about NFTs hosted by Sonal, or see our curated NFT Canon on A16Z.com for much more info on NFTs. But in this episode, we have a hallway-style chat featuring A16Z general partner and crypto

• 0:41Speaker 00

  investor Chris Dixon, talking with Kevin Chou, who founded Kabam and is the founder of Rally, an open network on Ethereum where creators can launch social tokens, and Jesse Walden, the founder of Media Chain, a music rights protocol that was acquired by Spotify. He's now the founder of crypto venture fund Variant. They'll talk about how musicians, artists, and writers can think about NFTs and social tokens, and how these different types of assets can interact to create models that haven't existed before. But Chris starts off the discussion by talking about the emergence of crypto tokens, and to look at how video games and gamers were early to the idea of community engagement and digital assets, and how that model is beginning to spread outward.

• 1:20Chris Dixon?

  We've all, all three of us and our friends have talked about this stuff for years. I think we're starting this year to see what you could kind of call app layer mainstream kind of crypto token things happening. And so that, of course, is a lot of people have heard about, or you know, originally, I think it starts with NFTs. So non-fungible tokens, but Kevin, you're working on is sort of the fungible token counterpart to that, which are tokens that would be associated with communities on the internet. I kind of think of it as analogous to how modern video gaming works, where you have a game like Fortnite and the most progressive games, the game themselves are free, but you have in-game currency. In the case of Fortnite, it's called Vbox, and then you use that currency for various things, including for buying digital goods,

• 2:04Chris Dixon?

  like in the case of Fortnite skins and emotes and things, which, you know, in the web world, the Vbox would correspond to social tokens and the virtual goods to NFTs, right? And so I think what I believe is sort of happening now is that Video games, which are the most advanced in thinking about how to engage people in social software in a way that both goes viral and spreads on the internet, but also makes them money. Those ideas that have been developed over the last 10 years in the gaming world are now propagating out to the rest of the internet and the open internet. And that, of course, is going to have some similarities, including a lot of design overlap, I think, but also differences in the sense that these crypto blockchain concepts exist on the open internet, not within silos.

• 2:48Chris Dixon?

  That's where I feel like we are. And I think the first bit of the kind of sunlight has broken through in the NFTs and people are starting to see it, but there's a whole bunch more hopefully coming in the near future. Kevin, maybe you could describe how you think that might evolve with the next year or two.

• 3:02Speaker 02

  The gaming world is a little bit unique because we created these online communities that had a deeply integrated set of social interactions and communication tools. And so, you know, before there were social media, there are these games that these nerds like me kind of hung out in and we, you know, developed our friends and communities and played these games. And we cared about what our mounts looked like. We cared about what our skin looked like and how we appeared to the rest of the community that we had developed relationships with. And, you know, today you don't need a game for that. You don't need World of Warcraft or EverQuest or something like that anymore. Now you have Twitter, you've got Facebook, you've got Snapchat, you've got TikTok. The game is not just in the game anymore. It's happening across all of social media. It's happening across forums and Reddit.

• 3:47Speaker 02

  And, I mean, it's happening everywhere. And if we could build at the blockchain layer, how do we then take that and propagate it all across the internet and not just have these things being games?

• 3:58Chris Dixon?

  Yeah, I mean, Jesse, you have a long background in music. So like the video game industry, I think, is something on the order of $150 billion with a B year in revenue. And I believe the music industry is something more like 20. And for the most part, right, it's not really grown with the internet. And why isn't a musician with a community on YouTube or Twitch or some other place just kind of an MMO? Instead of shooting other cartoon characters, you're listening to music and talking to people. You know, and why can't they take advantage of all the same monetization and engagement technologies that the gaming world has developed? Certainly, there's no lack of passion for music. You know, but people are just as passionate in those environments, arguably more so than in games.

• 4:44Jesse Walden?

  Yeah, while the sort of recorded music industry hasn't grown all that much in the internet age. One thing that's interesting is like the live music industry has grown like people are definitely engaged with musicians and you know, having.

• 4:55Chris Dixon?

  Well, but it's what they're doing is that's the virtual, they're monetizing the compliment, right? So they're using the internet as the free part and the offline is the premium, right? To analogize to like productivity software and premium models. But there's no reason they couldn't have a scarce resource on the digital side as well, right?

• 5:10Jesse Walden?

  Exactly. And I think that's what's been missing to date is that, you know, music became free with that then of MP3s and piracy. And then Spotify sort of, you know, won by making accessibility super convenient. But with that, you also sort of demolish the value in the sort of scarce creative work that artists are producing. And I think NFTs have reintroduced, you know, the concept of scarcity to the digital realm. And sort of given fans a new way to patronize creators, express their support, route financial value to things that they want to see in the world. And from there, there's all kinds of interesting things you can do with them and communities you can build around them. That start to get more into social tokens and the like. So one analogy I think is useful when thinking about social tokens and music is, you know, artists had fan clubs, right?

• 5:54Jesse Walden?

  And if you bought a membership into a fan club, you got maybe access to the artist's meet and greet, you know, backstage or something like that. But, you know, we haven't had a digital equivalent of that to date. And I think social tokens might be it, right? You're becoming a member of an artist or creator's sort of community by owning their token. And that probably gets you access to all kinds of new cool experiences. In crypto world, a lot of people talk about how early they bought Bitcoin, right? It's sort of a signal of like how OG or how deep you are in the space. And I think that same behavior definitely exists in, you know, certainly with like indie music fans, like being early to a band or whatever. Now you can prove it and profit from it, which is cool.

• 6:31Chris Dixon?

  So Kevin, what does this mean in practice? So can you just kind of walk through what the user interaction is like? Will people encounter this and what will their experience be?

• 6:38Speaker 02

  Yeah, I think there's a few different dimensions. So one is how easy is it for the average fan, not the crypto audience, but the fan, to figure out how to earn or buy or trade these either an NFT or a social token. And there's a lot of different approaches there. There's very crypto native, you know, type of approaches where everything has to be on chain. It's going to be held in a non-custodial wallet, etc. to be considered real. And then on the other side of it, what we're trying to experiment with is how do we make that on-ramp experience for the average fan pretty simple, vertically integrate as many different things as possible, have the first-time crypto experience for the average fan be something that they would expect from

• 7:19Speaker 02

  another internet service. Some other approaches like what Zora and others have expressed is kind of putting up a big enough barrier so that the fans will have to figure it out. So there's all sorts of different approaches and there's no right or wrong answer and different musicians or celebrities will figure out what's best for their fan community and do that. The second dimension is once you own this thing, how do you actually use it? So it's great if I have an NFT in my wallet. Okay, maybe I can show people a link to my MetaMask wallet and people can look at the NFTs that I have in there. But how do I actually show this thing to the rest of the community that cares about it? And so there's a lot of work in terms of just status and reputation and be able to show off different things. But I think even more importantly is how do you actually potentially use these NFTs? There

• 8:02Speaker 02

  is no doubt in my mind that five years from now, maybe even sooner, your backstage pass will literally be an NFT. Somebody will stop you at the velvet rope, they'll scan your QR code that shows that you indeed own the NFT and you gotta show it in your-

• 8:17Chris Dixon?

  But will it, an NFT, will it just be like in a digital equivalent of a backstage pass? Or will it, I mean, I find one of the interesting things about NFTs is that they can be multipurpose. Like it could be both a beautiful picture and a backstage pass and an investment opportunity, right? Is that right?

• 8:32Speaker 02

  There's nothing that says that an NFT can only have one use case, right? Certainly, you're talking about a financial or economic dimension of the NFT having value of whatever the community or the fan, you know, gives it or what the next highest fan would pay for it. But then you can use it as a backstage pass after the event, right? It's not like the NFT disappears. I mean, you could certainly configure it that way if you're a musician and say, hey, once you use the NFT, it burns. You could certainly do that. But in this particular case of a backstage pass, what probably makes more sense is that you still own it as a fan in it, you know, a year from now, five years from now, it's proof- That I went to this event and I was a fan from five years ago when the band was still undiscovered or whatever it was. So the NFT could be a collectible.

• 9:16Speaker 02

  A lot of what's happened in the gaming realm, for example, is creating sets and creating different ways that you can compose different items together. So in the MMO world, one of the primary mechanics that have evolved is taking, you gotta get this leather strap, you gotta get this gem, you gotta get this catalyst, and you gotta go get this ticket. And then you put all of them together and it gives you this new thing, right? And so what happens if you own a track from the musician? What happens if you then combine that with one of the backstage passes that show you've been to the event? And then you combine that with something else that shows that you bought a vinyl or a hoodie. So we're gonna see all sorts of different ways. You could create NFTs, you can use them. You could then, as a creator, say, hey, if you go collect a bunch of these other things,

• 9:57Speaker 02

  you can then forge a new type of thing that you only get by being a true fan of mine.

• 10:03Jesse Walden?

  Yeah, I think like the key thing that Chris and Kevin, you're both touching on is that these assets are programmable, right? And you can sort of compose them into all kinds of new use cases. And they're also portable. And that's because, you know, you own them in the same way you own Bitcoin. It's yours. You can choose to park it somewhere like Coinbase, or you can take it with you to another platform. And so because they're both programmable and portable, you can take your assets and bring them into all kinds of new experiences that developers build that give them a different utility, right? Like it can be a fan club, backstage access pass, but a third-party developer can add some additional functionality to an NFT or a social token that makes it useful in another context for a different purpose.

• 10:45Chris Dixon?

  Well, yeah, and I think when people start to really get a tangible feel for it, it'll make a big difference. So right now, if you're buying a piece of art on Foundation or something, or you're buying a basketball moment on Top Shot, you basically can use it in that context, right? But because they're blockchain objects that are portable, third parties will start creating experiences around them. I think you'll very soon see companies that get funded that let you do games and social experiences and other things with all of these assets. And kind of the broader thing, right, is you're inverting the polarity where the earlier web was built around applications.

• 11:22Chris Dixon?

  The next, the Web 3 will be built around these user-controlled objects that are primary, and then the applications come secondary and serve them.

• 11:29Speaker 02

  We're talking about Flow and NBA Top Shot, it's just absolutely exploding. And then we have OpenSea and Zora and a few others on Ethereum. And then there's emerging some of these Layer 2 NFT, you know, sort of like purpose-built Layer 2s for NFTs and a few other things. And I wonder about this portability and kind of what you guys see as how portability evolves over the next year or two as this fragmentation at the Layer 1 and Layer 2 things fragment more and more.

• 11:57Jesse Walden?

  So for social tokens, I think there's going to be a lot more interoperability because they're fungible tokens, they're sort of easier to port around, and it's okay that they sort of fragment across the universe of various blockchains. NFTs, I struggle a little bit more to reason about because one thing that makes an NFT valuable is the fact it's unique, it's scarce, and therefore its provenance is an important attribute that people look at. And so I do wonder if there'll be more of a sort of power law winner to the place where you want to originate an NFT. It may not be the case that all NFTs originate on this sort of canonical.

• 12:33Chris Dixon?

  But couldn't you have trustless bridges across blockchains that preserve provenance?

• 12:38Jesse Walden?

  Yeah, I think that's ultimately the solution. So I believe in a world where literally every piece of media enters its existence as an NFT, like every photo you take on your iPhone, you know, every game asset is created as an NFT. And it probably doesn't make sense to put all of those very, very long-tail media assets on something like Ethereum, which is very expensive because it has a lot of security. Like you probably put that on a sidechain. But then I think as these assets take on social value and start to command more market value, they might migrate to the chain that offers the highest security, right? Like, so if you have a multimillion-dollar LeBron, like you might not want that riding on some sidechain, you might want that on Flow itself.

• 13:21Jesse Walden?

  And similarly, you know, a photo that starts as inconsequential but becomes very important will maybe migrate to Ethereum for security.

• 13:29Chris Dixon?

  I guess the way I think of it is you'd have different blockchains with different trade-offs, right? So like right now Ethereum is clearly, the non-Bitcoin programmable blockchains is clearly the highest-security blockchain, right? But you pay for it. You pay, you know, $10, if not much more, to do stuff, right, on a per-transaction for your gas fees. So you could imagine a world where the actual game activity is happening on Rally or Flow or something else, but then as it appreciates, you put it in the quote vault on Ethereum, right? And I would also say, like, I think that a lot of things will frame this as either or, like Ethereum versus Flow. If you look at every computing resource in history, so internet bandwidth, you know, PC CPU power, just go through them all, like, demand outstrips supply by 10x.

• 14:14Chris Dixon?

  And right now, you could imagine a world where tomorrow you snap your finger, Ethereum has sharding, proof of stake, all the good stuff, optimism launches, you know, all the other layer two launches, and then application developers would come up with some new clever stuff, and you'd very quickly be back up to not $10 gas fees, $5 gas fees, right? I mean, look, you just pay all of the above. You pay inherent overhead for a blockchain, right? The game theoretic consensus mechanism just makes it slower than, you know, a traditional centralized system. I think the specifics, as you raised, Jesse, like, you know, how do you preserve provenance across chain is really interesting. I think you're going to see, there's a lot of entrepreneurial opportunity for abstraction layers, so like, a Stripe for minting NFTs, seems like a no-brainer idea, like Stripe

• 14:55Chris Dixon?

  for NFTs, whatever you want, for minting and read-write, and it extracts away the underlying blockchain, you know, taking care of the metadata properly. There's a whole bunch, we need more entrepreneurs because there's so many great low-hanging fruit ideas, but um.

• 15:08Jesse Walden?

  Maybe we could talk about interesting intersections between NFTs and social tokens. So, an author minted a blog post as an NFT on Mirror, and they also crowdfunded the creation of that blog post, which was sort of like a long-form piece, and they said, look, like, if you want to see me write this investigative piece, back me to do it. And the way that that crowdfunding happened was through crypto, and what the crowdfunders got was not just a piece out there on the internet, but also ownership in the piece itself, meaning they were able to get fractional ownership of the NFT, and that was in the form of a fungible token called the SA token. And what's really cool is that SA token then became

• 15:49Jesse Walden?

  A social token for this author in that, you know, he started using it for gated access to a Discord. And he started layering on all kinds of other utility where if you had this token, you could talk to him about his next piece, for example. So that's one interesting example where the social token is sort of a derivative of the NFT. And then, as we talked about already, there's all this sort of like additional utility programmed onto it. And I wonder if you've seen people doing stuff maybe the other way around or different configurations.

• 16:16Speaker 02

  Yeah, you know, I think it's really funny. I think we start with fungible tokens, Bitcoin, Ethereum, et cetera. And then we create NFTs as a new building block. And then, of course, then we take the non-fungible token and we fractionalize it and make the fractions fungible. Funny world. Look, I think we come up with some of these weirdnesses, especially here in the United States, because of the regulatory gray areas. And so I think if you could sort of wave a magic wand and say, hey, like, there's clear boundaries. And let's just say we could talk about all the things that we want to talk about from a utility and so forth, without triggering any other things. I think a lot of people would start with fungible tokens. It's just a lot easier to think about how do you create a community around something that's more fungible and could be more easily exchanged.

• 17:00Chris Dixon?

  I don't totally agree, Kevin. I think it depends on the community. I think there's a lot of people, I think we all come from technical, financial backgrounds. I just find people like that just kind of have a natural affinity for fungible tokens. I think a lot of the world isn't like that. I think a lot of the NFT appeal is just that, like, it's a picture, it's a movie, it's accessible, and it's interesting, and it touches on culture and not just kind of numbers.

• 17:23Speaker 02

  Yeah, I totally agree with you. I'm certainly not suggesting that fungible tokens are greater in any way than non-fungible tokens. I'm specifically talking about once you take a non-fungible token and you fractionalize it into a fungible mechanism. I think once you start playing with that, like, once you start going into that.

• 17:39Chris Dixon?

  My counter argument is like CryptoPunks, like, that's a great way to organize a community, right? And so it's 10,000 punks, they look different, but it gives it this character and this, right? I mean, I think for a lot of people, that kind of metaphor is a better way to organize 10,000 people than 10,000, you know, indistinguishable, boring, it's. YouTube versus Excel or something.

• 17:58Speaker 02

  Right, but what I think that CryptoPunks represents though is that each one of those are unique and different, right? And the characteristics and traits of them really matter. Those CryptoPunks are not fungible in my mind, right? Each of them are a unique piece of art.

• 18:11Chris Dixon?

  For sure, they're not fungible, but they create a community of 10,000 people that feel an affinity for one another. You're either in the punk community or not, right? So, yeah. I was pushing back on your point that it's because of regulatory constraints and things that people tilt towards NFTs. I think there's a bunch of reasons. I think one of the really interesting things that goes on with social tokens, right, is that they're multiple uses. So you could want a token for your favorite band to get backstage access. You could want it to be able to buy NFTs and make donations, participate in the kind of economic life of the community. Right? Or completely different motive, you could want it because you see yourself as a modern day A and R person who is going to predict the next band and make money off it, right?

• 18:55Chris Dixon?

  And it's the fact that the very same token has those multiple purposes is very important, right? Because then you have the possibility for people to, the A and R folks, the people that find these early bands, come in, they've kind of bid up the price. That in turn, in your model, right, funds the actual musician to make music, right? Which in turn feeds the fandom, right? So the investment kind of activity and the fan activity and the creator activity have this really nice kind of triangular feedback loop. And it's the very fact that they're the same thing as opposed to kind of, you know, the old school model where you have sort of the investor comes in, gives money to the musician, buys up copyrights, then sells a different thing to the fans, right?

• 19:39Chris Dixon?

  The fact of the same kind of, you see what I'm saying?

• 19:41Speaker 02

  That's right.

• 19:42Chris Dixon?

  To me, that's a very big difference from the old world and a very powerful difference.

• 19:46Speaker 02

  Yeah, we've always talked about the internet as kind of this disintermediating sort of mechanism. And I think crypto does it even more at the economic layer of things. And I think what we're starting to see will stay on musicians for a little while. We're like, starting with Chance the Rapper is probably like the most prominent example of an artist that just wants to own all of his own rights. And more and more artists are realizing that they get their Power from their fans and that the more that they're just wholly focused on serving their fans, the more successful they become in this weird like layer of rights ownership and labels and publishers that then distort that versus just how you get your fans to support you to create the music that you love.

• 20:24Chris Dixon?

  When the fans have skin in the game, the fans become evangelists. And instead of doing all these old school things of like advertisements and other sorts of things, promotions and all the things they would do in the old days to promote various kinds of creations. Now the fans become the promoters, right?

• 20:40Speaker 02

  That's right.

• 20:40Chris Dixon?

  Because they have skin in the game. That's one of the remarkable things about crypto. You know, tokens over a trillion dollars in value, lots of successful companies, you know, exchanges and such. And no one ever spends money on paid marketing because it's all just done through kind of skin in the game, peer to peer marketing, right? So now musicians can tap into that, musicians, creators can tap into that energy, right?

• 20:59Jesse Walden?

  Yeah, it means that fans become part of the creative process to a degree, right? Not only do they have a willingness to pay for the creative work, but they're also essentially, you know, investors in the work itself and artists or creators that lean into that will find a whole new way to create stuff, right? Because they can do it as a community. And not just a community that's communicating with one another, but a community that's actually pooling resources with one another to achieve things together. Right? So it sort of blurs the line between creator and audience. So I think that's a big opportunity that we haven't seen a whole lot of yet, but it's coming.

• 21:32Speaker 02

  Yeah. Well, I think Blau started experimenting with this where he sort of sold the first track on his next album as something that would give you creative direction on that track as well as original ownership of that track. The best thing about working with creatives, whether it's a musician or a visual artist or a gaming streamer or entertainer, is that these are naturally creative people that once they get their heads wrapped around how a tool or a crypto system works, I think we're just seeing the very, very tip of the iceberg in terms of the use cases, because the technical challenges there will get solved, the friction will get removed more and more. There'll be a lot of different approaches to this, but I think the most exciting thing is getting

• 22:12Speaker 02

  these tools into the hands of creatives that then try all these new ways to create that alignment and community with their fans and disintermediate the folks that haven't been aligned with, sort of in that community. But I think the coolest thing that's happening is that we're creating kind of an integrated way that creators can very simply create all different types of NFTs and denominate it in their social token. And we just think that those are such natural pairings, right? So today with just social tokens, we see our artists do things like you have to hold X number of our tokens to get access to the trove of music that's here, or to get access to an AMA event or a virtual concert that we're putting on, or a virtual hangout that we see some of our artists are doing.

• 22:56Speaker 02

  And when NFTs come out, it'd just be much more simple to say, okay, you'll hold X number of tokens, you're part of the fan club, but to get access to this event, here's the NFT that represents that event access. And then so there's a lot more granular things you can do. We're starting to see artists experiment with things like creating physical representations and then digital representations and linking the two things together through their NFTs and social tokens. We're working with an artist that sells sneakers and other physical merchandise. And then they're creating NFTs of those designs. And owning the NFT, they are now starting to say, well, if you own the NFT, you could trade that NFT in for the physical. We're starting to see more experimentations with how does the physical and the digital sort of

• 23:41Speaker 02

  coexist? And the beauty of all of this is that when you denominate it in the social token, there's so many other different economic activities that can happen.

• 23:49Chris Dixon?

  You talk a lot about music and some video games. What about other, like Jesse, you mentioned writing?

• 23:54Jesse Walden?

  Yeah, the writing one is interesting because it sort of illustrates how this expands in all directions and eventually will touch all creative services. So if you think about how big ideas come into the world, very often they come into the world through blog posts or writing, right? Think about like Elon Musk's secret master plan for Tesla, right? Like that's sort of a canonical blog post. And certainly someone might want to own that blog post as sort of a representation of all the value that Tesla's creating in the world. And it's an investment in Tesla's success that's separate from Tesla's stock price potentially, right?

• 24:24Chris Dixon?

  Owning that blog post is sort of like owning a kind of signed copy of the blog post, so to speak. It's the cryptographically guaranteed one. Maybe kind of analogous, you know, if, I don't know, Thomas Edison had a, I don't know if they have it, but like his original notebook, that type of artifact, right?

• 24:37Jesse Walden?

  Right, exactly. So the idea here is like owning Elon Musk's secret master plan as an NFT could be valuable. Jack's first tweet as an NFT is valuable. It represents the sort of inception of these huge networks. You can imagine in the future that the next Elon Musk or the next Jack brings their big idea into the world as a blog post that is an NFT. And, you know, supporters of them as founders or, you know, people want to see that idea happen in the world, crowdfund to buy that NFT from the author. And potentially that crowdfunding is actually used to finance the creation of that big idea. So, you know, what starts out looking like, oh, people are just buying essays could actually disrupt the way that new creative things enter the world and are financed.

• 25:17Chris Dixon?

  I guess something we don't know is like, will the economics work? I guess one counter argument would be this such an exceptional blog post be worth a lot? But the average stuff won't be. I guess the counter argument is the average person doesn't usually need that much money. It's sort of the Substack effect, I think of it as, whereas like, you know, if you take a writer with a million Twitter followers who is getting paid X amount per year and they go on Substack and they get a thousand people who are really excited, they can make 10x per year. Even if it's not all some famous artifact, like if it's enough to fund the writing, that could just be enough to transform that industry and like creative activities there.

• 25:50Jesse Walden?

  Yeah. And I think, I mean, maybe analogy is, you know, startup funding, right? Like startups don't raise many millions of dollars in their first round. They raise a little bit, just enough to hire the team and get going, right?

• 26:00Chris Dixon?

  Sort of staged NFT sales.

• 26:02Jesse Walden?

  Yeah, yeah, exactly. Like I think you just need, I think to your point, you just need a little bit to get going, right? And to raise money to make the creative work you want to see. And then from there, if you can build a bigger audience around that, you can sort of move up the ladder and raise subsequent rounds of funding. And hopefully as you perform better in the market, you're able to double down and reinvest to keep doing that.

• 26:21Chris Dixon?

  And Kevin, in your model, that would be both NFTs and also a writer could just sell their coins as well, right? We think of

• 26:28Speaker 02

  Tokens and NFTs all operating together in a singular economy. This is just something that certainly comes from the video game industry where you would expect that you go into a video game. As we're, you know, just using the Fortnite example of, you know, you get the V bucks, the V bucks allow you to buy all sorts of different things from the game. And when we talk about things like backstage passes or that essay or something else, those things are best as an NFT. But then what do you do to transact it with that NFT? What if you as an artist, let's say that your first creative work sells for $10,000. But let's say at that point you create your social token and you denominate your NFTs in your social token. Well, now you have a way for people to say, okay, great, that creative's first work, you know, let's say was worth $10,000.

• 27:13Speaker 02

  Their second work, the audience valued it at 20,000, their third work was 30,000. The social tokens should then capture what the market thinks about the sort of total value of what that economic output will look like over time. And so I think there's really interesting economic forces between how you create your NFTs and what does that represent? And what does your social tokens represent? And how do they all work together in a singular sort of economy that you as the creative, you control, you own 100%. And I think that's a really powerful way to both give like all forms of fans and community members and crypto members kind of a way to participate in these economies. You may want to, you know, buy that NFT because you're a true fan and you just love it.

• 27:57Speaker 02

  You may want to buy that NFT because you're an A R and you want to speculate on, you know, what these things could potentially be worth in the future. Or you could just participate in the social token in all sorts of different ways. And I think we're going to be on the forefront of experimenting with how these things are intertwined and all put into the control of the hands of a creative. Do you guys think the role of the large tech platforms will be in this world? Well, I'm pretty passionate about this. I've tried to build businesses in the past, you know, certainly that have been at the mercy of some of these big tech platforms. I look at what Epic is doing right now, and I know Jesse, you're at Spotify for a while. There's very public emerging battles between big tech and some of these, you know, traditionally have been more application focused developers. And I love what this does to the world.

• 28:42Speaker 02

  As I was thinking about building a new company or building a new project. And thinking about building that on Ethereum was so liberating. Because I've been building on Apple, Google, Facebook platforms for a decade plus as a game developer. And there's a ton of benefits and value that comes with it, but there's a lot of headache too. That comes with building on these other platforms where the policies are changing all the time. The fees are changing, the rules are unclear. Maybe the platform ends up competing with you in the case of music or some other categories. So it's tough. It's why I'm so in love with crypto as a builder, because building on Ethereum, I don't need to worry that Ethereum is going to try to go public someday. They're going to change the way that the rules work or the fee structure works so that they can

• 29:27Speaker 02

  meet their numbers for the next quarter or whatever it is. There's not even a company, there's not a CEO that runs it. The idea that this thing is a permissionless blockchain that anybody can build on top of. It was such a game changer for me as a builder. And I think our approach to Rally was to do a lot of hard work so that we can make the same promises and commitments to the creatives that we work with. That, look, you're going to build, you know, if we work with you to help you build your business and represent your brand, your fan audience, your community through tokens, both fungible and non-fungible, you own this, you set the rules. You know, we do things at the protocol level to ensure that all people can participate equally and fairly with transparent rules. But we want to make sure that you, as the creative, you truly own this thing.

• 30:12Jesse Walden?

  Yeah, what's happening in crypto definitely flies in the face of the wave, like some big tech platforms work right now. And I think another lens to look at it from is just a complete inversion of their business model. And that's because like, you know, traditional big social media platforms, they own all the content that users post on it. And that's because somewhere along the way, in terms of service, users agreed to upload.

• 30:39Jesse Walden?

  Content to the platform and for the platform to monetize it as they see fit. So to be clear, I'm not talking about traditional copyright, like the creator still retains that. But you are transferring some rights to the platform to monetize content that you upload however they want to do it. And with NFTs and with social tokens, the amazing new thing enabled by Web three and crypto is that creators can just monetize directly. When you create an NFT, you're sort of like uploading your work to the blockchain directly. And then developers can build on top of that content. In other words, the blockchain becomes the sort of universal library of media that any developer can build a social feed on top of or content feed on top of.

• 31:23Jesse Walden?

  But the creator retains ownership of their work and thus can monetize it without a third party taking a large cut. And so these platforms, traditionally they've relied on being able to monetize creators' work on their terms. And now creators get to set the terms and monetize directly.

• 31:39Speaker 02

  And if you start with that kernel of the creators create the content and then developers build interesting metadata and usage around that content is that then becomes the social graph itself, right? So think about how for big tech platforms that rely on marketing and advertising. Yes, they create a simple platform for users to share and create content and build an audience and following. But it's really a lot of the metadata around that content. Who's following you? Who's liked what in the past? I think what's going to invert now is once you start with the content being on chain. Who owns that content? Who's owned it in the past? What are all the other metadata that's associated with that? If you can see all of that and that exists at the public blockchain layer,

• 32:21Speaker 02

  you then take it away from being this treasure trove that an advertising based company can like uniquely have as their advantage. And you open it up to the whole world. Anybody can look at that data. Anybody can look at that social graph and interest data and then figure out how to build unique new applications and services on it.

• 32:40Jesse Walden?

  Yeah, right now on social media, everything is sort of in 2D, right? Like you have an image and it's just a rectangle on your screen and then you have some metadata associated with it. But if I like. Copy paste that image and put it somewhere else. It loses all its connection to the creator, its history, what it's about. And now all that metadata can live on chain. Any developer can access it. So as a result, you know, this image goes from being a two dimensional box to taking on some of a Z access where you can like, you know, peruse through its entire history online. And to put all the context on display in new areas where that image is shared. Through that same channel, that information is being surfaced, value can also flow.

• 33:21Jesse Walden?

  You know, so there's this cool thing you can do with NFTs where you can impose royalties that flow back to the creator. Every time the asset changes hands, right? So that's an example of, you know, through the same channel that information on who owned this thing in the past. Well, value can also flow through that same channel. Awesome. Thank you both, Kevin and Jess. Great talk. Thanks for having us. Yeah, thanks.