🎙 "Blockchains are Adding Property Rights to the Internet:" Kayvon Tehranian
In this week’s episode I interview Kayvon Tehranian, founder & CEO of Foundation, a platform for minting, buying and selling non-fungible tokens. We talked about how he got into crypto by way of Google, building iOS software, and skepticism with traditional finance after graduating in the middle of the 2008 financial crisis. He started his work in the space at Dharma, the web3 wallet.
He felt like Ethereum was something much bigger than another financial system and started thinking about how to push this innovation into the hands of creators. That’s how Foundation was created at the start of 2020, way before this recent mania around non-fungible tokens.
We talked about why Kayvon thinks Covid has a lot to do with why NFTs gained so much popularity this year. He thinks the pandemic forced people to challenge existing institutions and businesses, and realized many didn’t have online-native business models that allowed artists and creators to support themselves in this kind of setting.
We also talked about the future of the internet —Kayvon believes blockchains are adding property rights to the internet. He also thinks that instead of having to wait for old institutions to come online, new ones in the form of decentralized autonomous organizations, or DAOS, will be built. He foresees a future when a lot of people will start saying, ‘why aren't you asking me to connect my wallet? Why do I have to log in this other way, that I don't have control over what I'm doing?’ I also believe that future is not so far away.
The podcast was led by Camila Russo, and edited by Alp Gasimov. Transcript was edited by Owen Fernau and Dan Kahan.
🎙Listen to the interview in this week’s podcast episode here:
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🙌 Together with:
- Balancer, one of the leading DeFi automated market makers (AMM) for multiple tokens. Dive into their pools at https://balancer.finance/!
- Kraken, consistently rated the best and most secure cryptocurrency exchange, which can get you from fiat to DeFi
- Aave, an open-source and non-custodial liquidity protocol where users can earn interest on deposits and borrow assets.
- The DeFi Pulse Index, a capitalization-weighted index that tracks the performance of selected DeFi assets across the market.
Kayvon Tehranian: Wonderful. I'll start way back, graduating from college, but I'll try to accelerate quickly into getting into where we are right now, which is I graduated actually during the financial crisis. I graduated in 2008, and that landed me basically on Wall Street in the midst of unprecedented carnage. And it was, in retrospect, such an unbelievable education, because it forced me to challenge my own thinking of all these institutions and systems that we had, and how they actually worked.
And that led me very quickly to become very skeptical of the existing financial system. And then as a young ambitious 20 year old, I set my sights on Silicon Valley, which felt a lot more optimistic, future focused, and offered a lot more opportunity. And so I moved to California shortly thereafter, moved to Silicon Valley, worked at Google, and spent five years there during a really golden age at Google, where the company was scaling, it was doubling, the internet was just growing enormously, businesses were forming online. And it was really, really, really just an unbelievable education in scaling and bringing impact to the world through the internet.
And then eventually by the end of my five year time there, I really felt excited about startups and wanting to move to a smaller context. And Y Combinator was front and center and Silicon Valley culture and wanting to be part of a small team building something we were passionate about, and ended up joining a team called Universe, we built iOS software. And the big insight that I developed there was, I love startups, but I realized I wanted to be on the frontier of something really new to the internet.
“...the big insight that I developed there was, I love startups, but I realized I wanted to be on the frontier of something really new to the internet.”
And if I think about my time at Google, the web was very established by that time. By the time I was working at Universe, app stores, and mobile phones were actually very well established. And so during my time at Universe, I caught wind of Ethereum, and once I started to understand what this was and what was possible, and then also realizing how nascent it was, and how much unexplored territory there was.
And then also this connected to my previous skepticism around the existing financial system. It really clicked. And once I started falling down the rabbit hole, as they say, I really never stopped, and ended up connecting with Nadav at Dharma and spent two years there, really working on the smart contracts and the product that powered Dharma before starting Foundation at the beginning of 2020 with the thesis that DeFi was an incredible invention that was really birthed out of the previous run in Ethereum. But I felt like Ethereum was more than just another financial system. It was something much, much, much bigger. And I wanted to think about how to put this in the hands of creators.
“...once I started falling down the rabbit hole, as they say, I really never stopped...”
And I think you and I connected, Camila, this is not our first time touching base. We've been working with artists for over a year now to figure out how they can use Ethereum to reinvent their ability to sell their work to re-shift a lot of the economic arrangements in the cultural sphere. And that's what we've been focused on at Foundation. That's both the abbreviated, but maybe slightly long-winded version of how I got here.
Camila Russo: Just a couple of questions on your background, what were you doing at Google? Is your education more technical, or what side of things were you handling?
KT: I refer to my Google days as like a Master’s degree. It really felt like going to grad school, where I was able to work in the sales department. I worked on engineering teams. I worked with Marissa Mayer on product teams. This was definitely a phase in Google where you were still getting your hands dirty in a variety of areas. And so I really had that opportunity to be interdisciplinary and I loved it.
I submitted code to many of the code bases as an engineer. I also managed products, and I also got exposure to the sales and marketing teams. And so it really gave me a very well rounded view of how products and tech companies work from all angles, which I think is really important. Because I think often people get pigeonholed, and they're like only engineering matters, only marketing matters, only sales matters, right? And in reality, you need all of those pieces to come together to make an organization or a product or a company work.
“...often people get pigeonholed, and they're like only engineering matters, only marketing matters, only sales matters, right? And in reality, you need all of those pieces to come together to make an organization or a product or a company work.”
Betting Early on NFTs
CR: Really interesting. And then maybe that's why you come with this more global view of what matters. So coming into crypto, most people, at least before 2021, I would say, when they came into crypto, they came into it looking at the financial aspect first, especially with Bitcoin, with the hard money and digital gold narratives. Ethereum’s main use case has been mostly financial applications. So it's interesting that you came to Ethereum from a completely different angle. And also starting Foundation in 2020 when NFTs weren't as trendy or making headlines like they are today. I'd love to get your perspective on that.
KT: And Ethereum was around $70 when I started the company…
CR: True. Yeah.
KT: It was not the cool thing to do.
CR: So what inspired you to do that, to go for NFTs, to build on Ethereum? What made you believe this was the place to be?
KT: So I think this comes back to the point I was making earlier, which is, I started to connect certain dots. When I was at Google, I saw the success of a company that really was early to the web. And with Universe, I was exposed to Apple building the App Store. And these were post some sort of breakthrough innovation. What I realized is I wanted to be on the frontier of something new, and that inherently entails going against the grain or being alone or being seemingly weird, and often in a different corner.
“What I realized is I wanted to be on the frontier of something new, and that inherently entails going against the grain or being alone or being seemingly weird, and often in a different corner.”
So these moments that happened helped to connect certain dots that other people don't see. And I think people were like, Ethereum is just for finance. Or Ethereum can't exist, you can only have Bitcoin. And there are all these narratives, and I was very aware that these things are very malleable. And it often takes people with an ability to see things differently, or see things from different perspectives to try things and experiment.
And that's what we did in 2020 to put us in a position where there'sthis enormous moment happening right now. And it's not that Foundation is joining in on the party. It's like we were already here and now it's amazing to be able to support all the people that are really excited about participating in this new economy. And I think that's the nature of being on the frontier is you don't know exactly when you're going to strike gold. But you're out there looking for it and looking to dig and build and settle.
“...there’s this enormous moment happening right now. And it's not that Foundation is joining in on the party. It's like we were already here and now it's amazing to be able to support all the people that are really excited about participating in this new economy.”
Catalysts for NFT Momentum
CR: I love that. So I'm really interested to get your thoughts on how this NFT craze, if you want to call it that, or excitement, developed. Since you've been in the space for a while in crypto terms, what do you think happened that made this thing blow up this year?
KT: I have to say the pandemic certainly feels related. I think that the pandemic forced a lot of people to reflect and pause and challenge the existing institutions and businesses that they were participating in. And I think a lot of them were caught really flatfooted, not having innovation, or new business models, or online native business models that allowed artists and creators to kind of find ways to support themselves in this kind of setting. We were all pushed online. We were all pushed out of our own routines.
And I think it caused a lot of people to question their ways of doing their practices or their careers. And I think in that questioning, people came more open minded to new paradigms. And what they found in crypto was something I think, very, very substantive, which is, we can use online, digital, global currencies to interact with each other, we can use smart contracts to mediate those interactions, and then we can participate in online ways that we didn't think before.
And so you're watching really powerful things happen now where you have Ethiopian artists selling their work online to a global audience with a global cryptocurrency. That actually is really revolutionary and radical. And moreover, the smart contracts are programmable, and so they can program lots and lots of features that we can't have in the physical world. And so these artworks can be easily tracked, their ownership can be recorded, their provenance recorded, and then their royalties can be rewarded based on whenever they sell. You know, auctions can take place around the world at any time of day. There's just a lot of really cool features unlocked by this new technology. And I think people really woke up to it. And they needed to, because they had to find new innovative ways to support themselves.
“...you're watching really powerful things happen now where you have Ethiopian artists selling their work online to a global audience with a global cryptocurrency. That actually is really revolutionary and radical. And moreover, the smart contracts are programmable, and so they can program lots and lots of features that we can't have in the physical world.”
Foundation App
CR: So interesting. I do think the pandemic also played a part in the overall crypto rally. People being at home online, you start to realize our world is online. We need a more internet native way of transacting value and of expressing ourselves. So I think that's where NFTs fall. So tell us more about the Foundation itself. What does it actually do?
KT: So it's actually very simple by design. I would encourage everyone in the audience to literally go to Foundation.app right now and dive in. It really should make sense and I think that's why you're seeing it be so successful, especially for a crypto app. It allows you to take a wallet, connect your wallet to the site, and it allows you to build a following or follow artists, creators creating NFTs, those creators can mint NFTs onto the platform, build a profile, build a collection, and then sell those pieces in auction to collectors. And it's really fun.
You're participating in auctions, you don't know if you're going to win. You really have to place the highest bid, the highest bidder wins. It all happens on Ethereum. It's all done through smart contracts and decentralized wallets. And so it's this very crypto native experience, but it's also very visual and very beautiful. You go to it, you're seeing incredible artwork, you're seeing incredible diversity of artwork. You're seeing creators from around the world participate in a global market now, and they're doing so in a currency that spans borders. And so you're seeing people in Brazil transact with people in Japan and Amsterdam, and Tokyo, and Ghana. And it's effortless, right? If you have internet, it works. And it's something to behold.
“It's all done through smart contracts and decentralized wallets. And so it's this very crypto native experience, but it's also very visual and very beautiful. You go to it, you're seeing incredible artwork, you're seeing incredible diversity of artwork.”
I think the reason why there's so much excitement in the room is I think we all know that this is something that just got started. The smart contracts are still very primitive, there's a lot more we can do. And value takes a while to accrue. So a lot of the things that are being created right now are going to be a lot more valuable in the future. We just don't know it yet. And I think it's a really exciting time.
And all this takes place on Foundation.app. And it's something that's really designed to be used by as many people as possible. I think the fun thing to share is, we are a crypto native app, we don't abstract anything away. And our user base is growing very rapidly. We're almost in the hundreds of thousands of users with this app.
CR: And that's hundreds of thousands of users, how do you measure that? Users who have purchased?
KT: Connected a wallet to the app.
CR: Okay. Not necessarily bought a piece?
KT: No, that's still in the tens of thousands.
Art Curation
CR: Okay. And then I want to talk about the mechanism that you have to curate or get high-quality art on your platform. Because I think that's one interesting difference with other NFT platforms. And I'd love for you to dive into that. What do you see as Foundation’s differentiating feature? And, just dive into the mechanics, its artists on their platform can invite other artists, and that's the way that you're able to mint on that platform?
KT: Correct. So, to date, there's been basically two polarities. Either there's some sort of centralized admin control that guards who has access, and it's really seen as curation. And then there's the wild west of, it's open, anyone can do it and good luck. It's chaotic.
And what we really saw was, we believe in curation, we believe in surfacing signal and giving you context and making you feel like there's a there, there right, and not just making it really feel like it's lawless or wild. But on the other hand, I don’t think the team feels qualified to curate the world's art. I think that's an incredibly preposterous assumption that a centralized team would know how to curate everybody.
“I don’t think the team feels qualified to curate the world's art. I think that's an incredibly preposterous assumption that a centralized team would know how to curate everybody. “
And so what we really did is we've been trying to seed pockets of curation. We've gone out there, and we started with 50 artists actually, we didn't expect this to grow so fast. I think it shows the power of giving people really well designed tools and real intent. Because we've then let those 50 artists invite other artists, and then those artists invited other artists, and then those artists invited other artists, and now the network has grown to the point where, I think, we're over 10,000 artists on the platform.
And then the fun thing is, you can see who invited who and who knows who, and it's social, right? Even though it's crypto, it's really fundamentally social. And I think that's the thing that creates context for NFTs. Because technically, anyone can mint anything, like without the context of who did it, you're missing that additional layer. So that's something that we really care about. And I think of it as neither centralized nor chaotic. That's really what we tried to find the balance between.
“And then the fun thing is, you can see who invited who and who knows who, and it's social, right? Even though it's crypto, it's really fundamentally social. And I think that's the thing that creates context for NFTs. Because technically, anyone can mint anything, like without the context of who did it, you're missing that additional layer.”
And if you really think about what an invite system is, it's peer to peer. Everyone’s given the same ability as someone else. And they're empowered to use that power to grow the network. I don't think chaos is an answer. I don't think everyone just having uncontrolled access to something creates structure. But I am very bought into peer to peer. So let's build something together, peer to peer, and that to me aligns with the ethos of crypto.
Seeds of Community
CR: I think it's an interesting concept. And certainly, just by looking at your site, everything looks beautiful. So in that sense, it's working. But I wonder how do you see this need to balance with making sure that good artists everywhere that might be not connected to the network's current artists are connected, how do you make sure that they also have the ability to get on the platform?
KT: I think that's the community's job. That's where I think the word community matters. Which is, our team is focused on that, we're constantly, almost half the team is not technical, they're not writing code, they're not building a product, they're working on the community, or they're talking to collectors or talking to artists.
So we're always plugged into these conversations. And we're very actively going to any sort of community where perhaps they're underrepresented, right, and making sure that the invite system gets embedded into those communities, so it can grow there. And then we also empower the community to go find those places themselves. And so there's people like Diane Sinclair, I don't know if you've seen her on Twitter. But she's been really onboarding black women into the NFT space and making that her mission.
It's like, our team is passionate about that. But what's even better than our team is finding people in that community who can do that authentically and full time. And so she's doing that. And so you're seeing Ethiopian artists join, and then they're empowered to kind of help onboard the Ethiopian art world, right.
And so I think this is just a matter of time. I mean, I think that's how viral coefficients work. And I think, it's something we care about, and it's actively changing, and I'm watching everyone critique how we can incorporate this community or that community. And as soon as that critique’s out, someone's working to make sure that those people are onboarded. And so it's almost this very powerful self-correcting mechanism, which I think speaks to decentralization, which is you don't have to file a ticket with our team to get going: the community can actually get going themselves.
“I'm watching everyone critique how we can incorporate this community or that community. And as soon as that critique’s out, someone's working to make sure that those people are onboarded.”
Scammers Selling Invites
CR: I think what the system has generated with this invite system is that being on Foundation is a very high signal of legitimacy. It's like, okay this artist is legit, they were able to get an invite and are recognized by other artists and so now they were able to mint NFT here. And those signals are so sought after that I'll tell you an anecdote. Someone came up to me on Discord offering to sell me a Foundation invite. I don't know if they actually were an artist. I think that it was probably a scam. I don't know if they actually had a Foundation invite.
KT: I would encourage anyone listening that if anyone is buying or selling an invite, that is certainly a scam. And if that got reported to our community, they would be banned. So it's not something we accept. And then I think this is the hard part about crypto, and I imagine you're very familiar with it Camila is, which is, when money is involved, especially this global cryptocurrency that has irreversible transactions, people are very aggressive and trying to find holes. And that's just the unfortunate part about crypto.
But again, the community is very self-healing. People are in our Discord, for example, there are very active community members ensuring that anyone caught doing this is immediately banned and revoked from having access to whether or not they got into our system or the Discord.
Yeah, and it's always a challenge. But I also hope that we do get to the point where the technology and the platform are large enough to accommodate a lot of people, and there isn't actually this need to sell an invite. That doesn't make sense to me.
Foundation Mechanics
CR: Right, makes sense. I wanted to get more into the weeds of the mechanics behind Foundation. Like, how does the pricing mechanism work? I also wanted to ask you about secondary sales. Do artists get a commission or a fee in the secondary market, all of that process?
KT: So right now, the format that we use on Foundation that I think we've really become synonymous with is a ‘Reserve Auction’ system. And the ‘Reserve Auction’ system is entirely on the blockchain, a creator would mint an NFT with us, and then they would list it for auction. And so those are separate actions. So minting an NFT is creating the token. And then listing it is putting it into a smart contract that manages an auction on the blockchain.
And what does an auction on a blockchain entail? There's a reserve price. So the reserve price is set by the artists. They're saying, I'm willing to sell this piece for this price. And then if someone were to meet that reserve, we start a countdown timer, and basically, through the smart contract, we give anyone else in the world the opportunity, 24 hours, to outbid that other person. And so it creates a really strong dynamic where the artist sets the price.
So they're telling you like, look, I'm going to sell this NFT for this price. They escrow the NFT in the smart contract when they put it up for auction so you know it's there. So if you place a bid, the NFT is there. And then when the collector places the bid above, or meets the reserve, it also escrows the bid. And so it's this very trustless, decentralized kind of mechanic that allows people to interact on the internet without having to engage in a complicated financial transaction. And so once the auction is going, the NFT is escrowed, it's going to be guaranteed to be sold, and the bids are guaranteed to be escrowed and they can't be revoked. And then the auction has rules.
So it's like if you come in and bid higher, the previous bid is removed, and the new bid is placed. And so it's really, really elegant, it's very powerful, and it gives time constraints. So if you're a collector, and you meet the reserve, you know that there's going to be a resolution to that auction that day. And then if you're an artist or a creator, you know that the auction will have certain rules that will be applied, and anyone in the world can participate. So I think it's very powerful. It's very elegant. It's actually very simple in some ways.
“So if you're a collector, and you meet the reserve, you know that there's going to be a resolution to that auction that day. And then if you're an artist or a creator, you know that the auction will have certain rules that will be applied, and anyone in the world can participate. So I think it's very powerful. It's very elegant. It's actually very simple in some ways.”
You know, I think it reminds me of Uniswap, where there's all these complicated ways to do DEXs. But I think you actually want to distill something down to be very simple and powerful. And I think what you've seen is the ‘Reserve Auction’ mechanic just take off because it lets collectors and artists interact in the simplest way and get the best price.
CR: Interesting. How does that compare with other markets? Is this different from what other NFT marketplaces do?
KT: So I think that it's really about simplicity and design. I think other NFT marketplaces have a variety of things going on. And some of them have different mechanics. And some of them, combined mechanics. And some say you can buy it now. And some say you can make offers. And some say you can put it up for auction. And some have timers. And some don't. And I think what that does is it, it makes it confusing, and it makes it difficult to understand what's happening. Whereas on Foundation, it's very clear: there's a price. If you meet the price, it opens the auction for 24 hours, anyone who places the highest bid that time, wins. And I think that that's really, really, really powerful.
Secondary Market Sales
CR: And then about the secondary market, do artists get a percentage of those sales?
KT: Absolutely. I think that it's the most critical and misunderstood part of this. And the reason it's misunderstood is because it actually takes a long time for this feature to be really valuable. Because if you think about it, we're going to need to have appreciation of artworks, and that happens over the artist’s career, it's not something that happens in two months.
And so yes, there's a 10% royalty encoded in all secondary sales on Foundation. So an artist will, for the lifetime of the work, receive a 10% royalty to their wallet. But I think that the really important thing to understand here is you will be writing about this in 10 years. That's when this will get really interesting. Because what happens when an artist sells something for one ETH today, that sells for 1,000 ETH in 10 years, right? Because, you know, Basquiats during his lifetime, it took a long time for them to become valuable. Jackson Pollocks, all of these pieces, they took time, and that royalty is going to be huge when these prices get into the millions of dollars.
Because think about it, if something gets sold for a million dollars, that royalty is $100,000. And that's really, really powerful. So secondaries are really important. It's a breakthrough innovation. It's what's going to hold this whole economy together. But it's also something that, I don't know how to explain this to people, because we're going to need to wait for a lot of these secondary markets to take off. I think everyone's expecting them to just happen right now. But I don't know why. I mean, outside of some kind of fun trading or flipping, in reality, the really big sales will take many, many, many years.
“If you actually think about buying an NFT, you're buying something. You're not trading a token on Uniswap, you are buying something that I think is much more long-term. And it's much more of an investment in someone's career than a token on Uniswap.”
And I think the really good artists know and understand this. It's like, what artist shows up and is like, ‘oh, man, I wish my secondary market would go 100x.’ That's not a normal thing. That has to happen over the arc of a career as that work is understood, and as it's appreciated.
It's interesting, because it's a new element to crypto, which is patience. It's not immediate. If you actually think about buying an NFT, you're buying something. You're not trading a token on Uniswap, you are buying something that I think is much more long term. And it's much more of an investment in someone's career than a token on Uniswap.
CR: Yeah, really interesting stuff, and yes, super valuable to have this baked into the contract. And we'll see how crypto feels about patience. I don't think that's a core virtue of this space.
KT: No. But I think it's fun, because I think crypto is changing. I think it's constantly growing. And I think you mentioned, there are a lot of new people here. Right?
CR: Yeah.
KT: And I think we should remember that there's new audiences and new cohorts, and there's new types of people. And I agree with you that it hasn't necessarily been its core virtue. But I also think crypto’s vision is to become a layer to the internet, in which case every type of person is here, and so different markets will appeal to different personalities.
Equal Opportunity
CR: Yeah, for sure. Does Foundation take a fee on the sales? What does Foundation get out of it?
KT: We take 15% on primary sales and we take 5% on secondary sales, and the beauty of that is, it's all encoded in the smart contract. So all of this is automated. No matter who we're talking to, no matter who you are, the fees are the same. I think that's also amazing, when we can offer the same tools to the world's premier artists that we're letting the new artists use. I think that's really, really, really powerful.
If you look at Sotheby's or Christie's, those are the auction houses we all know. And we run multimillion-dollar auctions with the same system and the same tools that we give to the teenagers that are inventing the new trends. So I think that's another powerful part about crypto.
“No matter who we're talking to, no matter who you are, the fees are the same. I think that's also amazing, when we can offer the same tools to the world's premier artists that we're letting the new artists use. I think that's really, really, really powerful.”
CR: So you mentioned Basquiat, Jackson Pollock, all these great artists, and how the paradigm has shifted with these new tools. Do you think the next Basquiat will be selling NFTs, tokenizing their art? Do you think this is the next frontier?
KT: Undoubtedly. I don't even think that's controversial anymore. I think maybe if we had this interview three months ago, but you're already having Christie's and Philips and Sotheby's, they're all here, the ship has sailed on that narrative, which is like, oh, is it happening? Is it not? It's a reality now, how does this play out? I don't think it's an if. And I actually will say, I would imagine a lot of the artists on Foundation already are those next people.
Authentic Experience
CR: Interesting. What do you think about Christie's and Sotheby's, like traditional auction houses, getting into this space?
KT: You know, I don't think about it too much. I really focus on what we're doing. I don't know to what extent they understand the technology, or technology in general. So I think it'll just be interesting to understand what role they want to play in the space.
And I think on our end, we cover the full gamut. We're an engineering team. We're a design team. We're a brand team. We have creator relations. We have collector relations. We have editorial. So this is something where we really see ourselves as something very relevant in every category. We're not just writing smart contracts, right? We're designing the experience on top of the smart contracts. We're telling the stories of the artists. We're building out relationships with prominent collectors in the space. And I think we just focus on our community and our value. It's hard for me to speak to what other people are doing. Other than that, I just would want them to really engage with the space and the technology authentically, and not try to warp it in a way that it's not meant to be used.
CR: Yeah, I think that's a fair point. It does seem to me, from the outside, that their involvement has been kind of detached from the rest of the space. But we'll see how that evolves.
KT: And I hope that their clientele would understand that you want things on-chain, you want the record of the bid on-chain, you want to be using cryptocurrency, because that's what is required. If you're buying an NFT, an NFT lives in a blockchain, right? It doesn't live outside of the blockchain. And so that's why I think it's important to really understand what is happening, what is an NFT, where does it come from?
And I personally believe that Foundation offers the most authentic experience. I think that's why you're seeing DAOs really choose us as their platform as they're building out their collection, these prominent DAOs. Because every action is recorded on the blockchain, all the auctions happen on the blockchain. Anyone in the world can participate. So when you talk about price discovery, anyone was able to participate in the high-profile auctions on Foundation. Anyone can create a wallet, anyone can get ETH, anyone can place a bid. And I think that that's really, really, really powerful when we speak about crypto and NFTs and what they represent in terms of values.
“I hope that their clientele would understand that you want things on-chain, you want the record of the bid on-chain, you want to be using cryptocurrency, because that's what is required. If you're buying an NFT, an NFT lives in a blockchain, right? It doesn't live outside of the blockchain.”
In Plain Sight
CR: That's a great point. So about that, you wrote this great opinion piece in The Defiant a few months ago, “Crypto Wants to be Seen”. And I think it spoke to a lot of people, because it was about this conception or misconception by Ethereum or blockchain DApp developers that you have to abstract the blockchain and the crypto so it can reach the mainstream user.
But you said, actually, no, we want to have crypto front and center, we want people to know that this is a blockchain application. And you said that you're kind of leaning into this and making sure that Foundation is as crypto native as possible. But how do you do that and also try to bring in a wider number of people, like how do you balance those two things?
KT: I think that it stems from good design, or it starts with good design. Good design knows what to abstract. And I think that article, what it was really trying to express was blockchains have properties to them that are fundamental, so if you abstract them, you lose those properties. And so if you don't give users control of their wallets, it's not noncustodial. You do hold on to people's data and information and funds. That's problematic for all the reasons why we're using blockchains. right? And then if you don't give people access to the underlying data, you're building lock-in through data ownership. And we know where that goes with platforms.
And so all these value props that we know we want, if we try to abstract these core tenets away, we end up in the same place that we wanted to get away from. You cannot abstract the core tenets from the core elements and not end up in places that are compromised. And when you end up in places in compromise, what's the point of using a blockchain? You lose that very quickly.
“Good design knows what to abstract. And I think that article, what it was really trying to express was blockchains have properties to them that are fundamental, so if you abstract them, you lose those properties.”
So I think that was the big nuance to that blog post, and I stand by it. And what I would say is, you need to build products and experiences that justify the learning curves and learning edges around using blockchains. Foundation is not suffering from a lack of growth because it doesn't have abstraction. You're watching artists and collectors join the platform every day. And they're learning and they're teaching each other why it's valuable that it works in a certain way.
It might not be perfectly smooth. And there might be misunderstandings. And there might be tensions in the community. But I'm watching the knowledge transmit to a larger group of people every day. And that's really important. I think that comes down to not patronizing your users. If we're going to live in a world where people control their funds and control their data, they're going to have to learn how to use this technology, and they do want those things. You just have to build experiences that justify it. That's the way I think about it.
Every day, I think more and more people are learning about this. And Camila, I don't know when this will happen, but I think we will get to a point pretty soon where a lot of people start saying, ‘why aren't you asking me to connect my wallet? Like, why do I have to log in this other way that I don't have control over what I'm doing?’ I think that's going to start feeling weirder then ‘why are you asking me to connect a wallet?’
Top 10
CR: I 100% see that. As you were saying, it makes so much sense to me, because right now I feel so much more comfortable using applications where I connect my wallet, instead of having to log in. So as this becomes more commonplace, and more people become comfortable with this kind of Web 3.0 native way of interacting, it just makes sense with what you expect from applications on the internet.
Okay, about this growth, you've obviously done spectacularly well. You're among the top 10 NFT platforms by volume. Is your goal to climb to the top three, top 1, NFT platforms? And if yes, what's your strategy to get there?
KT: I don't wake up every day and look at the top 10 and think about how to get to the top place, because I think that it's all so early. If you really just focus on competition, you can often get very confused or lost because a lot of the things that are popping up are very different from us. They have very different properties or trade-offs or communities. For us, it really isn't about competition.
“We're really, really trying to just focus on the categories we care about, the creators we care about, and forming a strong community that has an identity. I think that will just naturally prove to be quite competitive. But it's not something that we look to leaderboards to guide us.”
To me, we're moving to a world, and I don't know what the exact timeline is, but everything online will be an NFT. And I think in that world, these rankings and these charts become very meaningless, because we're going to really, fundamentally move into a new version of the Internet. That's the way we think about it. We're really just trying to steward like a cultural platform as we move into this new internet.
We're really, really trying to just focus on the categories we care about, the creators we care about, and forming a strong community that has an identity. I think that will just naturally prove to be quite competitive. But it's not something that we look to leaderboards to guide us. They're always changing. A lot of the projects that bubble up, I think they have a lot of cool properties to them, but I don't know if some of them have long-term dynamics.
A lot of the very hot NFT collectibles, they're very fun. But how many of them will be around in 10 years? I don't know. And it's not even my place to say which ones will. But I will say that good art, culture, the art that will live on, 10 years is nothing. How many of us go and see Picassos and Rembrandts, we have art that's hundreds and thousands of years old. So I just think about them through that lens. We let those values guide us, not necessarily the leaderboard.
Web 3.0
CR: Makes sense. I'd love for you to talk more about this new internet that you mentioned where everything is an NFT. How does that look?
KT: I think your audience will get there. Because this isn't how I would talk about Foundation. I think this is really just about the bigger tectonic shifts that are happening. The way to think about blockchains is they're adding property rights to the internet, right? It's like a whole new layer to the internet where, instead of all these objects floating around freely, and anyone can copy them, and move them, and you don't know who did what, we're going to move to a world where everything has an owner and everything has an origin.
There's a whole system of payments that are going to be attributed based on these kinds of connections. And all of that's going to be on a blockchain and that blockchain is not going to be owned or controlled by anybody. It will just be all these different experiences and platforms plugging into them. That's the vision that we subscribe to, and that's how we're thinking about the world.
“The way to think about blockchains is they're adding property rights to the internet, right? It's like a whole new layer to the internet where, instead of all these objects floating around freely, and anyone can copy them, and move them, and you don't know who did what, we're going to move to a world where everything has an owner and everything has an origin.”
The complexity is, that's a long-term vision. That's not tomorrow. And I think we all know that the theory needs to be upgraded substantially to be able to handle that. The user experience of wallets has to be improved. Transaction costs are way too high. You know, all these things, right? But we all know that technology solves these problems. These aren't unsolvable problems. We are building the product that works right now with the understanding of where this is going in the future, is the way I think about it.
CR: Perfect.
KT: That's why everything we do is crypto native. That's why we put everything on-chain. That's why we have you use your own wallet. These are decisions that will be true, no matter what. And even though gas costs are high right now, that just means that what you're minting needs to be particularly valuable. The product speaks to that. In the future, there will be experiences where the costs aren't so high.
Scalability
CR: Right. So about that, are you considering using a scaling solution?
KT: So, we have experience here. Like, we did play with xDai in 2020. The thing that I would just challenge the Ethereum community is, it's not just a matter of a scaling solution. We have lots of scaling solutions out there, right? It's a matter of consensus within the community. Because, if you're going to go to a scaling solution, there are trade-offs being made to scale. And the community has to want to make those trade-offs together. It's not just like, oh, we decided we like those trade-offs so we're going to go there.
“I think as a platform, we learned it's not up to us. It's not just like we get to decide. It has to be something that the Ethereum community, which we're just very plugged into, really decides as a whole.”
There isn't a clear place right now. Otherwise, all you're doing is fracturing the liquidity that's available for the market. And then you're also adding more friction to the user experience. Unless the full community is behind these decisions, it just becomes really, really challenging. I think as a platform, we learned it's not up to us. It's not just like we get to decide. It has to be something that the Ethereum community, which we're just very plugged into, really decides as a whole.
Like everyone's excited about Optimism. Well, Optimism has to get to the point where it has the level of adoption where we can move our market there, and artists don't suffer, or collectors don't suffer, or the user experience doesn't suffer, because everyone's bought into using Optimism. So that's going to really be a challenge for the Ethereum community as a whole, not really us as a platform. That's what we really learned by experimenting with L2 in 2020.
CR: Okay. So you're waiting until there's significant volume and liquidity in one scaling solution as a sign of okay, the community has made a decision that they are trusting these trade-offs, whatever they may be?
KT: We're not going to put our artists or collectors at risk until that's clear, because otherwise, we're not stewarding our community well. Because all of these things have trade-offs. I believe in the Ethereum community’s wisdom around understanding these trade-offs and choosing the right one.
CR: Okay. And with around $5 billion in Polygon, do you think that's still kind of wait and see?
KT: Don't get me wrong, I'm excited. But is everyone ready to go to Polygon? How much ETH will go to Polygon? What is the relationship between Polygon and Optimism? And then how are all these things going to interoperate? These are still open questions, and we're paying attention. I think we really need clarity, though. We're onboarding so many people just using wallets. Now you want them to change networks within their wallets? Every point has friction, and we have to justify it with real value.
DeFi NFTs
CR: Yeah, makes sense. And then to start wrapping up, in this Web 3.0 future, how do NFTs interact with DeFi?
KT: I'm very excited for this. I think NFTs have proven themselves to be a category in their own right. The beauty of blockchains is composability. I think you're going to see, and I'm already super aware of 10 projects, at least, that are going to go and figure out cool ways to combine these. How can we use DeFi to really improve the experience around NFTs?
So a few things that I am aware of is there are DAOs forming that are collecting NFTs, that are then holding them as a collection that they're tokenizing ,and then trading as a token on Uniswap. So the token essentially has access to the collection, and you can think of the token as a proxy for the price of the collection. I think that is wild.
I think DAOs, in and of themselves, how collectively people are coming together to build collections, I think that's the new institution. Instead of waiting for the old world to come online, I think people are going to build new institutions, and they're going to be DAOs. And then I think you're going to see all sorts of really interesting pricing mechanics to help create liquidity, create loans, create all sorts of financial use-cases for NFTs, how to look at the royalty structures around them, and to think about advances. I think it's a really new world.
“I think DAOs, in and of themselves, how collectively people are coming together to build collections, I think that's the new institution. Instead of waiting for the old world to come online, I think people are going to build new institutions, and they're going to be DAOs.”
And again, I think there's a lot of hype, but I think you've been through this Camila. It's like people might get overexcited. But the builders are going to be here building these experiences for the next couple of years. I think, the analog world, it just will be blown away by what's built in the next couple of years.
CR: Yeah. Possibilities are, I mean, not endless, but almost. Yeah, there's so much you can do there, like NFTs as collateral to borrow against, maybe tokenizing from royalty revenue, using it as some sort of supply chain financing against NFTs. I don't know. There's so much you can do with DeFi and plugging NFTs in.
Okay. Now we really have to wrap up. But I'm curious about your big vision for Foundation. What's the place of Foundation in this crypto native future, like 20 years from now? How do you see it grow?
KT: So I think it really just relates to the Metaverse, and I would encourage people to look at our blog and dive into some of these topics a little bit more deeply. But I think about the Metaverse, and the Metaverse is kind of the space that we're creating that's governed by blockchains, where there isn't a single entity that is in control and the data flows freely. That's what I think of as the Metaverse.
I think Foundation is just going to be one of the premier portals that people enter the Metaverse through. We're very pragmatic in the present, which is, this is all still very new. We have to onboard people and provide an experience that's beautiful and well designed. But I think as we all know, this is radically moving forward. We are going to move into a world where Web 3.0 is the predominant layer to the web. I think Web 2.0 websites will start to feel very old and silly compared to ones where you connect your wallet and move your data and funds around freely.
I see us really getting into a place where there isn't one Foundation site. There's a Foundation ecosystem, and it's a portal, and it gives you these powers to go into the Metaverse and feel empowered to participate. And I think that's abstract, and that's why it's the big long-term vision, because we'll make that concrete year after year by working on the next big thing in crypto.
CR: Okay. Really interesting. So not a website, but sort of like an ecosystem, like a portal, a virtual reality sort of thing. Like I imagine some sort of gallery experience or something like that?
KT: I think that there's a lot to come, is the way I think about it. And I think the challenge is sequencing it all. We already see lots of glimpses of this future right now. What we're really just trying to do is sequence it so we get as many people through the portal as possible.
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