In this episode, Tim is joined by Alexei Falin, Co-Founder and CEO of Rarible, a community-centric NFT marketplace that allows users to create and sell digital collectibles secured with blockchain.
Over the course of the show, Tim and Alexei discuss the recent Silicon Valley Bank collapse, why the current bear market might actually benefit NFTs, and the latest innovations in the NFT space.
To find out how Grindery is building a Swiss army knife for existing DAO frameworks, head to grindery.io.
Tim - 00:00:01: This is Tim Delhaes and you are listening to DAO Talks podcast. Over the last couple of years, we've seen DAOs go through a roller coaster ride from being nowhere to everywhere. But what exactly are DAOs or decentralized autonomous organizations and how can we use them as a lens to view the wider world? What is happening to them now in the bear market? Is it the end of it or are we just normal hype cycle? All of that and much more is what we want to find out together. Tonight I'm talking to Alexei Falin. Alexei is the co-founder and CEO of Rarible, creator Centric, well known NFT platform and marketplace. We're going to be talking about the recent Silicon Valley Bank failure and how it affected them or it didn't. The advantage of doing self-custody, the tendencies in crypto with that and obviously the latest on NFTs, the latest trends and what's coming next if one day this bear market is over. Alexei, how are you? Where are you?
Alexei - 00:01:12: Hi, I'm good. I'm in New York. Good to be here.
Tim - 00:01:16: That's good. You've lived in New York for a while. You just got there. I think you mentioned where you've been nomadic through the world before, but you've been in New York for some time now.
Alexei - 00:01:27: Yes, that's true. I moved to New York like a year ago and still here.
Tim - 00:01:32: You enjoy it?
Alexei - 00:01:33: It depends. So the city is a little bit of hectic and noisy, but yeah, you can find a good balance across quiet spots and busy areas. But also a cool thing that there is a lot of smart people here. And I really like communities. You can get almost every crypto startup has some employees around.
Tim - 00:01:58: I was in New York, I think in August last year and I think I took two things back. I did some great bike rides with the kids through Central Park, was good. And I remember in the hotel I bought a beer at the bar and I got like a plastic cup. It was like $17 before taxes and tip and I was, oh yeah, oh my God. Anyway, not talking about New York question. So did you get affected by what happened with Silicon Valley Bank or does Rarible have all the money on some Silicon Valley Bank account or what's up with you guys?
Alexei - 00:02:38: It's a good question. It was very interesting. Several days starting from Friday, pretty much sorrow is not the fact that we use self-custody, obviously. So it was cool to see how crypto is actually changing the way you interact with your money. So you own everything directly. There is no one else who are in charge and something happens. So that's a nice feeling then that you're safe and you're in control of your assets.
Tim - 00:03:11: The treasury in USDC
Alexei - 00:03:15: Actually, USDC is something we've got affected a little bit but two things. One is I'm really confident in USDC because out of all Stablecoins. They probably the most transparent and definitely all Stablecoins who is actually dealing with fiat money as a collateral. They act like a bank. And if you use the Stablecoin, you kind of know that you could be affected in a sense like a bank. But the good thing about crypto and USDC anyway, is that you can 24/7 just sell it, change it to other Stablecoin. Maybe you will lose a little bit, but it's not like with the Silicon Valley Bank, then you can just do nothing and you see them wait, like what they will decide still, you made the choice. So it's different. And we do have a portfolio of stables, but USDC will be there anyway, for a while at least. It's actually interesting question, like, what is the stable coins we have on the market? And there is not so many of them. Also, I saw some cool Twitter thread about some narrow bank before. Like some time ago, they tried to be a super safe place to deposit money. So they just don't really buy any securities except like Treasuries, which is super safe, super Liquid, and they held only like cash and treasuries, it's like very stable model. Right? And the thing is, I think they got banned by some regulators because they're too safe. And if such a safe place exists, everyone will just move all their deposits from other banks to this place. So everyone, at least in this current system, they should be somehow not so stable. Not too stable. Although I thought it could work pretty well for Stablecoins. So I hope someone will launch such a Stablecoin, which is baked by a very secure type of securities. And yeah, so it will be good thing to have on the market.
Tim - 00:05:34: So, you obviously had exposure with USDC. Where you surprised that Circle had exposure to Silicon Valley Bank? You go like, oh, they actually connected to Silicon Valley Bank. Okay. And then de-pegged to what, $0.90? Did you at any point think it could fall apart? Or were you pretty confident entire time that, hey, nothing's going to really happen?
Alexei - 00:05:57: Yeah, I was pretty confident because first of all, I know how USDC works and it wasn't like unexpected risk. So it's like a bank essentially. So if there is some kind of crisis in this sector, so USDC could be affected, but they are very transparent. So you can just check what's the risk there, what is the amount of assets that are in risk for them? It was a pretty small portion. It's like 10% of their assets. So I was pretty sure that everything will be fine.
Tim - 00:06:35: Also explains the pack, right? It explains that, hey, 10% was affected and it went from one dollar to 90 cents, you know.
Alexei - 00:06:43: Yeah, but actually, I think it's just like panic. It shouldn't go so deep. It should go for like couple one 2%. It was like real panic. And I saw a lot of messages or some conversations where people just tried to run from USDC to Tether, but Tether, nobody cared to check the history. But it's like an interesting company. I think they started in US and at least a couple of times from what I remember there was a holes in their balance sheet and they just moved to some unregulated I don't know where they now, like in Europe or where so in some place you shouldn't conduct like audit reports and all the stuff. At least as I know, probably there is some audits but yeah, for me treasurer seems like a more private company.
Tim - 00:07:37: A more private company in your company treasury. Do you hold any UST or you find it too risky?
Alexei - 00:07:44: Yeah, I think there is nothing else on the market with so good traction during the time. So USDT is still too big to fail.
Tim - 00:07:57: Interesting way of putting it for crypto. Do you think this incident now with Silicon Valley Bank and USDC de-pegging and do you think this had any positive or negative impact on perception of crypto in general? Like in the Web3 community and outside the Web3 community you think there's something to rescue or something that people took with them from it? Do you think there's any change of perception?
Alexei - 00:08:22: Yeah, I think that it was a really good sign and bullish trend for crypto and we can see that on the market if is up significantly, so bitcoin is up, all crypto goes up which clearly is saying that people believe in crypto and they just seem as value to own their assets directly.
Tim - 00:08:43: Yeah, I think it makes you really think I guess nobody in the startup world really thought about as well. We also have a Silicon Valley Bank account but I think we have like 10k on it or something like it's ridiculous because we do the same thing with self-custody. Right, but I had somewhat of the same thought, I was like why would you have all of your treasury all lying in the bank? Right? And when we waste the money we obviously had it in Fiat as well and we then had it in custody with finance but we also moved it off there because it just feels a lot safer right. Having it in your own MultiSig and being in control with your team and partners rather than having it someone on the bank account of some bank where as you know what they're doing with the money. Right?
Alexei - 00:09:29: Yeah, MultiSigs are pretty safe. So MultiSig plus hardware wallets, it's the same grade of security as you have in any custody or bank. But it's just more safer because there is no risk on top of it.
Tim - 00:09:45: Because you don't have to trust other people. Right. The point of trustless you don't have to go trust the guys in the bank, what they're signing and what they're not signing. Right?
Alexei - 00:09:53: Yeah, exactly.
Tim - 00:09:55: So going on, obviously, you're heavily involved, Co-founder, CEO, Chief Janitor, it's Rarible. So you've been in NFTs. What's on your mind about NFTs these days? So what do you see happening? I guess people who will listen to this and that follow what's happening in the space and an interesting opinion, I guess they would really like to see what you see happening from your vantage point.
Alexei - 00:10:18: It's an interesting market, as always. I think I like bear market more than bull markets because it's way less noise and you can actually see what's happening and what's on the market. So we definitely seen like a less of PFP movement, it's going like lower and lower and crypto art in contrast is growing. So I would say for NFTs, it's really, really good primitive in my opinion, generally for crypto. So before NFTs we've got like only cryptocurrencies plus ERC, 20 tokens, which is fungible and act like currencies as well. So it was like all sorts of project tokens, like voting tokens, all those things, and it's pretty complex, so DeFI as well. So if you just never use crypto before and you want to use any of those tools, so it's pretty complex, you have to dig into this, figure out how it works, like why you should buy this. Okay, you bought this then why you should stake it, or why you should put this token somewhere, right? So it's very nerdy niche and it's hard to scale except of the conception of just trading. So I believe there is a lot of people around the world, like Binance users, like Coinbase users and exchange users, they just trade and they probably don't really get deeper into the details, they just trade them and they enjoy using the stack just from the investment perspective. Right? Whereas in NFTs it's way more about culture, it's visual, it's engaging, so there is a storytelling aspect. So projects around NFTs and launching NFTs, they often tend to be very cultural based and very community based and all this social aspect. So like NFTs as a primitive, it brings the social aspect and visual aspect to the whole crypto ecosystem, which is why it's just way larger spectrum of people who can interact with this primitive, which in my opinion helps a lot in this long process of crypto adoption. So for the whole crypto market, more people coming to the space is better, right? And we still really small and each bull market probably ten to 100x the user base. And last bull market, it was a lot about NFTs and again there was a bigger audience that are kind of interested in interacting with this primitive. So what I'm thinking is that next bull market, NFTs will be a really big part of it, although definitely we'll see other primitive emerging as it was like all previous cycles. So it will be new things, but also Nfts will be there for sure.
Tim - 00:13:31: What do you think? Let's assume the market would turn around, like, as you put it, right, and suddenly we would be in the bull market. What do you think has happened since the last kind of like Hype cycle and now through this bear market, what have been the biggest innovations in the NFT space where you would say, hey, if the market would now turn around, then we could be seeing within the NFTs a lot of this or a lot of that. That's not a repetition of what we already had. Because I would agree with you that I think this mass appeal of NFTs, it's a good vehicle for mass adoption of Web3 clearly. I would just be very curious what you think will be the really new aspects that you've seen developing and coming out, where you now would go, hey, this is the cool shit that could be happening or not obviously.
Alexei - 00:14:19: I would say that we still have at least one to three, probably years until next growth cycle. And the previous cycle, it was very few infrastructure in place. So you want to launch your NFT. So it's like you can just create a smart contract, launch NFT or mint NFT through like wearable or through other platforms. If it's just like basic one, like a single one on one, or just like images and then go and try to build your community. So people use this primitive, in my opinion, in a very direct, very basic way. It started from just trading images and it's still there. Like digital art is growing and especially generative art is growing. So I think this direction will be here and will just grow in times whenever we will be high market. So it's very genuine value proposition for digital artists and they will be there and it will grow. But other stuff is more of the in exploration phase. So we saw a lot of experiments from teams to brands. So everyone is trying to do something like launching different experiments. At Rarible, we worked with a lot of brands to help them and just like some of them conducted drops on Rarible. Now we working with the so called community marketplace product. That's when we help them to launch their own marketplace. It's like a dedicated marketplace for their collection. Very vertical, small one. So usually these days the conception is they launch some NFTs with some idea behind and then they keep the audience and keep the branded experience and just allow people to trade inside the same space. So just seeing how all this growing and during all this process of working with different partners, teams and communities, we've seen all sorts of experiments. Some people trying to use NFTs as a loyalty programs, which is totally makes sense, actually, in my opinion. Another big direction is digital goods. So there is several companies who considering NFTs as a product line. So like you sell maybe it's even physical goods and now you're just adding to your line digital goods in the form of NFTs. So all this type of things I think will be growing next bull market. So I would say that there is a lot of experiments we should conduct during this next year, two years to finally have something that very scalable and very appealing to users.
Tim - 00:17:17: Really curious there. So, what are you saying and what I'm hearing from you? I hear two terms. I think there's a lot about brands in there which obviously goes with the second term, which goes hand in hand in both ways, in many ways is communities, right? Because this launching of your own marketplaces around your own NFT collections, letting people trade has a lot to do with creating communities around things. And these communities can be around brands or brands can create it out of these communities and it can be commercial brands or large brands, it can be very independent ideas and so on. But what I'm hearing from you and kind of the theme through the things that you describe seem to me these two things a lot around brands, not only just in the commercial sense, starbucks, NFTs or so on, obviously as well, there's money there, but a lot around this community and marketplaces. Would you agree with this? Do you think that's where we're going to see a lot of stuff happening over time, especially when activity in the market picks up?
Alexei - 00:18:23: Yes, so I would agree with how you put this. And to be precise, for brands, it's not only like some Web2 brands like legacy brands like Starbucks or someone like Trump, let's say, so there is also new brands like Hugo Labs, like Doodles, all these brands, they emerge from cryptoculture pretty much. So there is a whole set of new brands and communities that are emerging around this primitive.
Tim - 00:18:58: Two questions to that actually from what you've seen and your personal opinion there, not just from a business and wearable perspective, but what do you think is the most interesting NFT community brand project that has actually had an impact? Where you said, hey, this has been a really fantastic project for this and that reason. Not just because you throw a lot of money in it or have a large marketing machine, but where you go, hey, this has been a really interesting mix in terms of like an innovative approach that actually created value that was adopted very well. What stands out in last six to twelve months?
Alexei - 00:19:37: So aside of those PFPs which sometimes I like proof collectible, it's a good example of community that brings value in terms of marketing sites, right? So, aside of all this community driven PFP collections, I would say, I don't know, in my opinion, less of them is actually bringing any meaningful value, but there is some good one that actually do this job well. So, outside of this, I think the most from what already happened, the major like value, it's something like Art Blocks, something like generative art projects, Braindrops all these guys, they effectively multiplied revenue streams for artists and everything they do totally makes sense. So artists launch their draw artworks and sell artworks for people who wants to collect. And same happens here, but in digital way, which gives like a lot of additional value on top of it.
Tim - 00:20:45: Interesting. And from my vantage point, I've noticed that some of the blockchains have started to try to differentiate in terms of value they can add in the NFT space. Right. Again, from your vantage point, what are the interesting things that are happening on the blockchain level to support needs of creators in the NFT space and which of the chains that are not the major chains? And I think you guys how many support? Four or five? Not sure, but maybe some of the chains don't support yet do you think are really doing some really interesting shit where people should go, hey, this is really worth watching because it generates a lot of value independent from the fact if Rarible today supports it or not. But where do you see innovation happening on the blockchain space?
Alexei - 00:21:34: Definitely there's a lot of chains. We saw a really sunrise of L1s last couple of years. Now there is L2 s coming and ZK especially coming. A lot of such things we'll see in the future. But yeah, I think there is a few chains that actually state that NFTs is something that they are about, I think out of Flow.
Tim - 00:22:02: Immutable X, I would say, comes to mind.
Alexei - 00:22:04: Immutable X. Right.
Tim - 00:22:06: If you look at Flow and Immutable X, do you think there's significant innovation or would you say, hey, the stuff that the layer ones are doing here is kind of nice to have, but it's not really needed or is there an opportunity to actually do fundamental infrastructure improvement?
Alexei - 00:22:20: So, first of all, Immutable X is not layer one, it's like a side chain. Two, it almost has API workshops support Immutable X and it's more of like framework, like web two API, and then you can interact with NFTs through it. So, to your question, I mean, Immutable X is doing a great job in terms of gaming and they focused on this. And I think it's really helpful for the whole ecosystem to have such players who actually working with gaming projects and help game projects to adopt NFTs. That's cool. But out of this, probably Flow is the only L1 infrastructure layer that focused around NFTs. So we do support Flow as well. Flow is interesting blockchain, it's kind of NFT focused, but it's so corporate. So it's almost zero activity out of just like corporate activity, which doesn't really utilize all the creativity that is around the world that people are willing to use and launch all sorts of things. Right? So that's why everything is happening on EVE pretty much on Polygon. And Tezos is big around art. So, artist community, they moved to Tezos pretty much during the last bull run when transaction costs on Ethereum was really high. So they moved to Tezos and adopted Tezos. Now we do have fxhash, which is generative art platform, almost same as Art Blocks. And a lot of artists, they start from fxhash if they got popular, so they move to Art Blocks. It's like a playground for new digital artists and OG as well. So Tezos is big on art and generative art.
Tim - 00:24:21: Are you looking at things where you would say, hey, in terms of infrastructure technology, be it layer one or layer two, Immutable, or in terms of cross-chain technology, are you seeing areas where you would say, hey there's a piece of infrastructure missing, or there's a piece of infrastructure that somebody's already working on that you think would have a huge impact on the NFT space. Do you see something on the horizon?
Alexei - 00:24:44: So I don't see much difference for NFTs and for crypto in general. So we feel very behind on the mass level of adoption in terms of infrastructure from many, many angles. Like, let's say there is a new big trend of decentralized socials such as Lance Protocol, like Tezo, Lance Forecaster, all these guys. So let's say Lance Protocol, they already own L2, they're on Polygon, and I think they're at the maximum capacity even on this very small scale. Right? So we're lacking on the faster layers, like faster Layer 2s or even Layer 3s at some point where people start talking about even faster abstractions. So definitely we need more speed, less of transaction costs and better wallets experience. So better on ramp, off ramp, all this are still missing like on the market. And it's coming like a prerequisite for the next Bull Run will be robust, like L2s with really nice bridges, like with good on ramps, good wallet support. So all the things that can help developers build sleek products that people are used to, they should look pretty much same as Web2 products, maybe even like mobile apps, but they should utilize crypto native concept of direct ownership. And this is how next bull market will look like. We'll see like a very nice and sleek application with very professional teams building them. So the level of professionalism is also rising every bull market. So I'm seeing that more and more professional team coming into space. So it's more sophisticated apps, better user experience. It's something that we have to have to bring like a next wave of users.
Tim - 00:26:52: Very cool. I'm helping a team that is producing a movie about two street musicians from Malawi, an African country, okay? And these two street musicians kind of by accident ended up being discovered. Now they play on stages like Roskilde. They're going to their first US tour. It's just two dudes playing on subs-built instruments. It's really good and it's really amazing story. And there's a really small independent documentary film being made about that. But I've been involved there in the discussion to see hey, how does potentially NFT play into this, right? So you got a band that's doing music, they have several albums, right? They got a small community, small Instagram following. It's a really non-tech world. On the other side there's this movie starting to be produced and it's getting some initial traction and some reviews and people collaborating on it. What are two or three of other projects or examples that come to mind where you would say hey, look into this or that or the other thing that might be a good idea for a project like this to consider thinking beyond making an NFT out of the movie poster, right? What can you do? It's not like anything that comes to mind here. Where would you look?
Alexei - 00:28:16: So music NFTs, like NFTs around music bands there is a lot of things happening. It's like waves, sometimes it's going up, sometimes it's going down. So I wouldn't say that. We do have some really good working examples of NFTs that relate to music bands at the moment. Although there is several projects like catalog. So the major thinking behind music NFTs at the moment is that the only niche that music NFTs are trying to disrupt at the moment is the niche music bands. So the problem is if you are a small music band, so from some level of the Fundbase it's starting to be completely inefficient to sell your music through streaming services like Apple Music or Spotify because there is just like few people playing your tracks and they pay per listening, it's not going to work for them. And so all these bands, they suffering from this major music distribution options. They don't have this in their revenue streams. But on the other hand, let's say they do have like 200 of really good followers, like a really small audience, but they really love those guys. So it appears that these 200 people, they are willing to spend pretty good amount of money just to support those guys and there is no direct vehicle to do this. And then there is several projects that trying to solve this through NFTs and NFTs in a sense it's like a pass. You own this NFT and then you support all the charges, like direct support from the Fundbase to the music band. So general thinking is something like that, if that could work for them. So if they have a small audience, maybe there is a chance. So yeah, I'm not so deep in music NFTs and I think there is like very small number of projects and they should probably check and see how the latest thinking around this, how it could work.
Tim - 00:30:35: It's like being a struggling entrepreneur, right? You're going to have to push the boundaries and look for new angles to find to make it happen. Alexei, this was a pleasure. So thank you so much for your time.
Alexei - 00:30:47: Yeah, thank you. I hope it was helpful. It was nice being here.
Tim - 00:30:52: DAO Talks is brought to you by Grindery. If you enjoyed this podcast, consider subscribing to DAO Talks on Apple Podcasts, Spotify, Google or any other platform you fancy. To find out more about Grindery, visit grindery.io. Thanks for joining me. Tim out.