Everyone's talking about Web 3.0 (or Web3), but there's a lot of ambiguity about what exactly it's going to look like or even what it is. Nonetheless, there's a lot of enthusiasm about a crypto-based, decentralized internet. So to learn more, we talk to one of the most interesting builders in the space. Mike Demarais is the co-founder of Rainbow.me, which makes an Ethereum wallet that emphasizes high-quality design both in terms of use and aesthetics. He explains his vision for both his company and the broader Ethereum-based future. Transcripts have been lightly edited for clarity.
Joe Weisenthal:
Hello, and welcome to another episode of the Odd Lots podcast. I'm Joe Weisenthal.
Tracy Alloway:
And I'm Tracy Alloway.
Joe:
Tracy, we've obviously done a lot of episodes about crypto, probably doing more and more to say the least, but there are still big aspects of the space -- it's so sprawling and broad and maybe ill-defined that there's just a bunch of stuff we have yet to cover.
Tracy:
Yeah. I mean, there's new stuff happening every day, but certainly one of the big things that has been going on recently is this whole idea of Web 3.0, NFTs. The idea of actually building new worlds, new spaces, new identities on blockchain technology.
Joe:
Yeah, exactly right. So we've done a lot about DeFi in the past and maybe, maybe not crypto will have some disruptive effect [it’s] unclear, but then there's this whole other aspect. And as you mentioned, like NFTs and DOAs and identity and de facto social networking, and I think a lot of people are excited about some alternative to, I guess what I would say is the Web 2.0 tech giants, like there's this anxiety about the power of a centralized company like Facebook or Twitter, and maybe some hope -- even if it's still not perfectly articulated -- of how something that's decentralized and based on crypto or Ethereum specifically, could create new spaces, new forms, new ways for us to interact in a social manner that aren't tightly controlled by one entity.
Tracy:
Yeah, I think that's right. Although I think there's still a tension there, which we can discuss, but the idea of being able to have your identity on the web somewhere, or have your assets in a wallet somewhere and then be in absolute control of them in the sense that, you know, you can move them. They're portable from one wallet to the other without actually having to necessarily interact too much with the platform that you're using. Like, there is something that is very attractive in that proposition.
Joe:
No, it it's super cool. And like, you know, the idea of say being able to log into an app or website without saying a password or a username, just connect your wallet. It's pretty cool. It feels like really powerful. On the other hand, I guess I have to say I have a hard time getting to, okay, yeah, but when does this become a sort of genuine social interaction? Like mm-hmm, you know, I can't, I can't tweet in Web 3.0 yet, as far as I know, or no one else is there. Like there's a bunch of social things that I do…
Tracy:
That's when everything becomes real for you, right? When you can tweet it?
Joe:
Yeah. That's basically the question. No, but literally like all my friends are in Web 2.0. And I get in theory that there's some Web 3.0 stuff that would allow us to interact. But like, I don't know what it, quite what it looks like. What social relations look like in a Web 3.0-based world or whatever.
Tracy:
Yeah. Fair enough.
Joe:
Anyway, I'm very excited about our guest today, because I think he is someone who talks a lot about crypto. He's in crypto and explores crypto from this angle of like these tacit or de facto social networks. And he's thought a lot about this. He has a company that he’s building in this direction. I'm very excited. We are gonna be speaking with Mike Demarais, the co-founder of Rainbow.me. It's a crypto wallet and built around all this stuff, built for this stuff. Mike, thank you so much for joining us.
Mike Demarais:
What's up Joe? What's up Tracy? Big fan of the show. Excited to be here
Joe:
How many Dunkins have you had today so far?
Mike:
I'm on my second Dunkin right now. Feeling good. I feel it's a good number. You know, this is pretty early for me. I'm normally, you know, still up at the 5:00 a.m. ‘What’d I miss?’ tweet. You know what I mean? Normally I'm the first reply. So, you know, this is big.
Joe:
Yeah, right. You say ‘GM’ at one in the afternoon.
Mike:
Yes, exactly. GM.
Joe:
So in all seriousness, you know what I think. I don't know if anyone's made this analogy before, but I kind of feel like Rainbow.me, your company, it kind of feels like the Tumblr of Web 3.0, because Tumblr is like all the cool Brooklyn hipsters. That was like this very design-oriented, ease of use, social networking, making blogging this thing. And it's like, rather than installing some boring WordPress template, just have this fun cool way to interact on social media and, you know, did pretty well, I guess it got bought out by Yahoo. What do you think about that analogy?
Mike:
Yeah. I definitely think so. I think other people, you know, sometimes they say, oh, it feels like Snapchat or, yeah, Tumblr as well. I think that Rainbow stands out for being obsessively focused on fun and delightful experiences and yeah, we're really a design first company. But yeah, I definitely see the analogy for sure. All the hip kids are on Rainbow.
Joe:
That's my impression. Yeah.
Tracy:
So when most people hear, you know, it's a beautiful app. I think like they don't necessarily get the importance of that or why you're so focused on the design aspect of it. But my understanding is you're very focused on it because in a world of wallets, in a decentralized world of wallets where people have the option to easily switch from one wallet to another — so, you know, I use MetaMask, but if I wanted to, I could easily transfer everything over to Rainbow right now. Then like the thing that you're offering is basically that design experience. Is that right? Is that the right way to think about how you're differentiating yourself in this market?
Mike:
100%. What's crazy is about like with Web 3.0, there's just simply no user moats, right? So in the past, the reason you're using Facebook is because of the network effects that Facebook has built up, you know, all of your friends are there and it's really hard for a challenger to come in and compete with those network effects. But with Ethereum, you know, and the portability of your keys, a user can eject from a wallet and start using another wallet in moments. And there's nothing locking them in to a particular product. So yeah, it's our belief that basically the product itself, which to us means design, is really the core differentiator between these products and really the only way to actually, you know, retain users.
Joe:
So I don't think anyone who's interacted with crypto apps, whether they be wallets, whether they be exchanges, whatever they are, like, there is not a ton of design sense in the space right now. To say the least, I think people complain about usability a lot. It's really scary. You like click one button and you're worried you're gonna lose, you know, expose your private key to everyone. Why don’t you talk to us, just like step back, what do you see as like, what's your design philosophy? What do you see as the failures of existing crypto designers? And then how you think about solutions?
Mike:
Oh man. It sounds so, so cliché, but I think that people have been stuck in kind of an old paradigm of thinking where like, you know, they've been used to the existing crypto products and you know, everyone in this space is such a big nerd that it's hard for them to imagine new styles, right? New styles of, of products. What I mean by that is like, you know, MetaMask and other wallets kind of are all following the same almost like utilitarian approach to the product. And no one has really tried to imagine it differently. It feels like, you know, there just hasn't been a real attempt. It's so cliché. I think that the example I always point to is you all remember Windows mobile phones?
Joe:
I think so. I think so. Yeah.
Michael:
It was like with the stylus, with the little start menu. It’s like, you know, you can say that that's a smartphone, but really, you know, the iPhone came around and even though on a, on a spec list, right? Oh, it looks like it hits all the same specs as a Windows mobile phone. But in reality it was the design of the iPhone really unlocks this new type of product. Right. It was like the there's a before and after moment.
And we sort of think about Rainbow in the same way. It's like functionally, you know, similar or nearly identical to other wallet products in its capabilities. But the way that the product is packaged, we think it's more, you know, fun and accessible and you know, less scary. But yeah, I mean, the way that we approach design in general is first and foremost, we are trying to make something that my little brother would use, is always my example user. Both my co-founder and I have little brothers and very much Rainbow has been designed to kind of be something that they’d vibe with. So that's always been our gut check.
Tracy:
So now that we've talked a little bit about the design, can we talk about what's actually on Rainbow or rather what you can actually like store and buy and trade because, obviously you can buy cryptocurrency. You're also offering, you know, digital collectibles and NFTs and things like that. So what's the thinking behind that?
Mike:
Rainbow is an Ethereum wallet and it supports all of the different types of assets that can exist on Ethereum. So that can be everything from ERC20 tokens, some DeFi governance tokens, things like that, stable coins, things of that variety, as well as NFTs. And additionally, it also surfaces DeFi positions that you might have. So if you go and deposit your money in one of these platforms, we recognize that and essentially, you know, throw a custom interface up that lets you see more information about those particular positions because it's like when you actually deposit your assets in these DeFi protocols, your assets are technically, they leave your wallet -- so it's like, you know, MetaMask is unaware of your money when you go and deposit it into one of these DeFi protocols.
Tracy:
This happened to me on my first DeFi trade. Like it just disappeared from MetaMask. And I only, you know what, I only rediscovered it today and I'm very, very happy that I managed to find it.
Joe:
Are you rich?
Tracy:
No.
Mike:
Did you make it?
Tracy:
No, I only, I was just trying to learn a little bit about yield farming. So I think I put in like a hundred dollars and got two hundred dollars out. So no, sadly. I haven’t made it yet.
Joe:
That's pretty good. You're gonna make it.
Mike:
Yeah well, so that behavior is exactly what we think more people should be doing. We think that the best way to learn about this stuff is to honestly just play around the product. Rainbow has been designed honestly to encourage that.
Joe:
So I wanna go back to something you said comparing the Windows phone versus the iPhone. So the Windows phone is essentially started from the premise, I think, that the things that you would do on your computer, you could do on your phone, just smaller, just with a smaller screen and a sort of crappier keyboard. But you still do the same things. You send emails. Maybe you try to like zoom in on a spreadsheet and surf the web or something like that. With the iPhone, on paper it's kind of the same thing, except the design of the iPhone opened up these new worlds. And we obviously know that in the iPhone era, we started using phones fundamentally differently, new things emerged. And I thought that was interesting the way you stated, what is the sort of like new forms of interaction that can emerge or that you envision, or how people use it when there is a sort of design and user friendly wallet that actually brings delight?
Mike:
We actually think about crypto today as being really like a Trojan horse for getting public key cryptography into the hands of regular, you know, average people. So right now it's like the things attracting people to crypto is kind of, you know, speculative finance and there's nothing wrong with that. That's great. But in the future, what you can do once you have keys in your pocket, a.k.a. like a wallet in your pocket is do more things, like use it as your identity to various degrees. So some of the more exciting things happening with that right now is yeah, like using your Ethereum wallet as a login. You know, if you've used Uniswap, you'll notice that there's no login experience, you're simply connecting your wallet. That's been taking off, that user flow has been taking off a lot lately, this concept of token-gated communities, which is something popping on Discord these days. So, you know, on Discord, you can have a channel where, you know, people can join your channel only if they hold a token of a certain type. So whether that's an NFT, whether that's Unisocks, whatever. Basically you can have communities online now that you have to, the contents of your wallet are your ticket to enter the community. So I'd say the best answer to your question is yeah. wallets kind of being used more and more closer to the concept of keys.
Joe:
Are we gonna see, in your view, things that resemble what we think of as social networking in this model of my only login is my wallet? So maybe something that represents a photo-sharing app or something that represents chat, like what does, because I think people intuitively, like I said, in the beginning, they like this idea of social interaction. That's not on some centralized company’s servers, but can you talk a little bit more about what you envision that looking like?
Mike:
Yeah. I definitely think that it's gonna be iterative, right. I don't think that crypto-centric, social networking is ready to go. Right now where we're at is basically people are really loving this idea of portable social profiles, which I guess is really a subset of social networking, right? So you don't have your entire social graph today on Ethereum. You don't have all of, you know, friends and followers, etc. But what you do have is essentially a user profile that you can share across applications, right? So you can have your avatar, your user, your user bio, you know, relevant links that you have, your Twitter, your Github etc. You could fill that all in once on your ENS name and any application that would like to is able to then respect that data. And essentially use that as the prefilled data in your profile on all of those various sites. Social networking will begin to get eaten away by crypto. But I do think that there's fundamental things that need to happen before that's really viable.
Tracy:
So I have two questions on this, but you know, if I have TracyAlloway.eth and I have this identity that's tied to Ethereum, how portable is that, if say, you know, suddenly Solana or I don't know, Dogecoin or something like that becomes like the de facto blockchain that the entire internet is using? Like is my eth identity, my ether identity suddenly useless?
And then secondly, I get that decentralization and portability is like one of the big offerings of this technology, but on the other hand, a lot of it is still going through a platform of one sort or another. And I just saw right before we started this podcast that OpenSea, which sells NFTs, it just took down like some sort of alt-right NFT that someone had put up there. So there's still some sort of censorship and control because these things are still going through a platform of some sort. So I guess my question is how decentralized is this really?
Mike:
Great question. So to the first part of your question, what happens if a contender blockchain, you know, unseats Ethereum and what happens then? So that's a good question. ENS, which is really what I guess the community is rallying around and has seen the most adoption so far, it's actually designed and implemented in a way that is agnostic to Ethereum.
Tracy:
Oh right.
Mike:
So, yeah. Basically Solana could read that data off the Ethereum blockchain, and even today with Solana you are able to configure essentially any blockchain's address and have it attached to your ENS name. So ENS is actually less hyper Ethereum-centric as it might seem. But in the end, it's our belief that Ethereum is here to stay, whether or not other platforms continue to see growth. That's secondary that we think that Ethereum is here to stay and therefore, you know, building a profile on Ethereum is, you know, the most conservative long term centric place to do it.
The second question is, as far as like, you know, how decentralized is this? What's nice about ENS and this whole concept of Ethereum as a login is, again, it puts the control in your hands, and whether or not a third party application is actually decentralized or neutral, etc. That's up to them. And you as a user can choose to use that platform or not. So OpenSea definitely has taken a strong approach with, you know, DMCA takedowns and I guess, you know, moderating the content on OpenSea, but in no way does that actually take away from the power you have as an ENS user?
So yeah the data on your ENS name is actually decentralized and immutable, so what you can do is even, you can configure your ENS name and actually destroy the ability for that data to ever be updated into the future if you'd like, right? So what that actually means is that you can kind of like set it in stone and truly make it, you know, unalterable if you so like. There's a number of these platforms and there, you know, OpenSea also has their own profile system, right. They have their own username system and their own bio system. So I don't know if they're the best example of a compatible platform with this portable profile concept. I'd say like Mirror and Uniswap are better examples of applications that, you know, are more tightly integrated with this idea of a portable profile.
Joe:
Can you actually explain Mirror a little bit? And so, I mean, you know, we're not even talking about Rainbow right now, but I feel like, because the idea is that you want to be someone's entryway into this sort of decentralized… Do you like the term Web 3.0? I forget.
Mike:
You know, I think the term Web 3.0 was a brilliant idea. I don't have any issues with it. I think it's fine. Honestly, it's pragmatic, you know, I think that perhaps to a certain demographic, certain nomenclature maybe has been tainted right? By bad preconceptions about, you know, use cases etc. Like is crypto just for drugs and terrorists or whatever. And that's, you know, obviously a poor framing because that's just not the reality. So Web 3.0 is nice in that regard.
Joe:
So what are we gonna do with Web 3.0? Cause like, okay, I'm aware of Mirror and it kind of seems like a little bit like Medium or Substack, but with crypto, but you know, Medium and Substack seem to work well. And people are making money and finding ways to get paid and not have to be on, you know, work for some major news operation. What are we gonna get out of Web 3.0?
Mike:
So, I mean, it's a couple things. Right now, Web 3.0 is about having fun. It's about having fun the same way that playing around on the early internet was very fun. It really sparks your curiosity and it, and it kind of, yeah. Right now Web 3.0 is about like remixing and having fun. Now broadly, I'd say the big difference is the ability for content creators to monetize directly with their audience in a super streamlined and undisturbed way. As far as like there's no middlemen. What is Mirror? Mirror is like a content platform. It's similar to Medium. In the beginning, it was essentially kind of gated, where it wasn't open to everybody. And it was instead something that you had to use tokens to vote on which writers, you know, were able to actually write on the platform. So I think that, I don't know, Web 3.0, I'd say it's kind of this like fun living kind of like democratic experiment in a lot of ways. So it's as a user, you're able to kind of, it feels like you're participating in every step of the way.
Tracy:
Can I ask another slightly technical question? Just going back to the notion of identity and, you know, digital assets, which are yours and tie to your wallet. My understanding is that you own the token, right? So you own basically a database entry that is somehow connected to a JPEG or somehow connected to your identity. How do you link, like how do you actually link those two such that they're immutable and incontrovertible without having a third party have to do it? So, you know, if I buy, I don't know, one of those like Ape NFTs, I know it's an Ape NFT because it was listed on OpenSea or whatever. But once I own the data entry, what actually proves that it goes to that particular JPEG?
Mike:
Let me think. There's two approaches to NFTs and the way that the data is actually stored. So there's one path in which the content itself, right, whatever the graphic or media is, so that can actually be stored directly on chain using SVGs. So, you know, SVG as like an image format, you know, it's similar to PNGs except it's like lossless. So examples of NFTs that are completely on chain with SVGs are things like Loot or Blitmaps, you know, Avastars and that's ideal because those are the most immutable and the most permanent. The other path for storing NFT data is essentially keeping a record on Ethereum that points to the third party location of where that NFT data is stored. Right? So, you know, for example, CryptoKitties, one of the original NFTs. The data for the CryptoKitties images are actually being stored on something similar to Amazon web services.
Now that might seem problematic. But in fact, there's actually a number of ways that that's really not that problematic. So say the CryptoKitties community, you know, so they all love the kitties. Everyone is obsessed with the kitties. If Dapper Labs, the creator of CryptoKitties went out of business tomorrow and stopped paying their AWS bills, the community itself could easily recreate the entire thing. Meaning as long as one person or a couple of people have essentially like, you know, mirrored, or, you know, archived all of the images and the associated token IDs that they're matched with. It'd be pretty trivial for the community to like reboot the storage of that media type, right. So, yeah, I think that as far as like the permanence of that data, that's something that people are very, very interested in and there's a number of, you know, novel improvements that people are working on right now. You know, so it's like, it's an ongoing kind of like R&D effort.
Tracy:
So you just mentioned CryptoKitties, which reminded me of gas fees on Ethereum because I remember back in the olden days CryptoKitties used to like clog up the entire chain and this is still an ongoing issue for anyone who's actually doing stuff on DeFi, or trading. And you know, you might put in a trade or you might say that you wanna buy something and then suddenly your gas fee goes up and that's not much fun for everyone. So I'm wondering, given that your goal is basically to create an enjoyable wallet and to make the internet fun once again, how much of an impediment is the gas fee issue?
Mike:
Yeah, it definitely sucks how expensive gas is these days. So it is an impediment. Meaning, you know, if everyone in the world used Ethereum today, it'd be bad, right? So it's almost like it is inherently not ready for everybody. There are a number of solutions that are very exciting that we think, you know, will largely solve that problem, you know, and the timelines on those things are anything from six months to a year and a half. Right. In the meantime though, we really think that it's okay that, you know, gas is expensive and we largely view this as perhaps a little bit of like a luxury experiment, right. That this is really like, this is experimental stuff. Maybe it's a little bit of a luxury good as far as like the affordability of playing around with these things.
It's our strategy to really focus on creating the most unbounded featureful product, kind of at the expense of the affordability. And the reason why is because once these technologies come along that allow Ethereum to scale more affordably, our product will be able to easily adopt those things. Right. Whereas if we focused exclusively on making gas fees cheaper in Rainbow, it would actually mean that Rainbow would have an extremely, you know, small subset of its current features. Because only so many things actually work on those, you know, layer twos, etc. Interesting. So we’re of the belief that it's okay that, you know, gas is a little expensive and that we would rather have yeah, like as many cool little things to do in Rainbow as possible, you know? And if that potentially limits its immediate user base, we think that's okay. We've been here for years. Honestly, it's blown my mind, the interest that Rainbow has gotten over the last year. We wouldn't have expected this, you know, level of adoption to have happened so soon. So honestly, if anything, yeah, like we're excited and this is going, you know, way better than we thought. So the gas fees, you know, they'll go down. We're sure.
Joe:
So I have a question about NFTs. So like I'm a boomer obviously, and by and large, when I look at like various NFT projects, I guess in some sense, the idea of like buying into like, I don't know, some collection of art and then having like a gateway to a Discord where maybe I could talk to people or do stuff with them. I guess maybe it kind of seems cool in theory, but in practice, I have to say none of it appeals to me. And I'm not an NFT hater and I'm not like, oh, I'm just gonna like right click and save that. Like I get, okay, you own this. But like, I don't care about the apes. I don't care about the kitties. It's not my thing. What is gonna be like a type of NFT thing that, well, what am I gonna like? When's there gonna be something that sort of appeals to normies like myself?
Mike:
So I think that, yeah, NFTs it's either you kind of get them or you don't. I think that, well, Joe, are you a collector of anything, I guess? Do you identify as a collector?
Joe:
No, I guess that's the thing.
Mike:
Yeah. So I think that…
Joe:
But I like the idea, when people talk about like a community or it's like, oh, you buy this and you're part of some scene, I guess like, you know, oh, the apes, like to hang out with each other IRL.I guess I kind of get that in theory. You know, they're not my scene. That's fine. It's a different scene. But like, you know, I don't hate the idea of like a scene per se or like buying into some community. I just haven't seen anything that looks very fun to me.
Mike:
Yeah. I think that NFTs are just like crypto in general, which I find to be an asset that almost comes with that scene built-in, right? Like from the beginning, crypto assets tend to kind of evoke almost a religious zeal from people, right. Where it's like, you've bought into this thing and you have this vision for the future of that thing. And it, you know, it comes with it ideology, it comes with it, whatever belief system. And I think that NFTs are largely similar to that. NFTs will be a part of people's lives, whether they realize it or not in the sense that, you know, the ENS names that we were talking about before, you know, those are actually NFTs. That’s how they functionally work is that they are NFTs. You know, whether or not Joe you'll be collecting cartoons, who cares?
I think that there's other things you can do with NFTs as well, purely from a functional perspective. For example, Rainbow’s interested in potentially doing, you know, a KYC NFT, right, where essentially once you've been KYCed, you know, to access our fiat onramp, we could issue an NFT that says, Hey, this is a real human who has gone through the KYC process. And third parties could use that token, or the existence of it, for example, you know, to unlock further functionality in their app. Right. So you might have some feature in your app and you really don't want it to be botted, right. You don't want it to be like, you know, someone in an automated way to take advantage of it. And you could use the KYC NFT to, to only let you know humans through. That whole concept was really, you know, pioneered by this company Wire a few years ago, but no one ran with it. NFT is, yeah, you really have to be a collector of something to really get them, I think, or at least in the current trends.
Joe:
So what's the deal. Are people really paying a $105,000 for a pair of socks?
Mike:
Yeah. I mean, people are paying a lot of money these days for the Unisocks..
Joe:
Yeah. Could you explain that? Why is the price of Unisocks, what is it and why is it $105,000 for a pair of socks? If I’m reading this right.
Mike:
Yeah, so Unisocks are somewhat similar to NFTs and really they’re collectibles. Really that's what an NFT is. And that's what Unisocks are. Unisocks are instead what's called an ERC20 token, so they're more of like, you know, a currency than an NFT is. But yeah, what Uniscocks are, was this really silly experiment done by the Uniswap team back in 2019, as a demonstration of the Uniswap protocol. So what Unisocks are is basically like merch for Uniswap the, the company. It’s branded socks. And what they did was they created 500 pairs of socks and then 500 socks tokens, and put them on Uniswap, which is a decentralized exchange. Then anyone in the world can buy and trade the socks token. And at any time you can take one full socks token and redeem it, meaning it gets burned, and then the Uniswap team will mail you a pair of the socks.
So that whole system ends up with something looking like, kind of, it essentially creates something close to Yeezys, right. Or kind of like Supreme, where you have this limited edition run product that, you know, it's like, yeah, it's like, you know, memorabilia, but what's cool about Unisocks is instead of, you know, buying, Yeezys and then sitting on them and hoping that the price appreciates and then like having to mail the physical box, what's nice with Unisocks is you can just trade the token back and forth. You know, if you're there to purely speculate on the price of that thing, instead of having to custody the box, you can just trade the token back and forth and the box sits, you know, where it is. Right. So it's a really interesting experiment in kind of like bringing markets or making markets more efficient, in, you know, non-traditional markets. I think the closest analogy to Unisocks is like high-end sneakers and that whole culture. You know, it's, it's something that crypto OG is like, you know, used as a status symbol, I guess.
Tracy:
Yeah. So just on this note, I saw a really great description of NFTs today, and I wish I could remember where it was from, but I've forgotten. But the basic argument was that like forever, or like throughout all of history, there have been rich people who have a lot of money that they can spend on whatever they want. And traditionally, those things that they've been buying have been status symbols, like, I don't know, watches or sneakers or fancy clothes or bags or whatever. And now there's a whole different class of people who've made a lot of money out of the crypto space. And for them, the status symbol is now NFTs. Like, that's the thing that shows that you know who you are and how much money you've made. And it's basically sort of like digital bragging rights for nerds. Does that make sense?
Mike:
Yeah, very much. It's similar to, I don't know, it's like you meet a hipster and they're like, yeah, I liked that band five years ago. Right. And it's like, if you own some of these NFTs and you've had them for years, I mean, you could have bought crypto punks a few years ago for like a hundred dollars. And they're now I don't even know, like 60 ETH or something. Like Joe I'm sitting, you know, my day is mostly sitting on Twitter. And, you know, how do you express yourself on Twitter and in these digital places and NFTs are a really great way to do that. I don't exclusively tie them to like wealth or status. I think of it more as self-expression to a degree, but yeah. I mean, I think honestly that they're just like fun collectibles, you know, some people collect anime dolls or, you know, baseball cards, like whatever. And, yeah, NFTs just like are a new thing.
Joe:
So speaking of NFTs, and this actually relates to Tracy's question about, you know, will Ethereum be the chain that wins out. Literally while we were recording this episode, I see that former first lady Melania Trump is launching an NFT project, but it's on the Solana blockchain. And also I saw last night, Michael Jordan and his son, they're also launching some sort of like fan experience NFT thing on the Solana blockchain. And I guess temporarily, at least, you know, you mentioned like gas fees on Ethereum, like you think it'll be solved, but temporarily other chains like Solana are much cheaper. And furthermore, I think if you are like, just a Jordan fan or a Melania Trump fan, you probably don't care. You might not be that much interested in like, you know, various aspects of decentralization and other pluses or minuses. You just want to have a cheap way to buy something from a celebrity that you like. How much of a threat is like, you know, all these people are just like, yeah, let's just put it on the cheap chain? How do you think about like that competition and the sort of threat that poses to Ethereum as the scaling and as the layer two solutions, you know, they're still not really built or widely available yet.
Mike:
There has been some interesting traction happening over in the world of Solana. One of the things to consider when assessing one of these chains is simply the ecosystem itself. One of the biggest values about, you know, Web 3.0., so it's like I have an Ethereum wallet. The nice thing about an Ethereum wallet is that it's compatible with so many different things. It's like all of the assets within it are interoperable with each other and all of the applications, you know, targeting Ethereum can interact with those assets. And if most of your assets are over here in Ethereum, but then you wanted to go buy that Michael Jordan NFT over on Solana that actually creates this like weird fragmentation where now it's like you have assets over there, assets over here that are incompatible with each other. I think that there's an appeal right now for these systems that have cheaper gas fees. But, you know, it's not truly just about decentralization. That's not the like, you know, the only trade off, there's like the reliability aspect as well. And you have to think like, you know, which one of these systems will definitely exist in five or 10 years from now?
Joe:
I guess, as you sort of applied also the interoperability so that in theory you want different NFTs on the same chain to create the possibility that somehow they could interact with each other or work. And so there's sort of like a network effect.
Mike:
Yeah exactly. There's a network effect there. And I'm not a crazy maximalist or anything, if anything, I honestly kind of consider myself like, you know, approach this stuff pretty conservatively. When we started Rainbow, people were trying to pay us to integrate various chains, right? Like, why don't you support EOS? Why don't you support Tezos etc.? And it would've been a bad idea to have supported those things out of the gate because, you know, it comes to the detriment of the product, right? It's just like additional scope that you have to add. It takes away from your focus. There's other chains that are cheaper, that are more compatible with Ethereum, right. That actually that like, you know, respect the interoperability. So things like Polygon, things Arbitrum, etc. And we think that that's where a lot of this more like, you know, low value type of activity is going to happen.
And when I say low value, all I mean is like, you know, low dollar amount, right. Where, you know, if you're paying half a million dollars for a crypto punk, the transaction fee is really not something you're thinking about. Whereas if you're talking about, you know, $25 NFTs from a major brand that you are a fan of, you know, that activity, we see that more likely happening on one of these two gains with cheaper fees. But yeah. I mean, we're just really big believers in the network effects of Ethereum, which is something that I feel like is under discussed. Yeah. I mean, all these other chains like Solana are really starting their network effects from zero, which is, you know, totally fine. It's just that it's gonna take a lot for these other competing platforms to really build up the same level of ecosystem that Ethereum has, right?
Like how many Solana wallets are there? Well, in the world of Ethereum, it's like as a user, you can choose from 10 wallets. You know, obviously Rainbow's number one, but you actually have a number of pretty solid alternatives. Whereas some of these other chains, you really don't have anything to choose from right? There might only be one platform for, you know, buying and selling NFTs. Whereas at Ethereum there's like already a competitive, you know, ecosystem. So yeah. I don't know. I think that like big brands are attracted to some of these other chains as well because of their ability to handhold them through the experience.
Tracy:
So you mentioned before the amount of interest that Rainbow has gotten, and I'm curious how much interest you've gotten from venture capital and potential funders. Because it just feels as if there is so much money pouring into the space right now, and it almost feels like people are keen to buy anything related to the crypto market. You know, regardless of how well it's designed or how usable it is. So has that been your experience?
Mike:
Yeah. They are very thirsty right now. There's been a lot of attention. I think that all of a sudden this year, people who hadn't been paying attention realized that the stuff is real and not going away. You know, people are, you know, I got VCs in my DMs, you know, pretending like they're willing to quit their job to come join the Rainbow team, but then, you know, halfway through the conversation, they switch it up and they're like, Hey, actually, nah, can we invest? And I'm like, what are you talking about? So yeah. I mean, there's a lot of VC attention.
What's crazy though, is that Rainbow in particular, we had very little interest from kind of the crypto OG money, right? Like the big crypto funds really didn't understand Rainbow and broadly have like misunderstood the wallet product and the wallet opportunity. So Rainbow's raised money mostly from consumer social investors. But yeah, I mean the space is definitely heating up. People are trying to get us to raise more money right now. We're not interested. People are, you know, are trying to acquire us right now. We're not interested, but yeah. I mean, it's definitely a good time to raise money, I'd say so.
Joe:
Can we just go on this further? I think it's really interesting what you said about VCs who want to invest pretend that they want to be employees of Rainbow and then they change the conversation. Is this like a sort of broader phenomenon where startups or projects in the crypto space find themselves more starved for labor than they are capital ergo the way to get your foot in the doors to pretend to be the worker?
Mike:
Honestly, I think that this experience is pretty unique to me because I've kind of okay, you know, part of my recruiting tactics has been to really turn it into a meme. I think that that's kind of what's happening here is. I do think that labor is the bottleneck and not capital. Honestly, there is an abundance of capital. Most of it is undifferentiated capital. Yeah, from, you know, the labor side of things, t here is a huge talent drought. But more and more people are jumping ship from FAANG and, you know, joining this space, which is really exciting. But yeah, I think that I kind of asked for this whole, like, you know, VC trickster games, I kind of brought that upon myself with my recruiting memes.
Tracy:
I was gonna ask when you tweeted that you were looking for like CIA agents with psychological warfare experience because you want them to be able to create high potency memes. How serious is that?
Mike:
I mean, I don't know. I heard that Reality Winner is outta jail or whatever so, you know, if she's looking for a job she can hit me up. No, I mean, listen, I think that memes are fundamental to crypto. I think that it's honestly what keeps people involved is just like, Crypto Twitter is one of the funniest places and yeah. I mean, we have somebody on the team today whose title, you know, it's like our official job offer to them. Their title is memes, etc. Right? So it's like memes are a super vital part of building in crypto. It's essentially our flavor of marketing, whether, you know, any CIA agent is, you know, looking to leave the agency for a career change. I mean, we're more than happy to talk. Memes are a skill, you have to be good. And some people out there are playing some real good 4D chess with the memes and, you know, we respect that. Yes. If you've got the skills.
Joe:
So I have two questions, one is very short and one's a little more substantive. The very short one is, are you sitting still on TheStalwart.eth and TracyAlloway.eth and do you have those?
Mike:
I have both of those…
Tracy:
Oh yeah. You said you would send it to me.
Mike:
You know, Tracy, I gotta get my assistant to get that over it to you. I'm so sorry. But yes, I have been keeping those safe for you guys for a long time. I knew that someday you would want them.
Joe:
Thank you.
Tracy:
Thank you, I do want mine.
Joe:
And I do too. The other more substantive question is, you know, there's this other question about Web 3.0 and I've seen people debate it, which is like whether all of the services that we sort of think about with respect to Web 2.0 will eventually be like on a blockchain, like Uber on a blockchain where it's a DAO and there's a token and no company, or Airbnb with a token, etc. Is that something that you envision?
Mike:
I think in the far off future that it's definitely, you know, an inevitability. I think that the biggest obstacle there is actually regulation. Personally, I think that that stuff is a little bit of a pipe dream today for two reasons. One is technical and the second is regulatory. I think that there's a lot of improvements needed to the tooling and infrastructure available to DAOs to actually enable that, like using a DAO today is pretty clunky and would not scale to this size of like, you know, imagine if every Uber driver wanted to vote on some sort of company policy today. That would be really difficult to do via a DAO. But I think that there's merits to the idea of new corporate structures enabled by tokens. That's honestly how I've thought about this from the beginning, right. Is like this technology can honestly enable like a new Renaissance in capitalism where there's entirely new corporate structures available to everybody.
So whether you're a small business, whether you're trying to create some sort of like, you know, large network, like Uber, there's advantages to the flexibility of, it's like remixing your corporate structure with a click of a button, right? Doing that today is incredibly difficult. You know, changing around how, you know, your corporate structure works today is difficult. It requires lawyers. And honestly, if you're like a small all business, you don't really know how to do that. So I think that that is definitely within our future, but I think that, you know, our politicians don't really know how to use email today. So I think that in reality, there needs to be, it's gonna take some time for regulatory clarity to happen on kind of like real world Dao experiments.
Joe:
Mike, that was awesome. That was really fun. I'm looking forward to us getting our .eth handles. And thank you for coming on Odd Lots.
Tracy:
Thanks, Mike. That was fun.
Mike:
Thank you. Have a good morning. Gm.
Joe:
You know, Tracy, I really liked that conversation. I was thinking about our recent episode that we did with Matt Huang of Paradigm. And I do kind of think that the more compelling crypto visions that you hear are sort of, the parallels that I see is like organic and unique to crypto. In other words, like the models where it's like, oh, this is going to replace X or Y or, you know, I don't know, like DeFi, like, I don't know whether that's what's gonna happen there, but the idea of just things that are totally new to crypto, like some sort of token-gated community, even though there's not any community that I really wanna be part of that I've seen, or something related to interesting art with NFT is like, I have to say, the idea of like new stuff seems compelling to me even if I don't know what it is.
Tracy:
Yeah. I think that's right. And also Mike's idea of like, just making the internet more fun once again. I think that's a big part of it because I think there are a lot of people who are maybe in their thirties or late twenties now who can remember what it was like, you know, when they first started going online maybe they were on something like AOL or Netscape or whatever. And it was genuinely a fun time. And you were discovering new things, chatting with new people.
Joe:
I don’t think people in their twenties remember AOL.
Tracy:
Oh, okay. I don't know. I'm getting my like timeline mixed up. I remember AOL, but anyway, I think what's nice about Mike's approach and others like him is they're not taking it so seriously as some of the maximalists who are like, we're creating a brand new financial system with its own ideology. This is about actually creating things that people want to use.
Joe:
Yeah. And, you know, I loved his point in the beginning about the difference between the iPhone and the Windows phone. You know, it's like the first iPhone, there wasn't even an app store at the time, but I think everybody sort of intuitively recognized that because of this new highly usable phone, that it would like open up these new possibilities, like it would create new things. And so I sort of see what he is saying is like, if you get design right and if you create just a better experience, then maybe like these new things that people want to do that aren't the same as just like, oh, we're like shrinking a spreadsheet with the Windows phone. Like that will open it up in some way.
Tracy:
Yeah. Or just being able to see where your DeFi Ethereum has got to, that would be useful.
Joe:
And decentralized identity. Like the idea of, you know, we both played around with Uniswap, the idea of being able to log into an app with a wallet as opposed to I'm gonna like set up my name and password and mother's maiden name and all that stuff. The idea of just being able to do that with a name or .eth handle or a wallet is like pretty interesting and potentially seems powerful. And I could see that actually appealing to a lot of people.
Tracy:
Yeah. I agree. All right. Well that was a fun conversation. So shall we leave it there?
Joe:
Yeah, that was a good one. Let's leave it there.