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My guest today is Jesse Walton, the founder of Var., an early stage venture firm focused on Krypto networks and platforms building the ownership economy. With all the hype surrounding NPT's and given Jesse's background in the music industry and his focus on the creator and ownership economy, he's the perfect person to teach us about the future of NPT's. We discuss the basics of one of the NFTE is what new creative paradigms they may unlock and where we are in the NFTE hype cycle.

This episode is the first in what will likely become its own show that we are calling Prima's.

Our goal for Prima's is to bring investors and operators from a zero to a seven understanding of a topic, concept or industry. The goal here is for the education around these topics to be fast and entertaining. I hope you enjoy this discussion with Jesse Walden and hope with the first of many primaries to come.

Our mission with these episodes is to provide access to the best ideas and people in business and investing, we will soon be significantly expanding the scope of this effort to make it possible. At Colossus, we're expanding the team and hiring to critical early roles. The first position will be our lead mobile software developer. This person will lead the development of our mobile applications, which will change how people learn together. The second position will be our lead designer. Because the existing team lacks U.S. UI design experience, this person will have a blank slate to creatively design new applications from the ground up.

To learn more about both roles, visit join Colossus dot com forward slash careers now onto the show. So, Jesse, I think just to level set, it's probably appropriate to begin with just a simple explanation or definition of an NFTE from your standpoint, and then we're going to jump a little bit backwards in time to your origins in the music industry to help the audience understand this interesting new concept.

I think a really simple way to define and left is are as a file or a file type that lives on the block chain. You have MP three JPEG. These are files that live on your phone or your computer. And if these are new file type a digital media file that lives on the block chain, and that's technically not correct, but it's a good metaphor for what we're describing. The idea is when you upload a file to the block chain, it becomes a token that can't be meddled with, just like Bitcoin is a digital token that is provably yours, independent of any third party.

So in a nutshell, anarchy is make it possible to own a piece of digital media in the same way that you are able to own a digital currency like Bitcoin. Maybe click one step deeper on the fungible piece of NFTE. So if I think about Bitcoin, I guess it's not perfectly fungible because you could trace each individual Bitcoin back through time, but one is sort of like another, right? It's worth the same amount. There's not a difference between one versus the other.

NFTE is quite different than that. Just draw that distinction one click further and how a JPEG is so different, a pixel is worth a thousand words.

What I mean by that is one pixel differentiator in a jpeg makes that image unique from any other dollar bills in your wallet or fungible for one another. But an image, a video or song, these are sort of like unique ideas that can come to be represented as unique tokens. So what we're talking about is taking unique digital things and making them individually ownable on the Internet for the first time without any third party. Fungible tokens benefit from auctions because the technical properties of auctions and force their scarcity.

The fixed supply of bitcoin well with NFTE is you can reduce that fixed apply to one on one. A lot of the attention and NFTE has been around visual art, whether it's an artist like people or NBA top shot or something that you can see on your screen and now is scarce, that can't be replicated, at least in the meaningful sense for the first time. But I actually think a really interesting area for you and I to draw the line here is around music.

You started your career in and around music worked at Spotify for a time. I just think this is a great way to understand digital media. Maybe begin by just describing the importance of your background in music, what it taught you about when there's a song, let's just take a unit of a song. Lady Gaga creates a song or something, what the value chain looks like for a song and who owns the rights to that thing? Who profits from it, why?

Music is sort of a fun way to explain what this might all unlock.

I think before we get into all the complexities of music royalties, first offer up just a bit of context is how I came to be involved in the music industry in the first place. And that was through piracy. Like a lot of teenagers in the early 2000s, I was, of course, downloading music, but I was also part of a much smaller cohort of people who were uploading a lot of the files that everyone else was downloading. And through that came face to face with the way media was going to come to propagate on the Internet before YouTube existed.

Before Spotify existed, there were these topsides FTP servers that were sort of limited in terms of who could access. And on those top sites, you have every piece of media, every album, every video game, TV show, movie, etc. And it was very clear that this was the future of all media. It was that it was just going to all be available. So this was early two thousands. What happened shortly thereafter was we got platforms, social media platforms like YouTube and Facebook and Instagram and so on came along.

And they solve this critical problem that piracy had, which was piracy, did not have any mechanism for the participants, the people creating the files and disturbing them to communicate with one another in the protocol or in the BitTorrent protocol. That was all sort of happening ad hoc. And what these social media platforms came along and did as they bundled the ability to distribute media, post a photo to Facebook, post a video of YouTube with an identity which is their profile and the ability to communicate with fans and build an audience.

What then happened, of course, is those platforms came to sort of dominate the relationship that creators have with their audiences. Oftentimes, those platforms were at odds with the legacy distributors of media. And there's a whole saga there where the music industry is suing all these platforms. Spotify is the one who got it through all of that to say that the platforms today dominate that relationship. And NPIs, I think, are this new way of distributing media that inverts that relationship that gives the creators and their audiences the means to.

Correspond and transact directly with one another. So now getting back to your question on what are the implications for music? Well, it's interesting because music is probably the most complicated type of media when it comes to rights management in music. There's rights to the song, a recording, and then a song can be recorded by 10 different artists. So separately, there's also the rights to the underlying composition. Those are the publishing rights. So you have recording rights and publishing rights.

And each of these rights have different rules of different countries and different organizational bodies that administer those royalties. And it's just this complicated mess. It's such a mess, in fact, that a platform like Spotify, which is global, often doesn't know who to pay royalties to for songs on their platform because the information is just not available. It's siloed in all these databases that are maintained nationally in different countries. It's been this major problem for artists to monetize directly because of the complexity of these various copyrights.

Artists have had to depend on third parties, whether that's the royalty administration bodies or the platforms that distribute their music or both to get the money that's due to them. And if you just kind of explode this whole model, because now it's very easy for a creator to go on Twitter and say, hey, here's my address and I'm publishing my work as an adult and suddenly the whole world can see, hey, that's their thing and I can buy it directly from them.

And we just saw Jack do that with a tweet. Jack was like, here's my original tweet, and here it is, isn't NFTE and anyone can bid on it. That's an example of how all the complexity of rights management in music just kind of gets exploited by unappeased.

I want to make sure by this back to you a little bit and make sure I understand and really thought about the interesting angle that what the platforms did was bundle the identity of the creator with their creations and by doing that, have a legitimate direct path to their audience. Build this relationship directly with your audience and it's clear that you produced X, Y or Z, but that in that relationship, the platform itself is still capturing an enormous amount of the value of not the vast majority of the value.

I think YouTube pays out a ton of money each year, but also makes a lot of money each year. Right. It sounds like what you're saying is that the net represents an opportunity for media creators, for artists. We'll call them, generally speaking, to keep a higher percent of the value that they are creating.

Is that fair?

I think that's the bottom line of it. Again, it's dependent on the idea that the creator that their identity and their media can be discovered and interacted with independent of any third party platform in the same way your Bitcoin is yours without having to depend on any third party to verify that.

Let's take an example of a piece of media where the artist or the creator is being paid in proportion to the number of times that media is consumed. So simply speaking on YouTube, if you've got a billion views of a video, you're going to get paid more than a million views or something like this. For the most part, that's a cut of ad revenue that's generated against that underlying piece of media. What does that look like in the NFTE world?

So I could sell a song if I'm Lady Gaga, perhaps I sell that song for the collector that wants to own the official original copy of it for a ton of money. How am I, in the same way going to be tied to the popularity of my creation in the same way that the platforms enabled?

You sort of have to suspend your disbelief and sort of break with the ad based model of web to in order to understand how this might come to pass and what three or crypto. So most platforms are ad driven monetization and there are certainly economies of scale there, like you want to be on YouTube because they have the most advertisers and the most eyeballs you can make the most money there. NFTE is enable you to monetize directly with your super fans. Someone who really wants to patronise your work can do so and pay a ton of money to you directly and probably more money than you might ever make.

Even with a billion user listeners on Spotify. That's the day one incentive for creators to try out this new marketplace. But you have to remember these assets, these entities are permission, mostly programmable. So because they live on the block chain, anyone can build an experience that you can bring your NFTE to. For anyone who is familiar with Bitcoin or any other cryptocurrency, this should be familiar because if you have Bitcoin in a wallet you control, you can take your Bitcoin and bring it to Coinbase or you can bring it to and so you can bring it to any other exchange.

The same is true of an NFTE. Once it's in your wallet, you can bring it to any third party application. And so developers can build all kinds of new, exciting experiences to attract you to come and bring your stuff there. What I think we might start to see that might. Resemble royalty or ad based revenues that you have in Web, too, is that you might see applications that pay some portion of the revenue that they're generating back to the NFTE holder for the reuse of that asset in the context that they're building today.

That doesn't exist. By and large. But I think that's where we may be heading. And what's cool is all of these, like new revenue streams or new rotifers, can be sort of programmatically administered in a transparent way. Compare that to the way copyright is administered for music today, where it's very opaque and goes through 10 different middlemen. Now, all of that is transparent and automated. And as a result, hopefully the creators and IP owners will be able to retain more of the value.

It's a really neat idea and I'd love to dream of an example just to make sure I understand. So what would be the motivation of a consumer? So let's say there's some cool app that gets built and it's an experience that's built and not owned by somebody else. Is part of that experience from the consumer standpoint, let's say it's a song or something visual, whatever it might be, doesn't really matter what is the incentive to pay more to see the quote unquote original version of that thing versus just a normal copy?

Like, I don't really care if I'm listening to the original song I like. I just want to hear the song I like talk me through that piece of this because that's still not clicking for me.

It's important to note that owning the original may not be for everyone. Like you said, you're totally fine just listening to the song. But somewhere out there there's a super fan who really wants to own the original, like the sort of infamous story of Martin Shkreli buying the one of one Yutang album for million dollars. That's one example. There's also the example of art in museums. Anyone can go to the museum and see the painting for free, or you can look at a postcard of the painting or look it up in an art book.

But someone wants to own the original painting. It's true that physical work is desirable because you can put it up on your wall or whatever, but soon we're going to see experiences that allow you to showcase your collection anywhere on the Internet where you get attribution for being the owner. So that little placard in the museum that shows here's the painting title here is the owner was contributed by so-and-so. And so that's going to be everywhere on the Internet. So there's social status involved in being the owner of a popular idea, a popular image, video or song.

And I would argue that the value of an NFTE is in fact directly correlated with the number of times the image, the video, the song has been shared. So the more viral it is, the more value there is in owning the original. And to date, I think empirically that's what's driven the markets for an artist to grow so quickly, a platform for our marketplace for selling enough is sold. Nyan Cat, which is a famous original Internet meme for six hundred thousand dollars, because that idea is so viral, such an important part of the Internet consciousness, someone wanted to be the owner of the canonical instance of it.

Maybe a way of thinking about this is just that right now I could be the biggest fan ever of a certain recording artist and my payment, quote unquote to them is kind of limited. Like I'm paying them the same per stream as anybody else's. And maybe I go to a concert or two, so I pay them a bit more. But it's potentially orders of magnitude more. It's very hard for that to be a thing. So what you're saying is for artists, what this does is unlock the demand for them or their creation in a way that just hasn't been possible before.

That's right. Yeah. And I sometimes refer to this idea as patronage plus. So on the Internet today, you can be a patron of a creator using something like patriation or some stack where you're paying a subscription to support their work. In a sense, you're renting access to whatever they put behind that paywall. What not to do is they allow for the content that the creator is making to be open to anyone, but allow for patrons who really want to support their work to do so.

And this is the plus part of patronage, plus the user with the benefit of potentially profiting in the future. Because when you buy and then if you actually own some digital property that can be transferred, you can't do that with your subscription to some or patron. But when you buy and you're buying digital property, even if you don't plan to resell, there's this vague idea that maybe in the future someone else will want to buy this. Maybe the creator becomes more popular.

I have one of their early works. So this plus is an incentive to become a patron in the first place. So I think a lot of the incentive to participate in NFTE marketplaces is the idea that, one, you can support the creators whose work you admire and that's no different from Web to. But there's a much stronger incentive to do so because you actually own something and you can benefit potentially from. The resale of that ownership value, it's really fascinating and it makes me think of this idea, I think the term used is programmable media, just an entirely new concept, kind of like programmable money.

Your value is one of the original block chain concepts. But it made me think of this idea that so intrigued me, which was let's say it's a visual artist that sells a painting. Part of the programming of that NFTE could be that when the painting changes hands in the future, the artist always gets some cut of the transaction. So even though they've given up their thing, maybe it becomes hyper valuable. The artist themselves could potentially in a programmatic way, be attached to the success or the popularity of that thing.

Can you talk through that concept and whether or not you find that to be key or interesting today?

That exists on a lot of NFTE marketplaces where you can programmatically specify a royalty rate that goes back to the artist or even back to the original collector in any resell event that happens in the future. And again, because this is all specified as code, it's administered automatically by the auction on which then of lives. Those are royalty streams that are flowing consistently back to whomever they're do. That's a fundamentally new thing where in the legacy media world, you're very much dependent on all these third parties to collect your royalties for you and they all take a cut.

So the artist is left with whatever fraction of the day. I think that's one early example of these assets taking on programmable utility for the creator, for the collector. But you're going to see all kinds of new, interesting ideas that people will program into these assets. One very popular idea in the world of DFI or decentralized finance is that every application, every marketplace, whether it's exchanging tokens or borrowing and lending crypto currencies, these are open permission marketplaces that anyone can build on top of.

And this concept will be familiar to anyone who is around an early web to we developers building on top of the Twitter API or building on top of the Facebook API. Those were platforms which had a lot of users. And if you wanted to get users for your app, you'd go and build on top of them. But of course, as those companies need to monetize, they shut off those APIs in Krypton and find you can build on top of any marketplace without fear of it getting shut down because these applications live on the block.

And as a result, we've seen what has come to be known as money, Legos or developer stacking these building blocks on top of each other. And as a result, innovation compounding really, really quickly. The same is going to happen with NFTE of fifty five applications. Our money, Legos and I think NFTE are like media Legos where royalties are one new application you can build on top of them, but another might be the ability to display your paintings or display.

Your NFTE is in a virtual world that some third party developer bill. This is all going to move very quickly because any developer can permission lesslie remix these assets and bring them into new context. Can we do just like a quick sidebar on the actual technical thing that is going on here? So we haven't said Ethereum yet. We haven't said the place where this is actually happening. You've mentioned some of the benefits, especially permission less building. We haven't mentioned any of the limitations file size or some of these things.

So just walk us through like the literal technical thing that is happening here. How is an NFTE, quote unquote, minted? What does that mean? Where does it live? Why is it secure, etc.?

Earlier said NFTE is like a file that you upload to the in. Now is an important opportunity to say that's not actually what's going on. What's actually happening in most cases is you're taking what's called a hash of your file. The hash is a fingerprint of the file and that hash is just a string of twenty four characters or so, and that's what lives on the block. So that's a very small piece of data. It's quite expensive to put data on chain.

That hash then points to the file somewhere else. Where is that. Well, it could live in a decentralized storage network like our with is a box and specifically built for file storage where you can look up the file based on its hash. The NFTE on the box is a pointer to the actual file which can live elsewhere. It can be replicated infinitely. A good way to think about what's technically happening is you're creating a unique ID on the block chain.

And by and large, this has been happening on a theory. The Ethereum Boeken and that unique ID is what is being bought, sold, traded is the token. And that unique idea has certain metadata hooked to it. Metadata could include who made it what it's about. You can put anything in there. A good example. This is the first lock in the bitcoin box chain. Satoshi put some metadata in, which was the headline Chancer on the Brink of Bailout for banks.

That's. Metadata in the first Bitcoin book, similarly, you can put arbitrary metadata into the box and associated with this unique ID, that is the file that you're uploading. Apologies for veering into the technical here, but I just think it's interesting and important in the same way that with Bitcoin, if you can demonstrate with your private key, I assume in this case that you own the public cache that is then pointed to the art. You can sort of take the original art and confirm it somehow.

How do you confirm that is the same way that it would work in Bitcoin and proof of work?

Yeah, exactly right. When you make a transaction in Bitcoin or a theory or any other cryptocurrency, what you're actually doing is you're signing a message with your keys and you're saying, I approve this message, please process it and send that message off to the bottom. And that message then gets put into a box. And now you have one Bitcoin and I have one more. And that transaction can be attributed back to you because your signatures on it, your cryptographic signature.

The same is true of an NFTE. When you mentioned NFTE, you're signing a message that says, here's my file, here's the hash of the file, it's mine. I'm signing it with my key and that lives on the box chain for anyone else to see. So it's very much like a painter signing their work in the corner. You can verify it's theirs by looking up their signature and preparing. If it's authentic, that can now all be done of programmatically with cryptographic keys.

So of course, that mandates that, you know, the creator's public address. So what you see happening often is as creators mint on these platforms, they say this is my public key. You can verify that the work is truly mine and authentic.

How do you think this will be for those that are the super fans or the super patrons, even we'll call them, that are going to be the ones delivering the most direct value from we'll call it the audience to the creator? Where will the creators all themselves aggregate? One of the beautiful things about all the big platforms out there is that I can be pretty confident, like if I'm interested in someone, they're probably on Twitter or they're probably on one of these places.

What will be the equivalent here for Discovery and how much will that then just be? History repeating that the aggregator somehow ends up extracting a lot of the value.

It's a little too early to call, but I'll offer some thoughts. So first off is it's important to come back to this idea touched on earlier where web to social platforms, they bundle your identity with your media and the distribution NFTE is undo that bundle. So now the media lives on the auction and any developer can build an interface to that media on top. A good analogy or a good way to think about it is the block chain is becoming this universal media library, on top of which developers are building all kinds of new applications and services.

So there are marketplaces like Open Sea, for example, looks at the auction and aggregates all of the media and puts it up for sale, eBay style. And you can bid on any piece of media on the Internet and then separate. There's other marketplaces that are more focused on primary issuance, like foundation. That's where artists come to meet their work and put it into the library. And there's also marketplace functionality to buy and sell there as well. But I think this idea of there being this universal media library means that developers can build on top of this universal media library and by default, the creators are there.

What that means is that we're going to see a lot more experimentation around the types of social media experiences that we can play with. Right now. Twitter is the only company that can play with the feed of content that we see on Twitter. And likewise for Facebook and Instagram. When you unbundle the content from the platform, anyone can sort of experiment with new ways to organize that information and new ways to present it, new ways for us to consume it.

This question, where are the creators going to be? They're going to be everywhere. I think the better question is where are the consumers going to be? And I think what the answer may be that it's going to be a lot more fragmented. There's going to be a lot more competition for consumer eyeballs and ultimately more competition for consumers is a really good thing for the Internet. This might just promote fragmentation and focus on niches. So someone's a huge NBA fan, top shots, plus the ten other media lefties that exist in that general space.

Someone could just build a really interesting consumer experience on top of all of those things and deliver just something that could never be delivered on Twitter or something like that.

That's right. One other thing I'll add to this is in the Web to world, I think there's a lot of things that haven't been built because this is going to fund them because it's like, well, hey, if you're going to compete with Twitter, you're going to get crushed. And we're not going to fund the one other interesting property of crypto that's sort of adjacent to what's happening with unappeased is the ability to pool value very easily. Right. You can send value in the same way you send an email.

What you're going to see is people funding the experiments or the experiences that they want around the media that. There's going to be a I think, a very long tail of consumer media applications built on top of this universal media library and then appears because the funding for them to exist will come from the people who want them to exist as opposed to having to come from disease. And critical to note, these may be very long tail and they may not be huge businesses, but they don't need to be so long as the people using them are members or patrons are happy to fund operations at cost.

If half of this is true, you have to think it's one of these friction reducing unlocks that tends to create an explosion of behavior, I'll call it. What this sounds like is sort of the ultimate scenario potentially for creators, for artists. With that in mind, I'm really curious to hear your thoughts on some of the most interesting things that you've seen very early on. Like I feel like probably three months ago no one had heard of NFTE, almost nobody now.

And really, truly incredible pace. Everyone's aware of these things all at once, kind of like crypto in twenty seventeen or something. So I'd just love to hear what experiments or versions of this have your attention most. Are you just thinking like, wow, is that creative or interesting use of this technology?

There's so much happening. And so let me preface first by saying we're definitely in hype cycle for NFTE is right. This is classic Carlota Perez technology financial hype cycles where the markets for these things have exploded really fast and there's going to be a correction. That said, the technology and the utility of this technology is very real and developers are going to keep developing it regardless of what the markets do. I'll start with that. And in terms of interesting experiments, there's just been an explosion on them.

We have very investors in a platform called Mirah, which is a community owned blogging platforms of think of like medium or sub stock, but where the users actually on the platform and what they've done is they've enabled writers to tokenized their essays. As F.D., there's a twist, which is they've then enabled writers to crowd fund ownership of their essay as an NFTE. So in effect, say you want to see an investigative journalist piece done on some esoteric topic that nobody's covering in the mainstream media.

You can now crowdfund get people from all over the world to send some crypto into Mirah, put a bounty out to get the journalists to read the piece. And in return for your patronage of making that work happen, you get a share of the NFTE that represents that piece. And again, what is the value in owning an essay? Well, imagine Marc Andreessen. It's time to build this canonical essay. Someone might want to be the proud owner of that artifact of history.

That's kind of interesting experiment where you're marrying crowdfunding to NFTE ownership. And I think that concept will be generalisable go beyond just essays, but potentially all kinds of media on the Internet can be crowd funded. And we're the crowd funders actually own a stake in the success of the work that's produced on the back of it. So again, it's like Kickstarter patron, but with this plus being, you actually own a piece of what you have to create. Then outside of the world of art and essays, there's collectibles, right?

There's Topshop, which is doing two hundred million dollars in volume in the last thirty days and that's just taking basketball cards. I used to be a collector as a kid, so it totally resonates with me and making them digital and by doing so, making them a whole lot more engaging and interactive. And again, because there's tons of experiences getting built around them, people building fantasy leagues around the assets we're collecting. So that's another category. And there's also more crypto native versions of these collectibles.

Instead of the NBA, there's stuff like crypto punks which are actually the first back in twenty seventeen. They were the first crypto collectible. These are little avatars which are limited in series and there's different types. Some are more valuable than others. There's crypto zombies. But essentially the behavior is you want to own a piece of the set of this limited edition collectible. So Beanie Babies, but digital age. So here's another one I talked to an artist manager, friend of mine from the music is they just did a big drop on Nifty Gateway, which is where a lot of the high value artwork is selling.

But they recognize the fact that on Nifty Gateway, where work is selling for hundreds of thousands of dollars, not all their fans can participate. What they did is they decided to mint a series of works. They sold some of the series and they took the others and they fractionalized ownership of them. So they took a non fungible one of one and turned it into fungible tokens. This is known in the finance world, the securitization. And then they gave the fractional ownership to the fans for free, just gave it away and said, hey, now you own a piece of this work, which is interesting because it's a strong loyalty or alignment incentive and you now feel like you're part of the club.

Another version of the same idea is people taking the list of NFTE owners, which is publicly accessible on the auction and saying. If you own one of my SFD, you can join a private group, chat with me, so access to the creator is another sort of interesting experiment. There's just so much happening and all of this is moving in a lightning clip. It's really hard for me to keep up even knee deep in it.

What about I'm going to call the category culture assets. I just think it's like an interesting way to put an umbrella over all essay's art, music, cetera. What about culture assets which are physical, the Mona Lisa.

Nineteen eighty. Something fancy French wine, valuable physical things which are created by artists, let's call it.

Is there a role for this technology mapping onto the physical world, do you think, in the full span of time?

Absolutely. I don't think that's going to happen any time soon. Reason being, the physical world has endpoints that are not connected to the boxing. Sure, you can tokenized a physical painting and say, hey, this token represents that physical painting and I can buy that token from you. But how do I know with certainty that I am now the true owner of that painting? There's still some connection to the physical world that has to be worked out. And now you're in the world of lawyers and traditional legal contracts.

There's this kind of dissonance between smart contracts and the idea that you can enforce rules as code, you can express ownership as code. There's dissonance between that and the way rules are enforced in the physical world, which is the legacy legal system. In the full span of time, I think the legacy legal system will come to interoperate with smart contracts on the walking. But right now that friction means the digital native world is just going to move out of 10x faster pace than the physical world.

How do you think?

We'll see. I'll call it legacy brands start to experiment here. So I was always fascinated by the artists and fortnight that hosted concerts. Travis Scott or whomever else are using this new place or new platform to meet their fans and do something valuable. And I'm thinking here about luxury brands, Gucci or Chanel or something like this. How do you think we'll see the old world players start to experiment with testing these waters? And have we seen that yet?

I was reading a headline this morning that Taco Bell minted a series of NFTE collectibles. To be honest, I don't know the details beyond that headline, but they're definitely experimenting. We know that digital goods, not NFTE, but just digital goods generally are multibillion dollar marketplace in virtual worlds like Fortnight, Roebuck's and others. And there are legacy brands playing there where, for example, you have fashion designers creating skins that you can put on your for a character and so on.

I think we'll start to see. I think these brands will recognize if you give your customers true digital ownership, where they can own digital assets in the same way they own a good person, a Gucci outfit can be resold, that there will be actually much more consumption that takes place because property rights are the foundation for a functioning market economy. Right. We haven't had that in the Web to world. Your items that you buy in a fortnight can be taken away from you.

And any time you can't take them with you outside of Fortinet and bring them somewhere else. Once you start to realize, hey, I bought this item, now I can bring it with me, I can reuse it somewhere else. I can wear it to any game that I want to be in or any virtual world. They're going to start to see a lot more value in digital items. And so the market will expand. That's the functioning market economy growing.

So I think brands will lean into that because they realize they can make more money. And I would zoom out to go beyond brands and just say, I think the reason enough teas are inevitable and will become the sort of port of entry for all Internet media is because everyone involved can make more money. The creators issuing the assets can make more money because it comes directly to them. The patrons who are buying the assets are the customers. Buying the assets can make more money by reselling or they can realize more value through all the programmable utility that gets built around their assets.

And then developers who are building for prior to developers, building for creators or building for consumers can step into the flow of this growing market economy. So everyone involved makes more money. And that's what draws this whole thing forward.

I want to make sure I understand exactly what you mean by port of entry. Can you just describe specifically what that means in this context?

We will get to a point where every photo you take on your iPhone enters the world as an end of every piece of media that's created will be registered on the box and to you as the creator. And that gives you an option on it becoming socially valuable and as a result, financially valuable in the future. That's what I mean, is right now we have files on our phone files on our computer. In the future, all files will be incepted on the boxes as entities.

I understand now. So if I post a photo on Twitter and post the same photo. Somewhere else, rather than that order of operations that originated somewhere canonical and as an left and then I would just use that in all the other apps.

Yeah, what I would say is it's probably even more likely that Twitter and all social media platforms just integrate this functionality natively. So you don't have to think about where you're minting as a separate action from posting is just the default.

And how does this all fit into your concept of the ownership economy? It seems like Entities is a really important piece of this kind of vision for the future.

Can you just outline what you mean by the ownership economy?

Sure. So the ownership economy is this broader thesis that the next generation of Internet platforms are going to be built, operated and owned by their users? This idea is what's at the core of the success of Bitcoin and Ethereum today, both of which are multibillion dollar networks where there is no company, there's just independent users all over the world, many of whom are developers and technologists, who in the early days built the network, operated it, ran the mining rigs and as a result earned an ownership stake in the network for doing so, which was their incentive to build it and operate in the first place.

And that same economic model is now starting to sort of cross the chasm from developers and technologists to consumers. And and if these are really good example of this, where now creators and collectors of their phones are realizing, hey, I can own a piece of the Internet value that I create, I can capture that value directly by selling to my audience. And you're starting to see the same idea of ownership as a keystone of new product experiences manifest in a number of other verticals as well.

So I touched on earlier, there's a bunch of marketplaces you swap is a good example of an exchange that's very similar to Coinbase. But the business model is take a fee on transactions just like Coinbase. But what's different about UNICEF is what's done with that fee instead of it going to shareholders. The fee is distributed directly to the users who put liquidity into the marketplace and bootstrap the network effects of the platform, which again is a very strong incentive for users to join and help grow the platform.

The ownership economy thesis is that platforms that are built, operated and owned by their users can grow to be much bigger, much faster than they're institutionally owned counterparts. And this is uniquely unlocked by the fact that crypto tokens enable us to distribute the value of ownership in the same way we distribute information which is instantly to anyone, anywhere in the world. So that's what's happening with NAFTA and it's what's happening at the very foundation of the Internet products and services we use every day.

So we all need to go back and study Jack Bogle and Vanguard again because he had this right very early on. Effectively, the company was owned by its investors. That created a very specific kind of outcome that's very, very different from any other asset management firm.

That's totally right. I think the analog here are co-operatives and mutuals. There have been tons of challenges with each of them and very few major success stories. Visa is another one that's little known, started as a sort of member owned cooperative. But yeah, the benefit of smart contracts is you can now scale these things up without the cumbersome overhead of having to coordinate a zillion members in a legacy institution like a vanguard.

What about and if he's have we not covered that you think is important for people to understand and do want to come back to the hype cycle thing because it is going to end soon.

And by the time this episode airs, who knows where it will be? I think there's going to be a market correction and there's going to be a lot of people saying, I told you those entities were stupid. Who wants to own a digital asset when I can just copy paste the original? So I think really important to stress the idea that we've seen market cycles and crypto a number of times now after big run up in price, there's always a correction and there's always naysayers come out of the woodwork saying, I told you that was dumb.

But what you see if you stay in the space long enough is that the technology just gets better and better and better. There's sort of a Moore's Law going on with crypto technology, and that goes for enough to use to these market cycles are good and that they drive sticky fundamentals. Developers keep getting into the space. The technology keeps getting better and the result is more experiences, more competition for consumers. I guess just reiterating the idea here that while we're in the thick of a bull run for two years and there will be a correction, this technology is here to stay.

And I think it's going to happen fairly quickly because the incentives for people to participate are there and directly economic. You pointed out in that way, like you look at some of these things and I think a lot of crypto people love to speculate and they love to trade when frictions to do those things are very low. You see a lot of activity and hype cycles like what we've seen. And there's a reason I haven't talked at all in this conversation about investing returns or anything like that associated with these things, but rather just the deeper fun of.

Interesting features that they bring to bear. I'd love to close with a trio of questions on it's something we're going to do at the end of a lot of these. The first being a lesson for investors, a lesson for builders, and then a resource to go read more. If you're an investor, how does this make you change your view of the world and where you might find return, etc.?

A lesson for investors is we are entering a paradigm shift where everyone is an investor needs to have to be a public market expert to really have an edge on the stock market. Now, every day, people using social media platforms can have an edge in investing because they're closest to what's going to go viral and where the value is on social media. So everyone is becoming an investor thanks to crypto, where, again, you can now send value and transact value in the same way you transact or send emails.

Everyone is going to become an investor. And if these are demonstrating that Wall Street bets is demonstrating it outside of crypto and this technology is just accelerated.

And how about for builders out there? So you've mentioned developers a number of times. They're a key part of this ecosystem for sure. Crypto, broadly speaking, software, broadly speaking, NFTE specifically. What do you think the one big lesson here is for builders out there?

The one I would take away is not these are not a new idea for anyone who's been in the space for a hot minute since twenty, seventeen or back when I started my company in twenty fourteen, the same ideas were being explored then. I think the lesson here is stick with it, because this stuff can happen in the flash of a pan and suddenly the whole world knows and cares about enough to use. If you were there from the get go and stuck with it, you're seeing a lot of the benefits of that.

If someone out there is super interested in this topic and they want to listen, read, watch, learn more. Is there a resource that you think is especially beneficial to go straight from this conversation, to continue learning?

There are a number of NFTE thought pieces out there. There have been thousands of them written over the last couple of weeks. I'll shamelessly call out one that I wrote, which is titled NFTE Make the Internet Ownable. And it's all about why crypto media is becoming the port of entry for all Internet media. I think Chris Dixon also wrote a really great post, a primer on an is where he goes into some of the details of the market dynamics and where that might go.

And then there's another really good primer by Linda Lindskog, which is also published on Mirror, the decentralized blogging platform I mentioned earlier. And that gives a sort of detailed view of a lot of the different categories of entities that are out there right now. Awesome.

Well, Jesse, this has been incredibly informative. I'm leaving the conversation with models for thinking about this that are much more clear than I came in with. What was the goal? I really appreciate your time. Thanks for breaking down entities with us. Thanks so much for having me.

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