Blur Founder: Why Optimizing for Creators is a Bad Strategy

Transcript

All [Music] [Applause] right, everyone. Welcome back to another episode of Empire. We've got a really timely episode today. We have Pac-Man, founder and core contributor of Blur, as well as Santiago, who is actually an angel investor or one of the seed investors. You can you can correct me here, Santi, if I'm wrong, but in Blur. So, Santi uh Pac-Man, welcome to the show guys. Thank you. Thank you for having me. Yeah, excited about this. Um, Santi, was I right? angel investor, seed, what what do you want to uh early investor? Um so there is a lot of bias here folks, but I'll be as objective as possible, but full disclosure, there is I guess you know a disclaimer here.

I'm I uh I I know you didn't know I was going to do this. I'm picking on you for the first question here, which is you see a lot of deals. Um obviously NFT space was really hot year and a half, two years ago. Why did you make why did you invest in in Pac-Man and the Blur team? So great question. I had the good fortune of knowing Pac-Man and first meeting him a few years back. And when I reconnected with him, I always like to invest in repeat founders. I think um a lot of times, you know, you get to see someone over the years um and and particularly someone that hasn't given up um and is willing to be agile, nimble, and you know, like I read this recently great book called Quit. And I

think a lot of what I look for in founders, uh, Pacman has and embodies. Um, and so, you know, I think he had a very clear vision of how the NFT market was going to evolve. And even though I didn't fully kind of agree with the thesis at the time, um I thought it was worth like I think it was a big it was a piece of the market that I wasn't paying enough attention to. But then as a result of multiple conversations and then thinking more about his thesis, which he'll go into in a minute, um I thought uh the combination of great great builder that I've known over the years plus a big market that will continue to grow um was kind of the primary drivers.

Nice. for my investment. Pac-Man, I think it'd be helpful maybe to just start with uh with that thesis then. What what was that original thesis and like how's that changed over time and like or may Yeah, maybe what is like what is the thesis of Blur and and and your broader thesis of the NFT markets and how they'll develop? Yeah, totally. So, you know, first just to kind of talk about the the founding of Blur because I think that kind of shares gives some good context. Um, you know, effectively, uh, Galaga and I, my co-founder, we start our first business in 2018. We ran it for 3 years and we sold it at the end of 2021. And in the process of selling it, uh, was that a was that a crypto company?

It was a crypto company. It was on a small niche blockchain, so you wouldn't have heard of it. Uh but it was um it gave us a lot of lessons but basically as we as we sold it uh I got really into NFTs myself. I minted a blip map as my first NFT. Uh really fell in love with it because I held it up to ETH and then sold it and I just got super hooked especially onto the trading side of NFTs. Um and I just really fell in love with the trading side of it but I was very frustrated with the existing infrastructure. uh all the existing marketplaces were very retail focused and you know they were doing a great job at serving newcomers but for someone like myself who is really in the weeds

very active in the space I wanted something that was more of a professional trading platform for NFTs especially a trading platform that you know wasn't slow and clunky and wasn't going down all the time and it was very clear to me that there was this large gap in the space and especially if you looked at you know even the bull market where there many more you know monthly activives uh in in the space than there are were today. It was very clear that the majority of the volume was driven by these power users and for myself and every power user that I knew you know nothing was really serving them well. So effectively the thesis you know the the clear pain point on day one was that there's a need for power users that is

just not filled at all. And then second, if you look at the progression of the token trading market and if you look at how the infrastructure developed from, you know, starting with very retail driven platforms like Coinbase over time, the infrastructure professionalizes, you know, now you have, you know, Binance, BitMX, Derbit, this advanced infrastructure with all these advanced financialized products. As the space grew, the majority of the volume came from that professionalization of the space. And similarly, we're seeing a similar trend in NFTTS and and that's really the core thesis that Blur was targeting is is building into that trend.

Okay. So maybe maybe I want to try to like repeat it back to you and you you tell me if I get it right or wrong. Basically uh the way that token markets developed was like you had Mount Gaus and then you have these like very retail friendly things where you can just kind of buy and sell Bitcoin then you can buy and sell ETH and that was like the Coinbases and Geminis of the world that really developed in like 2015 2016 obviously market starts ripping 2017 and then with the market ripping in 2017 you had the development of like these institutional exchanges like BitMEX and Binancees of the world like uh you know Binance's institutional offering Darabit on the option side of things and like really getting built out in 2018 and 2019. And for you guys, you saw like JPEG collectors go to OpenC and there's

no place for like the institutional NFT markets or like the pro NFT trader and that's where Blur Blur comes in. Yeah, exactly. Okay. I think Okay. So like I also saw Blur like a year uh maybe probably for the first time nine months ago or six months ago or something. Played around. I was like this is an awesome experience. Very trader heavy. really liked it. Uh, but what I got wrong is I thought I was like, "All right, you have open C, which is like dominates the market, great for like the retail crowd, and then you have Blur, and I always thought of them as like two very distinct different buckets, but what's become very apparent since the airdrop is like, oh no, like you're going head-to-head with OpenC." So, I'd be curious about how you how you see that market and like is there room for two?

Like, are you going headtohead? Are they like how do you think about that? Yeah, I think ultimately in any sort of market, especially any sort of speculative market, right, if you look at the token exchange world, where does the segmentation lie? There's the retail infrastructure and then there's the more advanced, you know, protrader infrastructure and then of course there's even a little bit more segmentation in tokens because you also have the the institutional grade infrastructure, but effectively it's just retail and pro segmentations.

And I think in NFTTS it's similar where the only two segmentations that really make sense are retail and pro. People talk about um you know like verticalized NFT marketplaces. I think there are a few niches where vertical marketplaces make sense. Like for example like ENS like shopping for like a a domain name is a very different experience than shopping for like any other NFT really. It's like a very unique beast and so like a vert verticalized market really makes sense there. But for the vast majority of NFTTS, especially NFTs that are speculated on, there doesn't really make sense to have, you know, niche vertical markets, uh, typically the

buyers and the sellers, they prefer, you know, going to where the liquidity is, where the eyeballs are. And ultimately that goes to, you know, horizontal markets. Um, and and yeah, I do I do think that is basically only retail and the proumer effectively. Hm. I mean, one thesis I've heard a lot is this vertical marketplace thesis. So, today you have something like OpenC and Blur. Tomorrow you might have gaming NFT marketplaces. You might have like there'll be the JPEG marketplaces. You would probably disagree with that.

Yeah, I think it's hard to predict the, you know, what what types of assets kind of emerge. Like for example, like gaming, that's something that can be unique, right? Right? Like if you look at Axi Infinity today, like most of those NFTts are traded on like the Axi Infinity marketplace, right? But they're they're traded in a very different way than like pretty much any other NFT. So I do believe that something like for gaming uh I could see like vertical specific marketplaces. Uh but not like I would be surprised if it's like a horizontal gaming marketplace. I would more so expect like each individual game to kind of have its own marketplace like

keep it all in house. Um but uh outside of outside of something like that again like there are a few categories where it's like I think that you know you probably need like a unique experience to serve uh the function but for the most part you know as long as the core action for the trader is you know buying and selling and holding. Um I would yeah I would be quite surprised if we saw a proliferation of vertical markets. I want to u take a moment to zoom zoom out here for listeners uh for anyone that hasn't been paying attention basically under a rock and hasn't understood what has been going on with blur and what recently happened with the airdrop and maybe can you just give us a compressed timeline of since you started

to what was h what has happened to date um and feel free to kind of pick your highlights more curious to to understand what are your highlights since you've been since founding of the project, some of the key learnings, what are things that surprised you mo about most about the original thesis, user behavior, and then we can go from there. Yeah, so that's a great question. Um, you know, for context, today is day 400 at Blur. So, we've been building for exactly 400 days now. We started up in January. Uh, we raised an 11 million seed round from Paradigm. Um, we built up a team of 10. So, we're seven engineers. You know, the core contributors are seven engineers, one designer, a chief of staff, and myself.

Our engineers primarily come from our MIT network. Gala and I, we studied at MIT before starting our first business. And we recruited friends that we knew that worked in, you know, trading and real-time systems. So, for example, ones from Citadel, ones from Fiverr Capital. Our smart contract engineer was previously working with Starkware and Maker Dow under Dybridge. and our designer was previously in fintech at Brexton Square. And so we've been building for 400 days and we basically spent five months in private beta. We kind of first like announced publicly in May of 2022. Uh we spent like five months in private beta um basically until our our retention was uh extremely

high until we knew that basically as a product that people would want to use the protocol and and the the trading product. And then we launched publicly and we launched with this airdrop campaign that effectively rewarded users for providing liquidity to the protocol. And a key point that is basically our holy grail is to only ever incentivize liquidity and never volume. The issue with incentivizing volume is that you just directly get wash trading, right? You have like me people or just like random arbitrageers just like watch trading the same asset back and forth.

as long as it's like a plus EV calculation, they'll do that. They're not real users, but incentivizing liquidity, it's in a very similar way to the way that like curve incentivizes liquidity, right? On either side of the stable coin peg, that liquidity is real and it allows for the volume to come because when people want to buy or sell, they of course want to, you know, sell for the best price and and buy for the best price. So, we launched with that campaign um you know, prior to the token launch. uh we we spent you know four months in that airdrop period. Uh in that four months period we gained a leading market share from a volume perspective. So even before the token launch, we were already doing more volume on a daily basis than OpenC. And then we uh of course launched the token

uh you know just about a week ago. And uh that campaign basically just brought in an incredible amount of attention to the protocol. And since then our volume skyrocketed and again this is all still volume coming from increased liquidity coming into the market. um a massive amount of liquidity came into the market. Like we just tweeted today, the Blur bidding pools, when you bid on Blur, you deposit ETH into your bidding pool and allows you to bid with ETH instead of having to use Weath. But the Blur bidding pools now there's $130 million uh dollars worth of ETH locked in the bidding pools providing liquidity. If you look at some of the top collections, you'll notice there's like like on mutant there's like $50 million worth of buyside liquidity uh

present on that collection. And you know, this is kind of an unprecedented change in the market because prior to Blur, there was really only ever like a few a few bids maximum. You know, if you want to sell like 10 mutant apes, you know, you would basically just like crash a floor price um pretty significantly. But now, you know, there's like $50 million worth of of bids uh you know, preventing that. And um you know, and in that time, we've achieved leading market share by a large margin. Um, in the most recent days, we've been uh like 10x OpenC's volume.

Uh, something along those lines. I I need to double check the exact number, but basically, you know, we we surpassed hund00 million in daily volume this weekend, which is not something that the NFD market has experienced in like um you know, about like a year I would say. Uh so, it's just kind of been like an unprecedented uh period of growth. Yeah. Can you talk about the mechanism to incentivize liquidity because it's novel and and perhaps why did openc kind of not think about this? Actually Pacman can I'm just going to ask a really dumb question for folks who aren't on the trader side which is like explain the difference between liquidity and volume and then Santi really good question by Santi too.

Yeah great great question. So incentivizing volume like for example um you know many of the listeners might have heard of looks rare they launched uh you know what's interesting is a lot of the players that are currently in the market um all launched around the time that we started building blur so like we started around 400 days ago uh about like a week after we started looks for launched x2y 2 launched gem launched and you know we basically had to start building from zero and uh you know from you know, ship faster than the competition and pull ahead. But they did this very interesting campaign where they rewarded uh trading volume and it was basically you got like a rebate on

on on your trades and they had these crazy gargantuan volumes like instantly, you know, were was way higher volume than than OpenC. Um and the issue with that is that that volume wasn't real. It was just it was just wash trading. Liquidity on the other hand is is not rewarding uh a trade. It's rewarding someone placing a open bid or open ask on the order book. So, if you think about uh an NFT marketplace like a exchange where there's, you know, an order book and I'm assuming the listeners probably know what an order book is, but I can kind of, you know, break that down if if necessary, you know, but, you know, just like you go on

on Binance when you go to trade, you can see the bids and the asks. Basically, Blur incentivize people placing those bids and asks, you don't get any rewards if someone takes your bid or takes your ask. So actually you're kind of disincentivized from someone you know accepting your your open order because you you no longer earn rewards when that happens. And so there's this interesting uh difference here where in the looks rare model you know basically there's a direct incentive to wash trade whereas in the blur model there's a direct disincentive to wash trade and then what you see is that leads to significantly more organic volume. The vast majority of volume on blur has been organic. If you look at hillb uh he has some really

extensive wash trading analysis on all the different marketplaces and basically the only marketplaces that have a very little wash trading are are blur and openc you know looks for and x2 y2 for example they are you know the vast majority of their volume is is effectively uh fake volume from from wash trading. So hopefully that kind of gives a little bit more of a understanding of liquidity versus volume. How how much do you of this uh liquidity I guess and volume is dri is driven by product the product being better verse uh like anticipation over the airdrop and and these care packages that you guys did a couple months ago.

Yeah, of course it's hard to distinguish. Yeah. But what Blur focused on from day one was really just speed, bulk execution. So even in private beta before there was any sort of airdrop campaign, traders were already there were like numerous tweets that you can see that that we retweeted, but basically traders were already kind of knocking on our doors trying to get access because it allowed them to list easier. It allowed them to buy easier. So we already had significant confidence in the product.

And then on the protocol side, there's a key unlock because prior to Blur, and this is like really in the weeds on the NFT market, so most people probably wouldn't be aware of this, but basically if you wanted to bid on any marketplace before, you had to convert your ETH into whe convert it into ETH and then buy. And so there's a lot of friction between, you know, bidding and and buying. And what what Blur did on the protocol side was we created these bidding pools that basically allow you to deposit ETH into a pool and bid using that ETH and then when you want to buy you can also buy with that ETH as well. So it reduced you

know it's a small small change but it drastically reduces the friction and then combined you know that that protocol level change combined with the liquidity incentives um you know brought a significant amount of of liquidity into the market. So one of the things I want to go back to that question or focus on a bit on liquidity because a lot of users skeptical might say well yeah you've gotten all this liquidity because you know there's an airdrop there's a scare packages came out it's been hard for some protocols not all to sustain kind of the liquidity the momentum after the airdrop curve which you mentioned is probably a really good example of they didn't get the tokconomics all right they're one of the first but still it is the best place to

swap stable coins And the question to you is how do you maintain market share and how do you maintain the stickiness of the liquidity over time? Yeah, that's a great question. So the key thing to keep in mind is when you look at like exchanges like Binance for example and you know ultimately a lot of blur strategy follows the Binance model where you focus on the cryptonatives and then you expand from there. And if you look on exchanges, it's not like the market makers on exchanges are, you know, have like liquidity mining incentives, right? They don't need any incentive beyond just making their

spread from their market making. The issue with NFTTS before was that the market was was highly inefficient for various structural reasons. basically like you know even just like a few months ago a very effective market making strategy was just placing open bids on the order book across marketplaces. Eventually someone needs to sell because they need liquidity fast. They sell into your low ball bid and then you can immediately flip it for a good profit. That that is a strategy that indicates uh a highly inefficient market with blur. Now that there's significantly more activity on the market making side, that's really right

way to think about it really. Before Blur, there wasn't really market making and NFTTS. Now with Blur, there's a lot more market making. Like these are like literally market makers like from DeFi, for example, like MB people market making um from DeFi. They're now market making on Blur. And a lot of them are actually market making profitably. You know, you can do different strategies. You can market make profitably. You can market make at break even if you want you know of course if you want to maximize uh rewards and then you know there's segmentation but the thing that keeps people's here is that there's an inefficient market and you can market make profit profitably. So even if the liquidity mining incentives disappeared,

there would still be market makers in the space because they already set up all the infrastructure. They're already, you know, participating in this ecosystem. And as long as there's, you know, inefficiencies in the market for them to profit off of, there's no reason for them to turn off their, you know, their bot effectively. Hey everyone, quick break from Empire to tell you about another Blockworks channel that I know you're going to love. I've been in crypto full-time for 5 years and have always struggled with one thing, which is keeping up with the next big trend. As soon as I wrap my head around me, we're on to app chains. As soon as I wrap my head around app chains, we're on to liquid staking derivatives. I'm sure you've been there.

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Sant, you know what this reminds me of is um do you remember we had Meltum on the podcast maybe four months ago and we were talking about she wrote this post called uh Pac-Man. I don't know if you ever read it in September. She wrote this piece called building market micro structure for NFTs. Um, and it was basically talking about how the whole NFT market is like incredibly inefficient and it's all based around like culture and collectors, but where most markets end up going is around like you you end up building really efficient markets. So just just because arbitrage ends up like squeaking out a lot of the efficiency and with that you will get a lot more things in NFT markets like better price discovery and uh uh better trade execution and better margin and

clearing and better settle uh settlement better like post-trade reconciliation. So I'm curious like when you see the where like so this is the NFT markets today what we're talking about and like you guys have obviously figured out how to bring better market makers to the table. What like what else is missing? Like what I I I can imagine you guys are going to innovate a lot in like the coming months. Like what else is missing from the space that you guys are going to bring to the table? Yeah, it's interesting. I haven't read uh that post from Alum, but I would say she's she's spot on with how we think about the market. You know, ultimately, if you look at the progression of the token trading world, like Blur as a protocol is is very similar to Uniswap in many ways. you know, UNISOP is an

exchange for ERC20s and Blur is an exchange for ERC 721s uh and of course in the future 1155s and you know any sort of NFT format but ultimately you know these are uh assets that are being traded as we've seen the token infrastructure progress you know you started with spot tra trading of course and then you add in you know options margins futures derivatives you know all these more advanced financialized products that same thing will come to the NFT space. The the issue is that NFTs are fundamentally different than ERC20s. You know, they're nonf fungeible. So, you can't just copy paste things that came and worked in the token trading world over to NFTTS. But the general theme of

the space professionalizing is is just fundamental to how markets work. You know, they do become more efficient over time. people do want the ability to take more financialized actions with their assets and that's just a core, you know, behavior of of these markets. What that actually looks like is still an area of active research because it is a different asset class. But I think that general direction should give a sense of, you know, where we think the space is heading and and what we'll be working on.

What is this? Wait, I I just have S before you jump in, I have one maybe weird question here, but like what does this do to the cultural side of NFTs? Like what does this do to like the you know NFTs or just things that you collect? Because it feels like where we're going is like NFTs are just another token that you trade. Yeah, I think ultimately as the space grows, the culture changes, but you can't ignore the collector side of it. You know, people have very strong attachments to their NFTts.

You know, there's a community aspect, there's a social aspect, there's a flexing aspect that that will never go away. When you look at, you know, token trading, actually, it's interesting because if you look at like the top coins, like what is like the one coin that like every retail person knows about? It's it's Dogecoin. And Dogecoin is a very interesting like cultural asset because the fact that it got popular is is quite interesting because it's a token and you know tokens and like numbers tokens are a very abstract thing like most people like I studied math in school I enjoy it but you know ultimately most people do not enjoy math they don't enjoy thinking of numbers and abstract concepts and it's very unapproachable but you know as

humans we really enjoy visual objects and collecting things that this is a core human behavior. that is just you know throughout history humans have done and you know NFTTS are a new technology but they're tapping into the same core human behaviors that have always existed if you look at the uh you know even like eBay like when they IPOed the majority of their like volume was from like collectibles right so if you look at uh you know where where do the demographics of tomorrow like what are they looking at like okay Gen Z today they're all about digital objects they'll buy their Fortnite skins they'll buy their Roblox, you know, skins. These digital items, this is effectively what NFTts enable is this, you know, ownership of these digital

digital items. This is something that um I don't think that like cultural aspect will will ever change even if you get, you know, more financialization, even if you get more trading, you know, just like in tokens like, you know, the core ethos of Bitcoin as, you know, decentralized, you know, digital gold, right? or any of the other, you know, utilities of Bitcoin that hasn't gone away. Even though a lot of the space has grown beyond even that, right? Like there's a lot of market makers trading Bitcoin. They don't necessarily buy into the ethos. They don't necessarily care what the asset is. They're market making the space. There are funds that invest in Bitcoin for various different reasons. There's a core ethos that started the space. The space can grow

around it and then there's multiple different chords coming in. But you know the the core ethos of the space doesn't go away. The kernel doesn't change. I think for NFTTS you're going to see a similar thing where there's going to be market makers. There's going to be you know traders, people who are in it for various different reasons but the collector mindset and the cohesion and the social aspect of it that won't go away but it will change. Yeah. I guess I guess in like the efficient markets basically just uh the less the less efficient a market is the more it benefits insiders right and there's all this like grift and in these like really inefficient markets like wine and art and most like even sneakers and things like that so the more efficient you can make

a market the the the better it is for everybody I think yeah but by virtue of being NFTs there'll there will always be some inefficiency ergo there will always be a market maker incentivized to, you know, take advantage of that. So, I guess my question, you mentioned Uniswap Pac-Man, which is, um, something that I want to focus on a bit now. They they acquired Genie and how do you think about Uniswap moving into NFTTS and potentially competing and bumping into what you guys are doing? Yeah, I would say when we think through the competitive landscape, um, you know, to be candid, UNISOP is not a name that comes up a lot.

Okay. Yeah. I'm not really Yeah. I mean, look, there's some about founders not thinking too much about the competition, right? But I am curious. No, it's it's not about not thinking about the competition. um you know, we're obsessed with it from from day one. Our number one goal was always just being better than competition. It's just that, you know, I haven't really seen anything from that side of the market that has been particularly impressive. Um but I I do I do see like the I mean, their strategy makes sense, right? Because you know, unis swap as an exchange for tokens, it's not it's not crazy to think and expand to an exchange for NFTs. I do think the the cultures and demographics like DeFi people and NFT people those

are very different groups. If you look at you know all the growth that has had been in the wake of the FTX collapse like Celsius like all these huge providers of liquidity collapsing uh you know really the worst bare market that we've seen in crypto history and you know for a large part of that NFT communities have not been affected because they're very separate from from DeFi. they didn't really custody their assets on FTX. They're self-custodied. They they don't really participate in in tokens for the most part. They're very different groups. So, I actually think bridging that uh those two um you know products and protocols, it's it's kind of harder than it than it looks on the surface level because these these are

different communities and they don't necessarily go back and forth between each other. It's like Robin Hood merging with like an e-commerce and trying to like buy stocks and then jeans at the same time. I guess um when you think about the response that OpenC's had, you know, there's been criticisms out there and look obviously I'm biased, right? Cuz you know the experience in you in OpenC for a while I felt like they were not innovating much and you know they have now responded recently since you guys launched the token. They are dropping fees um for a limited time to zero. They're moving to optional creator earnings um for all collections without onchain enforcement.

Um so I'm kind of curious now that we're talking about competition, how do you think about OpenC and what they're doing? Yeah, I think it's it's interesting. Um, a lot of their moves have confused me from a strategic perspective because they didn't make sense to me at the time and and I was wondering if there was something that I was missing. Um, and it does not appear to be the case that there was something that I was missing. I think that you know ultimately I do believe that the the two segmentations that really make sense are you know retail and

proumer in this space um them you know shifting their strategy and and what is you know sensibly has shifted strategy to kind of go after the pro market um it's it's not exactly what I would have done if if I was in charge of openc uh I'll just put it at that what what would you do if you were in charge Would you like pick a lane and try to win the retail side of things? Yeah, ultimately I think that NFTTS are something that's still incredibly inaccessible to newcomers. It's a very confusing space and a lot of the people who come into NFTTS, they really struggle in this space, right?

there's so many scammers like scammers are run a muck in this space and it's and it's so difficult to protect yourself um you know even beyond just the trading side of things I think there's a lot of product innovation that can be hap that can happen uh at the retail level and I think that that is is very very durable and and you and with retail of course you get to charge higher take rates as well so that can be a very large business even without capturing the majority of the volume and you know I won't go into specific features just because it's you know not not my job to run to run openc it's it's for them to figure it out but ultimately um you know I think we saw a lot of backlash when they when they made their

moves a lot of their recent changes if you look at their product changes it was like you know blur was the first marketplace to kind of prioritize a list view composed uh compared to a grid view they copied the the list view um you know blur was the first marketplace to add uh stolen NFT protection where there's like a three-hour limitation before bids can be accepted. Um, they added uh that same limitation with the exact same uh time restriction, the three hours. Um, which was funny because it was kind of like an arbitrary amount of time that that we chose and then they it was like it was very clear that they just, you know, copy pasting and then, you know, even even the fee uh structure um, you know, that's that's not even something that I necessarily would have

done in their position. and then they they copied that as well. So it was just quite surprising. Um you know it's it's pretty clear like what their strategic goal is. U you know obviously we always have to be careful like when I when I say this and anything I describe here I want to be very clear you know I don't think you can ever stop being paranoid in this market. It's very important to consider all levels of competition from you know from every provider. So, it's not to say that um you know like we we ignore them or anything like that. It's just that a lot of their moves I found quite surprising.

Do you think so? They pulled fees to zero for you know what they said was a promotional period of time. Do you think they'll end up pulling the fees back higher or or or they'll keep them at zero? You know, I think the thing the thing about building a protocol and launching a token is that you can't build a web 2 business and then tack on a token on top. You know, Co Coinbase tried that and then the SEC came in and and blocked them on that. Um there's a lot of regulatory restrictions uh and just like in terms of the team and and the contributors and like how they think about developing uh the space. There's a lot that kind of goes

into it where you kind of have to start from day one in terms of whether you're building a protocol or you're building a web two business. And Open C has built a web two business. You know, they're a Delaware CC Corp based out of New York, have a 100 employees all in a single office in New York and all of the equity value is tied into a single entity and they've raised multiple rounds of fundraising. They have a board that that is a very difficult situation to be in. It's, you know, we we know who their board members are. We know who their lawyers are. Uh we know the makeup of their team. Um it's basically impossible to launch a token from that standpoint. Uh the funny thing was they they actually in their uh

announcement about going to zero fees, they had these um like little OpenC tokens dropping and then everyone uh started speculating that OpenC would launch a token. Uh I thought that that was like the most DGEN original idea I've seen from OpenC um you know since starting on Blur. Like it was actually quite clever, but ultimately it's it's really not something that that can happen. Um yeah. Yeah. I want to go back to this 400 days of building blur. What are some of the things that have surprised you the most perhaps with in the sense of things that you can control, things you would have perhaps done differently, maybe not have done, focus more time on, less time on?

Yeah. You know, it's interesting because most initiatives, most startups, and you know, Blur is a protocol. So, it's it's not quite the same as, you know, just just for context on on my background. I I started off as an engineer in Silicon Valley around eight years ago. After working there as an engineer, I started my first business, went through Y cominator in the winter 16 batch and then I studied at MIT and then started started the last business and then you know sold that and started blurb. So I've kind of come from a web two you know Silicon Valley startup background and what's interesting is the typical advice in startups is that you need to pivot

fairly often, right? Like you never know what's going to work. You have to like change strategies a lot. You have to be very dynamic. Um, Blur is is quite a different initiative. Uh, from day one, the goal was always to build a protrading experience for NFTTS. Um, utilize a airdrop campaign for user acquisition. Uh, and build the largest exchange by volume for NFTs uh, in the space. Um, and basically we've not deviated from that vision uh, in these past 400 days. And effectively, you know, not nothing has really changed. I think the thing that's really most surprised us is the response from existing players in the space. When we

evaluated the space, you know, 400 days ago, it was very clear there was such a large gap in the market. It was it was interesting because a lot of the players were actually antagonistic to the traders in the space, but the but the business model of everyone in the space was to monetize off of the traders. You know, if you you take a take rate, right? either a OpenC or a royalty. You know, everyone was monetizing off of the traders, but there was this uh and then the traders were the source of the majority of the volume, but they were very antagonistic towards the traders. So, it was quite it was quite surprising. It's like how, you know, how can you hate the the the cohort of people that actually pay you at the end of the day?

So, I think just the lack of response was was very surprising. Um, you know, to us, we've only been incredibly grateful because, you know, we started so late in the market and we had to build from the ground up to build this real-time trading system, to build the protocol, to build up the community. You know, now we've gained so much momentum that we have the vast majority of volume in the space by a large margin. And, you know, I think that's really the thing that surprised me the most is um the lack of efficiency in the market on the infrastructure side. Mhm.

Definitely. Um, speaking of kind of rewarding traders, you obviously launched multiple campaigns of airdrops, rewards, and then and then this latest airdrop, uh, I believe it was, you know, you air dropped over 33,000 unique wallets. Um, airdrops have been they're one of those topics that are fairly contentious. Some people love them, believe that they're really efficient customer acquisition vehicle strategies. others that say it's really expensive way to acquire users. Most people just claim and dump. Talk to us a little bit about the strategy, what you're seeing in terms of user behavior um of the multiple airdrop campaigns. Yeah, the the key thing that we wanted to do was,

you know, airdrops are a great way of getting people into the funnel, but if you don't have a product or protocol that retains the user, then you just have a a bucket with, you know, a gaping hole in the bottom, it doesn't really matter how much water you throw into it. It's just all going to go away. We saw that with uh, you know, some of the prior marketplaces like, you know, looks for NXU2. They launched with these large airdrop campaigns, but their retention was was atrocious. And you know what that did was it brought a lot of people into the door, but it it wasted a lot of that attention. So for us, it was very clear that we could only launch once we were very confident in the product and the

protocol. And then the other key thing is that you know when you think about an airdrop from like a capital allocation perspective, it was always surprising to us that a lot of protocols would kind of do these like secret airdrops where they would airdrop users like retroactively. Um that's that's strange because you know you want to use capital to acquire new users. using capital to reward existing users is kind of an inefficient use of capital. If you think about like a protocol like a business, you know, you want you want a business to allocate capital efficiently and effectively. You don't want it to just, you know, really

throw money down the drain. And I think while some protocols have done retroactive airdrops that have made users really happy, you know, it's it's it's ultimately an inefficient use of capital. So for us in our airdrop, we wanted to make it really clear that the airdrop would go to the users that made Blur successful. So that's you know to the users that used the protocol that provided liquidity and you know those are the ones that would actually get the vast you know that got the vast majority of the rewards. When you know we were going to launching the airdrop a lot of a lot of people would ask me oh how do you incentivize uh recipients to hold the token? you know, are you going to add staking or something like that? And

it was very interesting hearing that because, you know, if you think about the the holder base, you don't want forced holders. You want a long-term oriented holder base. If you look at every airdrop in history, every airdrop uh basically gets immediately sold by the recipients. Like even unis swap where, you know, everyone would have benefited from holding, the majority of recipients sold it within the first 30 days and then the token price, you know, shot up afterwards. If you zoom out a bit and look at airdrops in history, even outside of crypto, when the Soviet Union collapsed, they gave away land rights to to all the people, you know, basically like an airdrop of land to all the people. And uh the oligarchs went around buying up the land for pennies on the

dollar um you know, from all the the peasants and everyone. And you know, ultimately this there's like a core human behavior here where people will sell the free money that they receive. That that is Oh, go ahead. Sounds like you've read red notice. No, you know what? Actually, it's too readless. Uh but I I need to read that. Fascinating. Yeah. But you know, this is it's it's funny because people would ask like, "Oh, how do you prevent that?" And it's like, you don't want to prevent you never want to fight human behavior. It's like, you know, you can't build a plane by flapping your wings. You can only build a plane by understanding aerodynamics and, you know, the the the laws of nature and working around that. So when we thought through the airdrop, you

know, we we we shared this very publicly. We shared that, you know, this is a core human behavior. People are going to sell. They'll they'll sell at a discount most likely. Uh and then, you know, that allows for the the paper hands to get washed out and then the, you know, longer term holders to come in. And then we saw exactly that behavior happen where, you know, the the tokens was sold I think like the lowest price was at like, you know, 40 40 cents uh or like 30 cents or something like that. And then um you know within a few days the token is now trading at over a dollar. Um it was very clear that that would happen and and and we shared that publicly that that that was most likely going to happen and then and then it did happen. Um it was just very interesting

to see that like the uh that that that just like core aspect of how humans work wasn't really fully recognized. But um yeah, that's really how we thought about the airdrop. How do you guys think internally about like I'm almost curious about like like on the P&L like how like is this a marketing expense like how do you is a like how do you treat this airdrop internally like was this a marketing expense like how did you decide if you should do like 2% of supply or 10% like what what was the thinking that went into this? Yeah, I think you know when we looked at the NFT space so if you look at like OpenC right it's it was very interesting because NFTTS are web 3 native asset and if you look at tokens

like tokens have dexes they have all this decentralized infrastructure to support token trading but NFTTS were all trading on a web two platform um and the web two platform you know wasn't only oriented as a web two platform but it also was you know financed like a web two platform platform, right? They had a capital base. They had, uh, you know, equity holders. Um, you know, the majority of the value of the business was held by, you know, the executive team and like A16Z and a few of the VCs. And it was very surprising to us that this was the case because this is, you know, we're we're in the web 3 space.

There's a huge unlock that's possible where you can actually protocolize the infrastructure uh and give away the tokens that control that protocol to the community. So when we when we thought about this we were like okay so openc you know the bull they re they raised at like 13 billion valuation um you know peak trading I think the peak secondaries was at like 18 billion um of course now in the bare market and especially after blur that the equity value has gone down significantly but you know ultimately when we saw that we're like oh wow here is a you know space where there's if we protocolize the space and give away the tokens to the community. We can literally give away billions of dollars worth of value to the community. And

when we think about as a community member, what would I prefer? Well, I want to I want to use a protocol that gives me billions of dollars worth of value. I don't want to use the, you know, marketplace that's run in a web two fashion where I don't have any control over the protocol. I don't have any upside in the protocol's growth. And you know, ultimately it was really about giving that value to the community because that that's going to win over the users at the end of the day. Yeah. Um, you mentioned OpenC is a web 2 company. They have a board. Delaware CC Corp raised a bunch of money, 100 employees in New York, so therefore they can't do a token.

How do you think about how did you weigh the regulatory risks of having a token and um, you know, versus the the pros of doing it? Yeah, ultimately you know navigating uh regulations and staying compliant with the law is something that's very important for you know every team in the space to think through. We were very fortunate because of course working with Paradigm and their council, they have some of the best you know lawyers in the space on this problem and we effectively were able to work with them from day one to structure and develop the protocol in such a way where you know we felt very comfortable about

being able to launch the token and you know progressively decentralize from there. So, it's something that it's something that's very hard to do after the fact. So, it's very hard to start a business and then afterwards be like, "We're going to protocolize and launch a token." It doesn't really work that way. You really need to think through it from day one. And if you think through it from day one, you can do it, but if you if you don't, it's it's basically impossible. Yeah. Do you think I mean, do you think OpenC will end up doing a launching a token or no? I think I think they'll tease it, but ultimately, no. Yeah. Um, this might be my last question here and then I know Santi wants to do a little rapid fire for you is um, just on this topic of creator royalties. Like if I was

advising OpenC, one thing I don't know anything really about this internal strategy of OpenC, but as an outsider looking in, one of their problems seems to be I can't tell who they're optimizing for. Like I can't tell who they want to build a product for. Whereas with Blur, I'm like, "Oh, they're building for traders. They are really building for NFT traders." Um, this topic of uh creator royalties is something that I feel like a lot of folks are really torn on and it's very contentious and like OpenC they like took it down and then they were like but we still love the creators and it should be enforced but we can't enforce it and and that kind of stuff. How do you think about this like creator royalties uh uh debate that's going on right now?

Yeah. What's what's interesting was, you know, one of the moves that OpenC made when we first launched because basically like we we launched and then a few hot collections launched and Blur was was winning the volume on all of them and surpassing OpenC's volume and then they basically came out with this um uh new policy where you had to like fil block marketplaces at the NFT level in order to get like full royalties on on OpenC. And it was very clear to us that that that was a a business level decision, but it was framed as a procreator decision. And it it kind of like spread in the market as that.

Y and it was quite frustrating because ultimately when we thought through our policies, we were thinking from the standpoint of what can we do to protect and maximize creative royalties as the meta is shifting. So prior to blur launching uh pseudo had launched which which had no royalties at all and it was gaining share and then gem which was uh owned by openc actually integrated pseudo. That was a very surprising move to us because that was like basically cannibalizing their own business and we were very shocked about that because it was also very clear it would put pressure on the other marketplaces to change their royalty stance. And then you know a few days later X2Y2 uh switched to optional

royalties and directly cited GEM doing it as the reason for why. And then those, you know, those uh marketplace were basically gaining a share. And then when we launched, we basically launched with this incentivized royalty program to try to shift at least some of the enforcement over and and get traders to, you know, pay some royalties as opposed to paying no royalties. Um, but you know, ultimately when we when we think through the market, it's very clear that there's segmentation in the market, right? So there's like retail, there's collectors.

retails are price insensitive, you know, either because they are pro royalty or just because they don't know better, right? It's like when you're on Coinbase and you buy on Coinbase consumer and there's like a fat fee, but if you go to like Coinbase Pro, suddenly you get like, you know, 75% less fees and the only difference is just changing the URL. So, you know, retail is of course going to tolerate higher fees. Collectors, they want to pay the royalties because they really support the collect, you know, the the the creators. And then traders, you know, they're very price sensitive, right? they uh will optimize for price. So there's very clear segmentation and the market the market is going to do what the market is going to do. The market will move towards efficiency you know especially be you know propelled by by the traders and it's and

it's quite difficult any any structure where you're fighting the market for forces is ultimately an unstable structure. So for us, you know, we were trying to figure out what is the end state here that's actually stable and that's what we were trying to move things towards. When OpenC came out with the filter policy, we actually adopted it within a week. We would have adopted it sooner, but FTX collapsed that week. So we're like, you know, we're not going to announce uh this adoption policy um you know, this week, but we adopted it within a week because we're like, you know what, at the very least, this isn't sustainable. There's no onchain royalty enforcement that that can't be circumvented. You can always circumvent any sort of like filter system like like you know people try this in DeFi right people tried so many of these policies

where you get you know royalties on trades or you can you know restrict the the minimum price of the asset and ultimately every sort of restriction like market restriction can be worked around. So, it's very clear that there there really isn't a way to do this in an onchain way, but we adopted it because we felt like it was a temporary solution that could maintain uh at least some temporary stability um that would eventually go away. And I think what we've seen now is that um you know this the the market forces were too strong, right? And now OpenC kind of like acquies and they changed their policy too uh uh as well. Um, I don't think that where we are today is the end state of royalties. I think that there's

segmentation that can be done. I think that there's more clever ways of of doing it where everyone is happy. Um, but you know, ultimately I haven't seen as much of a willingness in the market to experiment, but I think right now we're very clearly in a period of experimentation. Yeah. Will you guys end up layering on more like financialization of NFT type things as the market develops? Like lending and borrowing your NFTs or like better margin abilities like uh that was a very hotly debated thing at the at the end of the last cycle is like should you be able to basically borrow off of your NFTs? I'm curious how you how you guys approach that. Yeah, I think the financialization ultimately the professionalization of the space is you

know blur the community of blur is is very proumer and the future products that the community will introduce will very much lean into that. I will say that you know when we looked at the space we haven't seen anything that currently exists in the market that felt like it really nailed it. um we haven't been particularly excited by any of the existing primitives in the market. There are a few that I think are directionally correct, but you know, NFTs are a lot of a lot of the protocols actually, funnily enough, like just like copy pasted um like DeFi protocols uh and and made it work for ERZ 721s and it's just like, you know, this is this is fundamentally different asset class. It's why you none

of the sexes, right? Like every sex launched an NFT marketplace. None of them took off because this is a different space. This is a different culture. You can't just copy paste. And we've seen a lot of copyping. Um, you know, I do I do think that there will be something here and of course this is something that, you know, we're fortunate enough to work with Paradigm actively researching. Um, but that's all I can share about that right now. Yeah, Santi, my good friend, I know you are itching to do these rapid fires. So, you want to uh fire it off? Well, before we do this, um, you know, Pac-Man, I want to just kind of open forum. Is there anything that we haven't touched on during this last hour that you want to touch on, want to discuss before we move on to kind of this last

segment? Yeah, I think something that I haven't seen the market internalize yet is, you know, a lot of people see Blur as the like protrader OpenC. um like in the same way that they see OpenC as like a web two business, they kind of see Blur as this. But ultimately the this is a fundamental new primitive. The Blur token holders, they control the key economics of the protocol. They have the power to acrue value and to distribute value and allocate capital. This this is something that I think hasn't been internalized by the market yet because you know when we think through like the optimal model

here I really like makerdo where they kind of have these like subdows that they're spinning up and people are able to contribute from all over the community you know something that is possible now is that the the community members and that's you know that's traders that's collectors that's also creators they can actually actively vote and participate in the development of the protocol and and influence over the protocol that that is something that I I don't think has really been internalized. And the other thing that I don't think has fully been internalized is that now that blur controls the vast majority of volume in the market, there's a huge unlock that that is possible that wasn't possible before, which is if you were uh you know in the crypto space, but you wanted

exposure to NFTs, you know, because NFTs today have grown through the bare market, but we're still very much in the bare market. When you look at how crypto operates as a whole, it's it operates in bull and bare markets. And typically each bull market is a multitude larger than the prior bull market. Right now we're still about, you know, like 1/8 of the prior bull market. So the growth of the NFT space from here is very clear. When you think about the players that want access uh and exposure to that growth, you know, prior to Blur, there wasn't really way wasn't really a way to get exposure. like you can't really sweep $100 million of NFTs because that it's just too illquid for that. But now that there's a protocol where the

majority of the activity in the space happens, the blur token effectively becomes index exposure to the NFT space and not not just NFTs broadly but also the the fastest growing segment of the NFT space which is the protrader. So I think that index exposure is also something that I haven't really seen fully internalized yet but that's effectively what has been unlocked you know via the blur token. Hm. Very well. And just a reminder, folks, none of this is legal financial advice, but uh yeah, I definitely uh appreciate those insights back. Um okay, so just a quick uh rapid fire before we before we wrap it up. Um so let's start with what's your favorite collection?

You know, for me it's it's going to be sentimental. The blit maps were my first collection that I ever minted. is what got me into NFTTS. Uh if I didn't mint the Blit Map, I probably wouldn't have really fallen in love with NFTs. So, that's going to be uh my personal favorite. We all have to thank Blit Map for that. Uh what's been your best trade? Best trade uh was definitely the Blit Map as well. I minted it and then sold it at the ETH. And if you remember, the ETH was like around like 30 ETH. So, uh incredible ROI on that one for sure. Yeah. Worst trade.

Worst trade. Um, probably like the one of the art collections like mut mutant garden seeders I think was one of them where you know could have bought a car with it but uh you know wrote it down to to zero. We also know that you like cars by funny story it the entire blur team is is incredibly hardworking. I remember trying to convince Pac-Man to come out one night and he was working till very late um and trying managing multiple time zones. So yeah. Uh second last question, what is the most underrated artist project out there?

underrated. You know, that's that's something that I think uh some collectors will be able to tell you a lot more about the the creators that I see typically, you know, something that's interesting is I think that the talent typically bubbles up in the space like in in the market largely. I used to think that the market was very inefficient, but I think that um in tech and in crypto, I've actually seen the highly talented people, they might be ignored for a little bit, but eventually they get discovered. So, I think everyone eventually becomes known if they continue consistently producing good work. It's like you were saying with your thesis at the beginning, right? You like to invest in repeat founders and you know, ultimately I

think the people that prevail um the market kind of recognizes them. So that's one of the really kind things about this market is that those players do get recognized eventually. That's a beauty and power of open source especially. Um last one which I'm sure everyone's dying to know. Um can you tell us why the name Pac-Man? Yeah, totally. So if you go on Blur, you'll notice it's like a very like retro arcade theme aesthetic. And uh we chose that because you know ultimately you know NFTTS we're we're building very serious infrastructure but we're here because it's a very fun space you know people love collecting NFTTS they love the environment um there's a lot of drama honestly that kind of brings

people into it even more um it's just like a lot of fun for a lot of people and we see you know people who are like children 18 years old in the space and then we see like people who are 50 years old like executives at large companies and they they're all in the same space. this is a really magical thing. So, we wanted to have fun with it. And when we think about like a retro arcade theme, of course, you know, Pac-Man is is one of the OG games. Um, that was really ultimately the the thought that went into it. Awesome. Well, it's it's been a treat having you on the pod, especially uh as I'm sure you and the rest of the Blur team are incredibly busy. So, really appreciate you coming on and sharing some insights. Um, and uh really excited to to have this um go live later this

week. Yeah, Pac-Man, appreciate it. I would also recommend folks go to uh go play with Blur. I think that's the best way to learn about it is great insights on the pod, but like I think I think it's blur.io is is the URL. And yeah, I would recommend folks go play around. Yeah. And you know, just have to share season 1 was this initial airdrop that everyone probably saw uh you know, on Twitter, but season 2 is currently active and similarly sized to season one. So everyone who's active, you know, the goal is really to be able to give away the billions of value to the community that makes what it is. So that's something that we'll continue to push for.

Good alpha. All right. Well, Pac-Man, we appreciate it, man. Um, and yeah, congrats on everything. Thank you, sir. Thanks for coming on, Pac-Man. Take care. [Music]