ZKPodcast: Aping into DeFi and NFTs with Andy Chorlian and Tarun Chitra

Transcript

[Music] welcome to xero knowledge i'm your host anna rose in this podcast we will be exploring the latest in zero knowledge research and the decentralized web as well as new paradigms that promise to change the way we interact and transact online this week tarou and i chat with andy chorlion we talk about his journey starting as a maker dow dev all the way to nba top shot star and how this has influenced his new project fractional and how it connects to the pleaser dow

a dao that has recently outbid the competition and bought the edward snowden nft this episode really explores the connection between nfts daos and defy and how these overlaps could enable some truly futuristic ways to allocate value and create value now before we start in i want to remind you to check out the zk jobs board that i mentioned last week i update this every month to coincide with the zk jobs fair i also recommend you sign up for the zero knowledge announcement newsletter to stay up to date about all the activity over here in the zero knowledge community and it's hard to keep track do join our telegram group to join the conversation and i've also added the links to both the zk jobs board and the zero knowledge

announcement newsletter in the show notes i now want to take a moment to thank this week's sponsor and a zk focus project that i'm proud to be advising on mina mina is the world's lightest blockchain powered by participants it is a layer 1 protocol creating a private gateway between the real world and crypto the entire chain is about 22 kilobytes thanks to zk snarks the layer one protocol replaces the traditional blockchain with the zero knowledge proof ensuring a super light and constant sized chain this allows participants to quickly sync and verify the network the entire chain is and will always be around 22 kilobytes even as it scales and snark powered apps called snaps

allow access to verified real-world data from any website for on-chain use the ecosystem is growing fast and mina's mainnet has just gone live which offers users a platform to build a private gateway between the real world and crypto to find out more visit meenaprotocol.com i've added the link in the show notes so thank you again mina now here is the conversation between andy tyrone and myself today taruna and i chat with andy chorlion from the fractional project and he's also part of something called pleaser dao so welcome to the show andy hey thanks for having me excited to be here so maybe to start off tell us a little bit about what fractional is

and also what pleaser dow is yeah for sure so fractional is a new project that i started working on a few months ago and it's focused around fractionalization of nfts which have obviously nfts have kind of captured a lot of the crypto twitter sphere and general uh like mind share over the last couple months and i got pretty interested in them over the last half of a year or so or now even a little longer than that and so fractional as a protocol is going to allow you to take an nft or a basket of nfts and lock them up into what we're calling a

vault and then create uh fractional ownership tokens of that nft uh that are just normal erc20 tokens so that's fractional and then pleaser dow is kind of this new strange dow that that popped up back when people pleaser released her uh x times y equals k nft on foundation and i was actually part of the initial little group chat to form pleaser dao one of uh one of my friends jameis messaged myself and a couple of people and said hey this thing is really cool do you want to try to buy this and we were like yeah sure let's do it and we didn't really know it was going to turn into what what it has turned into there were a lot more people who were interested than we expected and now it's kind of

formed into a bit of a bigger uh collective of generally d5 people who are interested in in art and nfts and and defy stuff and tyrone are you part of this too i am i am i was also in this genesis group but i regret not uh not as they say aphing anymore me too [Laughter] i want to go back to this later on in the episode um right now i want to hear a little bit about your background let's like let's go back pre-crypto where were you at and kind of what led you to hear yeah sure so i went to school for computer engineering and i didn't really know it so at the time i thought i was interested

in hardware i wasn't interested in hardware um i learned that um that's good yeah yeah that's good and so then i found myself at a pretty generic a software company it was owned by fidelity called e-money doing um like general kind of like back-end work uh working in c-sharp uh i was there for around a year and this was from 2016 to like 2017 summer and kind of in in early in the early spring that year i had started to get interested in crypto and this all stemmed from wanting to uh gamble on an offshore sports gambling website and not wanting to give them my credit card and so i downloaded coinbase and

started it was like alright what are these things that i'm buying and i just got like totally captivated by it and uh just realized that this was something i was extremely interested in and i thought was just so so cool and so then i was lucky enough in august of 2017 to get a job at a fintech startup in new york uh that was tangentially interested in crypto and they knew i was interested in crypto and so i kind of fell into a position where i got to learn solidity on the job and we made an erc20 token and did all that fun stuff and so i worked there for about a year for a while i was the only crypto person on the team and then we eventually brought on noah's inspire from uniswap prior to him being at unislop and i

worked with him for a bit and then around the same time this was towards the end of 2018 i had left to go to maker and i spent two years ish at maker on the smart contracts team doing a little bit of everything that we need to do for the smart contracts team and so for a while that was uh prepping for mcd's release and a lot of the formal verification and testing around that when i joined a lot of the code was already completed and then a lot of the stuff that came after that with black thursday and working on the new liquidation systems and which actually i think just released today for link which is exciting and then also what's black thursday so oh man

all right oh yeah so this one i supposed to know this oh yeah yeah this is this is like the biggest day in d5 uh it's like the big crash i we've talked about it on the show before maybe not really yes damn it it's march 12th 2020. yeah so this was writer's covid was kind of really uh coming into its own which is a weird thing to say about a was this just the day that everything crashed yeah oh wait is this the day that everything crashed and makers like what are they called cdp's all got called yeah so i was at the time uh my girlfriend ally was working and living in london and so i was visiting

her in london and so the crash happened pretty early in the morning u.s time and so i was like sitting at a coffee shop eating some lunch and just you know like on my laptop and all of a sudden i see all these messages come in like what are you guys seeing what's happening what's going on and i was like oh crap then i grabbed all my stuff and left the coffee shop and went back to her apartment and essentially what happened was crypto and kind of everything flash crashed yeah and what we learned was the maker liquidation systems were not totally prepared for a massive flash crash uh but also there was a lot of other stuff that was going on there was difficulty getting transactions through to maker and i mean some people even still think

there could have been some type of minor manipulation there i didn't spend enough time to really have strong feelings about that but essentially what ended up happening is when cdps are liquidated they basically go up for auction and someone was putting up bids that were extremely low you know one way bids and the the bid length was only 10 minutes and so after 10 minutes if no one had outbid you you would win and people just weren't prepared for this and were having trouble getting transactions through and so that the gas fees were insanely high and so for example the makers keeper network code had like a hard cap on gas fees at like 400 way and i think it was up more like the 500 range so none of the bots would work and they couldn't get transactions through and so a lot of a lot of cdps were

liquidated for basically nothing and so that was black thursday and you were at maker at that time yeah uh the rest of my time in london i basically spent working wait can we get a little color on like what it's like being a developer in the war room on black thursday because like that's probably one of the since 2017 certainly the craziest day of course you know prior to 2017 there was candy stop trading and things like that but like that was the craziest day you're working at the developer that made the thing that was losing the most money and had the most at stake like what was it like just stress wise and like you know that's different than like being on call at a tech company

right this is like potentially hundreds of millions of dollars are like about to be liquidated well yeah so it was really stressful i think one of the hardest parts too was because it's all smart contracts and kind of code is law we felt a little bit helpless in a lot of things and so part of it was once we kind of realized what was happening uh oracles would update every hour and so every hour you would have a you know you'd have a wave of liquidations and so most of those liquidations happened over a period of a couple hours and so then it was trying to figure out like the first couple waves we just didn't really have time to appropriately respond and like figure anything out um and then relatively quickly after that um some people spun up just like some internal code so that

like we as employees could bid on these things or like anyone like anyone who had money and wanted to try to bid on these cdps that were being liquidated could try to come in and like just help i was literally on ether scan trying to put through uh bids on on different cdp's that were being liquidated and that was what was hard about you know you couldn't just like push a code through because maker governance has a has a whole governance process and all this it was hard um there was a a lot of internal discussion about calling emergency shutdown and what that would do i think that was really where the the stress came in was there was a group of people who felt that we should call and like shut down the system and group people who were like no that's not the

right way to handle this situation and i think in the end the right decision was made not to shut everything down but it was very stressful and then a lot of what came after that after the first couple hours was just like an insane amount of calls trying to figure out what do we do how do we how do we rectify this how do we calculate what the damage done actually was um and like kind of what is our process to move forward from this wow but wait they could have stopped it when you say shut it down that's sort of surprising to me that that was even an option well so so maker doubt the protocol has an emergency shutdown uh where if you burn 50 000 mkr it basically just kind of ceases the

protocol and there's a whole unwinding that that comes along with that and stuff but so that was basically the conversation was you know is the fallout that's going to come from calling an emergency shutdown and basically you would have to you basically have to rebootstrap die you'd have to start over again versus the fallout of people losing money from cdp's getting liquidated for next to nothing uh kind of weighing those pros and cons and figuring that out and for the record that is probably one of the most extreme engineering situations i think any anyone has lived in in crypto that day not just for uh maker but like bitmex went down uh i mean that led to bit mex's collapse in

a lot of ways was how much money people lost that day due to systems failing so like the craziest stress test of all of the engineering in this industry took place on one day during this crazy crash and it's important not to understate that because it's you know most networks especially new networks like have never even come close to dealing with like 50 of their network getting like liquidated all at once in like 12 hours or something one hour yeah bitmex was a crazy thing when that happened yeah that is crazy to think about like in my mind i i have a hard time imagining what could possibly happen that could be a more like catastrophic market event than that first first

system like maker at least and if they were able to withstand that and continue to like go through it's like it would have to be a bug in the code that actually broke the system at this when it feels like for the only thing worse for it to collapse yeah you know after the most calamitous collapse in this industry then you know we had this crazy insane bull market and part of the bull market was really driven by yield farming and and sort of these protocols giving out tokens to users directly which is a very different model than like proof-of-stake networks where you sell the tokens or distribute tokens up front instead of like distributing them to users per se it's a kind of different go to market model and

in the process you got involved at urine pretty heavily so i think maybe walk us through how your djinn habits uh somehow somehow made it on chain yeah so i was actually all things considered i would say i was a tiny bit late to d5 summer for a bit i was so i uh when wifi came out and there was that one week of farming i was on vacation with my girlfriend's family and i missed all of that farming so that was a bummer but what i found really really interesting about like a lot of defy summer and all that was a lot of the strategies and and figuring out how to more efficiently farm and do all that stuff and so back

in like september october i started to get pretty active in in urine and like the strategist group as i was kind of starting to be built out a little bit more and so what i was primarily focused on at that point was um sushi swap farming so they were like pretty generic uh strategies which were you know you were depositing uh liquidity positions into a urine vault and farming sushi tokens and then part of the interesting evolution of these strategies was yurin's kind of change in relationship with sushi and it created some interesting problems where originally we were farming and dumping sushi tokens and then urine kind of you know creates a pretty strong working relationship with sushi

and so at that point we changed the strategy from farming and dumping sushi to farming sushi and staking it and ex sushi and earning more ex sushi yeah so that was kind of a fun part of the d5 summer for me was trying to figure out more like programmatic ways to to be involved and also help other people do the ridiculous things that i was doing because there was there was a period of time in like september where i was just like not really sleeping and just aping money into every single like asian food name did you did you still have a job at maker at this time oh yeah i was still working at maker but i'm sure everyone at maker was doing this because like we were we were all at a group chat together all the time yeah i mean it's like you're already in the

weeds like yeah well and that's where having people who you know and trusted in the space was insanely valuable so we had a we had a signal chat with like 10 people in it and it was a lot of smart contract developers and one person would find a new farm and they'd post it in the signal chat and we would all pull it up on our code diffs and stuff and we'd look through it and go yep looks good to me and then we'd all just dive in right at the start we'd have like timers and keep each other all ready and stuff it was it was a really weird time very bonding though it sounds like a fun game with some friends like summer camp covet edition yeah interesting um so before you know kind of after

you learned a lot about d5 summer you decided hey i'm gonna go for maker you know which was an organization i suppose at this point is more like in maintenance mode than in like in adding new products mode at high velocity because it has a ton of value in it so it can't like move quickly as quickly uh somewhere kind of smaller so maybe you want to walk us through that and then how that led to you becoming the face of nba top shots in the wall street journal yeah yeah sure um yeah what you said exactly right i kind of i found myself so d5 summer kind of reignited in me like remembering just how cool ethereum is there was a period of time kind of while mall maker was in

maintenance and stuff where it was really easy to just be tangentially involved on twitter and tweet about stuff every once in a while and then do my nine to five solidity work and kind of call it a day uh and defy summer was just so insane and i was like oh this is really fun this is this is what's really really cool uh and so i after that definitely found myself in a place where i wanted to get back to more rapidly iterating and building and and having fun with all that kind of stuff and so that was where i found myself at yearn and then at that point i was pretty upset that i was going to move on from maker just kind of when the opportunity arose and figure out what i was going to do next and i had a good friend reach out and say hey i know

these guys who are starting a new project would you want to kind of read what their kind of docs are looking like in their idea because he knew that i was relatively knowledgeable about on-chain strategies and farming and stuff like that and so that was element finance and so i ended up after kind of talking with will and johnny the the co-founders i decided to join that team and help them out kind of as someone who knew a lot about yearn and knew a lot about strategies and so the idea of element is basically to take deposited positions into yield bearing protocols and kind of cut up that that position into two separate tokens one which is your principle and one one which is your

interest and those are uh based over a deposit that's kind of like a tranched or time locked and so i was helping a lot there with writing the code to integrate with yearn and and ideating on kind of what the value proposition of this stuff would be and why it's valuable to be able to separate your principal and interest tokens and that was a really really fun project to be a part of and so i was there for about five months and i think they're going to launch relatively soon and i'm really excited to be able to take part in that launch and kind of see what happens there but at the same time i was also starting to dabble in nfts and i found an nba top shot i'm a huge basketball fan okay and so like i previously uh but

like before kind of covered and everything i was playing i was playing pretty intense uh nba daily fantasy and had my own like models for scoring and stuff and i was i'd watch a lot of basketball and so for me it just like totally clicked in my head and i was like this is awesome nft is a basketball player so let's go wow and i i aped in a little bit harder than i probably should have i mean it worked out but um like in retrospect it's like oh yeah i put a lot of money into this thing but it was one of those things where i just i really i loved what i was doing and i so i didn't i wasn't even really consciously doing it i mean this and this is what we're going to be talking about for the rest of the

episode the the nfts and how you're kind of involved in that space but i wrote like a few months ago we interviewed andre and trevor we did this episode about nft's music and media kind of and after that i wrote a piece where it's like i can't imagine myself buying one of these things but part of the reasons this is what i kind of the conclusion i came to is like the reason is is the content the underlying content isn't something that i'm in love with yet but like there are things i am in love with like con me types of media i really love now if you combine that with nfts and that's where like the sort of mind experiment goes where it's like if you combine something you love with an nft would you then

ape into it and it sounds like you like they just sort of they did the combination that you wanted right right off the bat yeah exactly and that's that's where it clicked with me and so i had previously been following along with crypto punks and i was like i had considered buying a couple back in the summer and when they were less than 1 8 per and uh but you did why would i do that i didn't because i was like why would i do that when i could yield farm with it with that same ethereum um yeah obviously hindsight's 20 20 there i wish i had a couple more crypto punks than i do right now um but yeah so topshop for me it kind of like you were saying it unlocked to me like okay now i get this because previous was like

why would i care about crypto kitties or or crypto punks all these different things like sure they have an interesting story but they're not really like a narrative that fits what i'm interested in and top shot was the first thing that really did that and so i spent a lot of my free time between september and november december even uh like either browsing the top shop marketplace working on like off-market deals or all these crazy things i was i'd written my own a bunch of google sheets that was doing analytics on all the moments and stuff got way too into the weeds but it was just it was like just fun for me it didn't feel like i was making some super sharp investment that was going to do well financially and at that point it kind of at the same time made it really clear to

me the value proposition of all nfts and at this point like now i do own crypto punks and i want more because i get it and they have cool like a cool story let's hear what happened to you with the nba top shots so you said you you went in too hard maybe yeah well so i i had a couple of good connections with a couple of the the larger nft collectors and more like market maker style nft people uh and so they weren't really interested in basketball and i was and so i i felt that i had a bit of an edge where i could be like hey i want to buy a bunch of this player from you that you don't really know that much about or don't really care about and so i was generally like offering them an off-ramp from topshop because

it was at that point was very very hard to withdraw it still is now but not it's not as bad as it used to be uh and so i would buy stuff at a discount to offer them an off-ramp into ethereum and then back in january a daily fantasy guy now like writer doing a lot of cool stuff named jonathan bales put out a a piece about how him and some of his friends bought a java rant moment for 35 000 and that kind of kicked off like a tidal wave wow and so there was a couple websites that would show you like your account balance or like your general idea of how much your account was worth and over the course of like three weeks my account went from being worth like 200 000 which was a little more than the amount i put in but not very much

to i think at its peak it was almost at 16 million oh my gosh it's it's john downs significantly from that also there's an article that came out about your experience with top shot that taron actually shared with me that was one of the things that i read about you before i met you so you were kind of the the poster child in a way like you were the example of like what here's what if you know if you're lucky girls and boys here's what you can do yeah that that is definitely the weirdest part of this simulation that we live in uh for sure but but really i think honestly what that actually comes down to and what i've been incredibly thankful for is the dumb luck of top shot going crazy and me being one of the largest collectors has opened up a ton of doors for me

uh just of new friends and people that i've met who have been so just so kind and and really great to get to know and great to work with people who i'm excited like i feel like i've made lifelong friendships because of this and one of those guys uh one of the guys who bought the john murray for 35 000 peter jennings and so he is also a big daily fantasy guy really successful and he uh reached out to myself and uh mbl 267 who was the other guy in the article about his friend who worked for the wall street journal who's looking to do a top shot article and so we had a couple calls with him and then i had like a really weird hour-long photo shoot with someone from the wall street journal but yeah how do you take a picture of a

top shot star well so she brought a basketball i i don't own a basketball and so we like walked around brooklyn for a while and took some pictures and then it's funny like so that picture we ended up using is in my site the second bedroom of my apartment which is a home office for myself and my girlfriend and i didn't know we were gonna take pictures inside and i was like oh should i clean up the office she was like no it's fine we probably won't use one of these and then she didn't there's just like crap on my desk like clothes on the floor but that's good so what does it mean like when you make this changeover you like you've gone from farming i guess to now you're on top shot but is this your job is now this your job

like do you spend every day looking at these nfts and trading them or was it more like this was a side thing that kind of blew up uh i would say more so that um okay there was a period of time where i was spending a lot of time per day on it and kind of you know i think crypto has taught this lesson many many times especially in the crypto space if you feel like there's kind of an asymmetric risk reward ratio the best thing you can do is just like kind of dive in head first and see what happens and figure everything else out later totally and i i was lucky as well to have a couple of guys who were also pretty confident in the platform who i would i considered smart and would talk to and we would kind of talk about strategy what we're going to

buy and sell together who i think we all kind of were able to help convince each other that this was like a really good product we all came from extremely different backgrounds uh i was the only really crypto native one one of them is like runs a education startup the other one is a wall street guy and neither of those guys are really crypto savvy one like doesn't really own crypto and so that to me kind of made me feel more confident in it because i was talking with guys who were all interested in like buying these things one because they thought it would go up in price but also because they were really excited about the plot the platform and wanted to be a part of it and really enjoyed what they were doing and so it made me just really really confident and

so for a period of time i was probably spending like a full-time job amount of hours just thinking about it and and doing things but then you know at a certain point i got to the point where i was like okay i've put enough money into this i don't need to put any more money into this thing if it goes well i'm going to have money if it doesn't i'm going to lose this money and i'm at a point where i feel good about the the risk reward ratio fair enough by the way i just realized i keep asking you like was this your job and i'm sorry about that it's also it's such a dumb question to ask in this space like i mean if somebody asked me that it's like uh they're all my jobs all the things in my jobs at some point

because and it's also my life i don't know it's like there's a combination happening and a lot of it's just interest you're following something that you're into yeah no definitely i think that it makes sense it's like a weird that's another weird thing in crypto i feel like you know people do have jobs and like where they're paid hourly but at the same time it's such a like it's a con such a constantly moving thing that is just always changing and always evolving and so there's a lot of things you can do that can like take up a lot of your time that aren't your job and that you can still find like extremely interesting and are worth it yeah yeah it sounds like you're somewhat like at peace with whatever happens in the top shot world you've you've kind of like explored it to the point where you

your interest has been fulfilled you're like you're just gonna leave it there but at the same time like the nft market like you must know quite well how that's doing like what is happening in the nft market right now like what's your what are your thoughts on that that's one of the other funny things that have kind of come out of top shot is i now do a weekly live stream with some of the some other top shot guys called club top shot that's like a very very casual like youtube stream we had on ja rule a few weeks ago and it was so weird and so fun um yeah like john rule got high with us on a live stream talking about it you asked him about fire festival uh so he made one backhanded comment so he rules an insanely large collector he had some

crazy stuff in his apartment or his house not an apartment he's too rich to have an apartment um okay but he had one card that he was showing us and he said that it was fire but like it felt like he knew what he was saying and then he actually did talk a bit he sold a fire fest nft and he talked about it for a second yeah it sold for like six figures but he was saying i think it was kind of like a closing a chapter in his life in a way but i was shocked he came off as i expected like nothing from him and he came off as the nicest dude who was extremely thoughtful about collecting i was i was really really taken aback but he was he was like a really really

good hang it was funny um but sorry to go back to your original question um so yeah i definitely do at this point with top shot specifically i'm not really putting more money into it that would be extremely irresponsible i think just based on my general situation in life but i do still keep up with it pretty well and i still use this i have like challenges i'll go and complete them sometimes if i think it's a good risk reward but yeah so i definitely am keeping up with nfts pretty consistently and at this point i i don't only own top shots i have crypto punks and i used to have some hash masks i think i sold all of them but do you do you believe that at this moment in the nft life cycle that it was over hyped and that it's on the way down or do you

feel like yeah i'm really curious what your what your thoughts are maybe of this moment it's not like obviously in the future we don't know but i think so well so i think i've actually been thinking about this a bit especially because of the nft very very quick rise and fall that happened although i mean the crypto punks are still doing pretty good they kind of just rise and rise but kind of everything else has had a bit of a rise and fall i think that we're going to continue to see bubbles of these things like rise and pop faster and faster because of the internet i think they're not just going to keep accelerating these these things because you know the time it takes to disseminate the information of what is this and why is it cool has gone from like years to hours

and so i definitely think that uh it was over hyped but overhyped is a hard word i think the nfts are like amazing and game changers for a lot of different things so maybe overhyped isn't the right word but maybe just over bought for the amount of like participants in the market for the use case almost yeah yeah and it reminds me a lot of thinking about either like the dot-com bubble or stuff built on ethereum in 2017 where there's gonna be some really cool stuff that stands the test of time and it going up and down a couple hundred percent in like the spring of 2021 is going to be irrelevant but there's going to be a lot of stuff that no one cares about after a few years

totally probably speaking of things that will hopefully last the test of time let's talk about your project you have a project called fractional i'm curious about like the origin story of this like how old is it and let's talk about what it is yeah so naturally a lot of my kind of initial thoughts about it came because of topshop which i think just makes sense because of my kind of uh introduction into really taking nfts very seriously but a lot of my conversations with a few of the other larger collectors was i want to buy this moment for 25 000 i think it's worth a million dollars is anyone actually going to spend a million dollars on it you know what's the addressable market of people who have seven figures they

want to spend on a basketball gift uh which it seems like it's not none it seems like there's someone and so you know then it's just obviously reevaluate what that means to the larger numbers and so that got me and a lot of people at the time were fractionally going in on top shot moments but just not trustlessly that was just a group of friends yeah just a group of friends who were either agreeing to or giving one of their friends cash and then they were buying it and just custody in one of the accounts which works at small scale but realistically you have to have better solutions than that in the long term and so at the time this was i guess like early february i uh i basically just like spent a

weekend coding up kind of what it would look like to have a like a fractional vault of an nft that would give out shares and then you would have a reserve price and if someone were to meet that reserve price with ethereum you could buy out the shares and so i kind of coded this up over a weekend just no front end or anything just some smart contract code and i actually reached out to tarun because i knew that he had the robot i should say had some involvement with nftx and so i just wanted to like get his opinion because we you know i didn't know taron crazy all the time but we exchanged some dms and yeah you know twitter and so funny because you guys actually live in the same city but you just like never crossed paths

no you don't know i don't know i mean it is a big city i mean now we have now we have but hopefully many more times but yeah so i just reached out to him i was like hey i have this idea it's like kind of what i've been working on um i just like spent time doing this i'm curious what your thoughts are and kind of just pretty quickly i had been wanting to do my own thing and i had thought about that before doing element even and it kind of just felt like as good a time as ever to do that yeah and it's like a thing you have experienced maybe even more than most yeah you you you've gone through this cycle fully yeah totally and i do think that if that fractionalization kind of does bring some interesting like defy style

stuff to two nfts uh and so i i feel very fortunate that i think that i found myself in kind of a nice position where i have experience in both of these things to a level that not a ton of other people do just based on my circumstances so yeah so really the focus of what we're trying to build at a super basic level is how can we make something that's really easy for someone to kind of lazily buy some percentage of of a crypto punk or a lebron james moment or all these different things there's going to be i think there's going to be a ton of different really awesome and really complex dows and things like pleaser dao which has spun up to uh where it's not explicit

fractionalization of an nft and sharing the pieces but you're going to have these dow groups that are coming in and buying stuff but this is more focused on just the really basic lazy version of that what what does it mean to lock up an nft and people can buy a bit of it and then maybe someone will buy out the entire thing and so that's really been the focus is that how it kind of works so you the fractionalization i think makes a lot of sense i think anyone can understand that you take some fixed thing and then you break it up into lots of mini parts and each part represents a minor ownership in that like a stake almost but is the idea here that it would like go across all the platforms like that it would work on the nba top shot and

on some of like the ethereum based nfts or is this more like it like i'm just trying to picture is this like a you you already coded it in solidity so i'm guessing it lives more in the ethereum world is it meant to be kind of a concept that's then expanded out to other ecosystems yeah so in the short term obviously i'm insanely bullish on ethereum i spent a lot of my time over the last like four years building on ethereum um and so to me that was just like the natural place to kind of start building this thing i i think in the long term it'll be really really interesting to see how kind of the multi-chain nft world plays out because i do think that there's going to be a much larger retail and casual focus than uh

defy or a lot of the like financial stuff i've been trying to convince my friends for years to get into crypto it took me minutes to get them to buy a top shop moment so that kind of stuff it's just like to me i think it lends itself to a less sophisticated not not in a bad way but just a group who doesn't care as much about a lot of different things so i i don't want to totally count out something like a flow blockchain or some of these other chains that are coming up that are more nft specific but to me i naturally just first going to place my bets on ethereum and build on ethereum but i do think i do think the idea of kind of being in a cross-chain world with nfts in different places is definitely possible at least right

now it is it's happening whether or not that plays out long term i don't know but i wouldn't be shocked to see to see fractional living on multiple chains uh at some point in the future it's not it's not a protocol though is it like is it a product i'm kind of curious and and what stage is it at too yeah i'm throwing a few questions away i think the protocol verse product question is really interesting i would argue that we are trying to make something that could be considered a protocol um i guess like the question is what do you consider a protocol i i don't really know i i don't know i'm not sure i have like a finite answer to what is a protocol versus a product um but i want to make something and we are actively working to make something

that doesn't have to live on our website uh that anyone can come in and fractionalize anything and build on top of us and and create products on top of the fractional smart contracts so in that sense i i do think of it as a protocol for fractionalization as far as the smart contracts go but at the same time we're pretty interested in building a really nice front end and and ui that is a great product for people who want to come in and buy a fraction of a crypto punk or something along those lines so it's kind of hard to say and as far as how far along we are we just finished up an audit end of last week or middle of last week or so and everything went pretty good so we're hoping that

very soon maybe by the time people are listening to this people can can test out our product on uh girly test net and kind of get an idea of what that's going to look like it's just all you know a fake crypto punks smart contract and you can mint yourself a punk and fractionalize it and then go to sushi swap and sell the fractional shares or provide liquidity and so hopefully if that goes well it won't be too long until we're able to have people fractionalizing on on main net we don't have a a specific launch date kind of keyed in right now but we're definitely hoping that it's soon rather than later cool is this using one of the like erc i know that there was like erc 721 and then there's these extensions and i i can't remember the number of the

one that allows like the nft to have hats and accessories remember like the game example where you have like the one nft that is standalone and then you can actually use another standard to connect other objects to it is it using that or is it completely separate from that so i'm not sure exactly which one you're talking about i know there's erc-1155 which was i think made by engine and it that's like what wearable uses for their nfts and so that one allows for you to have an nf nfts with editions of more than one so out of the gate we are not going to be supporting that will just be erc721s but it's

we're very much so extensible to be able to support that in the future um should we need to yeah it was erc 998 but i think it's since been replaced by this maybe erc-1155 okay i don't have that handy but yeah yeah i guess anyone can correct us if we got that wrong sadly i haven't been able to memorize every single erc yet related to nft fair enough but actually i think something that might be might be super uh useful is to maybe go through the mechanics of like hey i own an nft and like how i fractionalize it how things work because i think actually for an audience that includes a lot of

developers it might actually be good to like walk through the mechanics of like how these things are made what they look like and i would say at least from my purview it's definitely a protocol like there are smart contracts that are options and like there's tokens involved that are made and so you know i think maybe if we walk through the mechanics it'll be a little bit clearer yeah if that makes sense yeah sure i'll go through kind of like the life cycle of an nft and what that what that would look like in the fractional protocol and what that what it does to the nfd so say i came with a crypto punk and i wanted to fractionalize it uh well one you'd have to have a wrapped crypto punk because we accept the rsc 721 tokens not crypto punk tokens but then at that point you would create

what we're calling a vault and that vault cares about a couple unique things and then a couple things it has you put in but it doesn't it's not very opinionated on them so you're going to be creating an erc20 token which is represents the ownership of the nft and so that your 20 token needs to have a total supply and number of decimals which actually force you to have 18 decimals for the sake of everyone's well-being um and then a name and a symbol and so the the protocol is not opinionated on those things you can name it whatever you want but then alongside that some of the more important stuff is one a reserve price which is going to be kind of the initial price in ethereum to buy out that vault and i'll get into how a buyout works in a little bit

and then alongside that we also need an auction length which again with the buyout is going to be a part of of that system and then lastly we have what we call a curator fee and this is a fee that the nft originator is able to set which allows them to essentially take almost like an asset under management style fee from the from the vault they create and this can be set in a range and the way that fee is paid out is in the form of total supply inflation so let's say you create a vault and it has a hundred ownership shares then you set your fee to five percent annually and then over the

course of a year the vault would eventually accrue up to 105 ownership shares and those would be sent to the nft originator and so what that allows for initially is in a market where maybe it's not very desirable to to fractionalize an nft because uh nfts are kind of going parabolic you are able to basically turn your nft into something that is providing you some interest essentially and you can you know take some profit off of your nft and still earn some shares but in the long term what i think is really interesting there is it allows for artists that fractionalize things to kind of create a new revenue stream that isn't secondary market sales it kind of it encourages diamond hands as opposed

to weekends with with their collectors so for example if an artist has a bunch of collectors who really like the artwork and don't want to sell it they're never going to have secondary sale profits whereas in this if you have a bunch of collectors who really like all on 25 of the fractional shares of your piece even if they never sell it you're still going to be seeing revenue from that which i think is really cool interesting yeah that's kind of one of the problems with like nfts being sold to an owner who really loves it they may just emotionally love it so much that they never resell it and the artist doesn't get that sort of secondary market resale benefit yeah and so i think that's a really interesting dynamic that could that will play out i'm very curious to see what what kind

of curator fees are set and and what the market kind of determines is a fair curator fee but i think we'll just need kind of need time to see what that looks like for this are you thinking primarily like the top shot model where it's like art that you're fractionalizing or is the vision a lot broader than that well so i think in the short term kind of the low hanging fruit of top shot and crypto punks and all that is definitely the the current addressable market of fractionalization but i do think that it's a lot wider reaching than that kind of as we see real world assets come on to ethereum and you saw that with maker just recently they started onboarding their first real world asset i think that what is able to be

fractionalized is going to continue to uh to expand beyond just our work i kind of in general my feelings on nfts is that we're in like a really interesting kind of proving grounds right now where where people are going to be building out a lot of cool primitives and applications that can use nfts and the artwork and everything that people are trading right now is just kind of like the testing tokens for all of the actual like insanely valuable stuff that in my mind should be an nft or could be an nft like buildings and esports teams and all these crazy things there's been a couple different kind of models around fractionalization some have been more like heavily dow focused and stuff like pleaser dial kind of is

moving in that direction and then other ones that are not quite as much and so it's gonna be really interesting to see kind of as this all plays out what do these fractional tokens look like are they something that trades above what people consider the the fair market value of the asset that's locked up and all these different things um it's gonna be very interesting to see that all play out are there like previous d5 models that influenced your thinking around this or like do you already see some strategies that could be influenced by some of that excuse the term degen activity that you engaged in earlier this summer at some point last year last summer um well so i think one of the cool things that could really pop up from this would be a

kind of an interesting way to do lending and borrowing protocols with nfts there's currently a project called nft phi which is basically like a peer-to-peer nft lending marketplace but i think turning the turning an nft into ersc 20 tokens allows for more like compound or ave style markets around them and stuff which i think would be really interesting and that would kind of create the ability for you to make more educated bets on nfts uh whether that's like trying to go long on an nft or short on it which i think is really interesting and not quite as easy to do in something like an ft5 i think or at least it's a little bit more of a

you know manual process because it's peer-to-peer where you have to have someone agree to your terms and kind of lock in to a more structured loan yeah and for some historical context so ave before they came ave was ethelene which was peer-to-peer just and very similar to mt5 and it just could not get traction because it was impossible for people to figure out the price what the interest rate was um and i think like once they moved to the pooled model of course they were able to grow much more quickly and i think that's in general probably the same thing for nfts although of course the notion of like price discovery for nfts is difficult but i think it's improved a lot when fractionalized

i guess one thing that maybe is is interesting to think about those like let's say i own an mft and i go and fractionalize it if i sell more than 50 of the shares then i basically have exceeded control of the reserve price right so like i lose the ability to have like a right of first refusal so that like how do you foresee the dynamics changing there when like people fractionalize mts but they keep a right of first refusal versus those that don't and like you know because because i imagine that's something that happened in the top shot that's that's something i haven't seen kind of in d5 you don't see there's no right of first refusal yeah it's a i don't really know what's going to happen there i've talked to

people who have been interested in fractionalizing stuff and have said you know i want to keep more than 50 percent to to kind of make sure that i still have some some say in whether or not this this thing would would sell but i i don't know i think probably a part of it depends on what's being fractionalized and why it's being fractionalized i think that maybe for some people fractionalizing an nft is just a different way to to find exit liquidity from that from that nft and in that case maybe they don't care and so they'll sell 90 of it because they just you know they don't want to own this nft anymore and it was easier to do a dutch auction for the for the fractional tokens than it was to list it on openc and wait for someone to buy it but i definitely think that for people

who are trying to build more like unique and wider reaching projects on top of a fractionalized nft or fractionalized basket of nfts i do think that that's going to be a point of contention for a while is you know say i have these grandiose ideas for i'm going to make take this thing and i'm gonna fractionalize it and then people who own fractional tokens for it will be able to do x y and z because they own part of the the usc 20 tokens uh and so it suck if you build this whole thing out and have this whole grand idea and then you sell 60 of it and then it gets you know a buyout triggers a week later and all of a sudden all your plans have now been ruined so that'll be a very interesting dynamic yeah because things like open c and

wearable like the people can make kind of make bids continuously and people do just like make a lot of annoying bids all the time right like there's like this weird ux thing that happens so kind of curious how you foresee that impact like there you know this idea that there's like an auction triggered it's kind of funny compared to d5 so defy an auction is a bad thing it's like there's a liquidation like the loan is going under but here the auction is a good thing in the sense that it's supposed to be like we could do the event yeah we're we're like we're cashing out and so somehow somehow merging those two mental states i think is like the the key to these products that like people haven't

really figured out but fractionalization certainly seems like the one of the necessary pieces yeah for sure and it is definitely it also comes with some like serious risks where if there is an auction where the the buyout ends up going for significantly less than what the token was trading at then everyone who was trading the token takes a haircut and so you know there have to be token holders who are making sure they're keeping track of the reserve price and or really and in any fractional thing i don't think token holders want to see the nft sold for less than than they bought the the fractional shares for but that's also just kind of a part of markets that's the rough part of that i want to talk about pleaserdo

and how this relates to all of this so it's a different project right it's not it's not closely related to fractional and yet like why like is there a connection point is there something of like commonality between these two projects maybe maybe we should give the history of pleaser down please do so basically people pleaser who is a good friend of both of ours in various regards she basically actually like in summer she did this amazing like set of illustrations for sushi swaps launch and for ava's launch and uh mateo at nina swap messaged me and was like hey can i get

introduction to people please so i introduced him sometime in summer and then i just didn't hear anything about it for a while she's like okay maybe it didn't work out um but then like you know april sometime maybe march late march unispot v3 kind of has this launch announcement and as a teaser they put out this video that she made and she she's an artist i guess she's a animator visual artist or yeah she used to work on game design game okay cool um then she she's been like kind of a freelance d5 graphic designer she's like done every d5 protocol like done some piece for like literally every protocol cool um probably the most in demand defy artist that exists like every project

should been trying to condition pieces and she's one person so obviously obviously that's like hard to do but and so like this piece was pretty epic because it kind of like marked kind of this big change for uniswap and then you know i think around the time there is a lot of violence towards asian americans and so she decided to put sell an mst of the piece uh with all the proceeds donated to uh like asian american violence uh nonprofits well anti-violence sorry i guess that sounded like that but you cut you got one um and so then basically i think it was at auction and the price started going up and you know i think andy and i both

have different sources of how we got involved in this but i was at restaurant a little bit in debris did and um i just got this message of like send 10 eth here before this amount of time and i was like well you know who knows what this is but sure let's let's roll the dice from from anyone was it from an anonymous account on calendar from someone who i want no they're from someone who i won't talk to but like okay someone you know and trusted i guess okay and they were like yeah we're like we want to buy the keys we're gonna pull together some funds and i was like sure this is basically like the the problem that andy is talking about about like pooling together money to buy one piece this is kind of that and you know get added to

some telegram group and all of a sudden it's like hey we won this 500 000 piece which was i think foundation's biggest sale at that time for them so you wait were you pooling together to buy the people pleaser yes like image nft yes yes the uniswap uh nft that she was selling to raise money okay so like there there's basically a collection of people who got together in order to buy this yes okay and then you know the the the group uh and then people pleaser you know i think the the group gave her some fraction of the token so they tokenized they sent me a token for voting on what pieces to buy okay uh mark mariano from maker was kindly our uh

our governance czar and set everything up okay and uh then you know i think there was this crazy excitement and like tons of people were like i want to join i want to join i'll add money whatever and so we're like yeah well we don't really the goal of this thing was have like a sort of social mission and to buy paintings that like have a social component and also represent sort of the values that people pleasers are does i think of these things like community and art museums right like you're never going to own a share of the map but at least here you can kind of own a share of these things and the way you're doing this is through dell so you're basically just using like a dao infrastructure kind of a i don't know which one is it

we're using compound slash unisoft governance contracts like okay pretty simple so you so you have this dow and you're pooling money in order to buy nfts and in a way you're fractionalizing the nfts yes uh and then somehow there's this decision on the snowden piece that the snowden piece was the thing we had to buy and we had to raise money for that and so somehow we added new members that part i won't really get into any details on but you know new members are at it capital came in and we had this crazy bidding war with this anonymous person and then the piece ended up going to please draft for 5.5 million wow and now you own it but like so are you waiting

to eventually sell it so andy and andy can now tell you where where the the true long-term goals go okay yeah so i don't think we've had an official snapshot vote or anything to ratify doing this but generally the plan is to fractionalize the piece on fractional interesting what exactly we're going to do from there also has not totally been decided i would say it's a very uh you know very free-form group right now we're still figuring a lot out um but that is the general plan and i think the idea is that we could potentially then you know maintain ownership of of the piece to some extent uh and kind of i think it's fitting for

a for a snout and piece something to give give it to the people and then also uh hopefully raise some capital through that to be able to figure out what's next and go from there but again it's all like if none of that happened if we did something totally different with the fractional tokens i wouldn't be shocked um but as right now it's the general idea the pleaser doll sounds like it just was created by a community spontaneously but like is everyone cool with using it with fractional or is it like that's why there's governance votes right the nft can only be moved by governance yeah the governance contract owns the nft this is an amazing experiment yeah yeah it's a lot of fun cool it's

really cool i know it's like the launching of your project through this experiment sounds given like the story we've heard also of your background this is so fitting and so awesome it's like learning in the moment as this thing is like moving a million miles an hour and all these people want to throw money in it yeah totally i mean like i have i just i pulled up like my first twitter dm from this i won't say from who it was just me and four other three other people just yo let's get this nft someone suggested kenny beach and that was it and then all of that turned into a telegram group and way more people and amazing is people pleaser involved in the dow yeah she is now after the

piece of purchased she is a a partial owner so amazing so maybe to to wrap up the interview what are you seeing kind of coming down the pipeline for nfts obviously fractionalization is one of these things but you know what else what else do you think you're looking forward to maybe in the space yeah so i'm really i'm very curious to see what happens with um the christie's crypto punk auction that should be happening pretty soon i think that's going to be really interesting and there's a chance that it just totally re-rates crypto punks and so i'm looking forward to that and kind of seeing what happens there i think there's also a good chance that that could be the like local top of crypto punks for a little bit

which wouldn't be shocking considering how the people's stuff went and all that but i think in the long term i'm i'm really interested in you know fractionalization and all the different things that can come with nfts in in creating these really interesting sometimes gamified sometimes just cool money legos you know just building out the the ecosystem around them from like just buying and collecting is awesome and really cool but there's just so much more that's capable of being done and i think that these last couple months have hopefully injected enough money and excitement into the space that over the next you know year or so we're just going to see some really cool crazy interesting projects that are going to come out uh and i think that you know as as

people continue to build that's what i'm most excited for is just other smart people who are building stuff and creating other interesting nft legos in the same way that you know for for a while d5 was just a few interesting protocols that were doing stuff and now we have this crazy ecosystem with so much going on uh i'm sure there's you know a lot of stuff that people haven't even considered with nfts i would add uh one of the things i find the most miraculous about this story plus in general kind of the way the analogs to like the last cycle like 2017 that i would i would make for nfts is like during the last cycle there's obviously a lot of froth and fake stuff that doesn't work or make sense like fractionalizing

farms in india and selling them on the blockchain or something like i remember seeing things like that but amidst all of kind of like in every good lie is a kernel of truth and so like i tend to think like in every good kind of hype cycle there's always a kernel of truth infrastructure-wise and last time it was d5 stuff like the core tenets of d5 like people were raised ave ico'ed for ethylene bancor icos they may not have been the main winners i mean obvious case you know obviously they've made it into the you know successful ico wasn't a scam really provided use value to users uh bank or maybe halfway there i would say but like the idea is like there's like

all this infrastructure that comes from the hype cycle and like getting all these people into it into like kind of these kind of last-minute things and i think nft like infrastructure in general to like make it more useful and accessible and almost like interoperable in a weird way in the sense that like somehow i want my top shot nfts to interact with my crypto punks but like we don't know exactly how that's gonna happen um i think like that's gonna be the the cool stuff to to see and i think fractionalization is like one of those like core primitives that has to exist first yeah i totally agree uh um yeah i feel a lot of uh similarities from from 2017 like icos and stuff to nfts now

which has a lot of good and bad connotations to it but i'm very very excited about what the next couple years are gonna are gonna hold so so i think defy and nfts are gonna intersect um a lot more over the next couple years kind of as we're talking about the future like where do you see that going and what are kind of the the grape leaves tea leaves whatever the leaves that are predictive i do love stuffed grape leaves but uh i i think the the thing that to me is just like an obvious use case for fractionalization outside of uh you know the crypto collectibles and art world and into the d5 world is uh the upcoming uniswap v3 liquidity tokens

or lp tokens so for those who aren't aware in unislap v3 because they have ranged liquidity as opposed to just generic liquidity they have to identify each user's lp position as uh as an nft as opposed to an rc20 token and so that's going to open up some really interesting things but it's also going to break a lot of things for example uniswap v2 liquidity uh pool positions are able to be used in make or dao as collateral to borrow against v3 that won't really be possible at least right now maker doesn't support nfts so to me fractionalizing those things kind of immediately helps to

solve that problem and and address one of those pain points and i wouldn't be surprised if in the long term kind of as defy gets more uh continues to evolve and explore nfts more and these worlds continue to merge we're going to see more and more nfts that uh that represent positions in d5 or or different things that we hold or do in d5 um i mean uniswap has generally been a trendsetter for a long time and them doing this to me means probably other people will do it as well and so i'm very interested and excited to see kind of what that whole d5 fractionalized lp positions and whatever else comes from that holds cool so thank you so much andy for coming on the show and sharing all

of this with us what an amazing journey and also like very exciting stuff in the pipeline it sounds like yeah thank you very much for having me this was a lot of fun it's always fun to talk about d5 and crypto i could do it all day of course same here tyrone thanks again for joining as the co-host thanks for having me and i want to say a big thank you to andre the podcast producer henrik the podcast editor and to our listeners thanks for listening [Music] you