podcasts

From CryptoKitties to Mainstreaming Non Fungible Tokens, Roham Gharegozlou of Dapper Labs

podcasts

From CryptoKitties to Mainstreaming Non Fungible Tokens, Roham Gharegozlou of Dapper Labs

July 2020

Posted by

Jamie Burke

CEO and Founder

As an early investor in Bitcoin and Ether Jamie went ‘all in’ during 2013 founding Outlier Ventures, Europe’s 1st venture fund and platform dedicated to blockchain and Web 3....read more

Roham Gharegozlou, Co-Inventor of CryptoKitties and Founder of Dapper Labs talks about scaling NFTs to billions of users and how the Metaverse, as an emergent ecosystem, will not be designed: it will be open fluid and anchored on a blockchain.

Posted by Jamie Burke - July 2020

July 2020

Posted by

Jamie Burke

CEO and Founder

As an early investor in Bitcoin and Ether Jamie went ‘all in’ during 2013 founding Outlier Ventures, Europe’s 1st venture fund and platform dedicated to blockchain and Web 3....read more

Key themes:

  • Breaking Ethereum with Crypto Kitties
  • Scaling NFTs to billions of users
  • Why the Metaverse needs blockchain

Listen on iTunes

Transcript:

Jamie: Welcome to the Founders of Web 3 series by Outlier Ventures me your host Jamie Burke. Together we’re going to meet the entrepreneurs, their backers, and the leading policymakers that are shaping Web 3. Together, we’re going to try to define what is web three, explore its nuances and understand the mission and purpose the drivers founders. If you enjoy what you hear, please do subscribe, rate and share your feedback to help us reach as many people as possible with important mission that is Web 3.

Today, I’m happy to welcome Roham Gharegozlou to the show, co inventor of crypto kitties, and now dapper labs, the founder of Apple labs and axiom Zen. Welcome to the show.

Roham: Thank you. Thanks for having me.

Jamie: So you’re most famous, at least in the context of Web three for breaking Etherium. And you describe yourself as being a relentless optimist, something I can definitely scribe to and I think a great quality to have in a founder. And I think if you look at your body of work, what you’ve achieved, I think that’s certainly evident. So to give some context as CEO at dapper labs, a company behind crypto kitties, and upcoming projects like NBA top shot and flow blockchain, you describe it as the serious business of fun and games on the blockchain, no jargon or nonsense, just good fun. Presumably that’s about abstracting away some of the complexities of blockchain. So I think definitely want to get into later and he talked about how Apple ABS uses the power of play to deliver blockchain based experiences for the real world and again, a reference to hopefully mainstream adoption that we all want to see. You are also former CEO of axiom Zen and award winning Venture studio based in Vancouver, which has created a number of projects that we’ll talk about a little bit later, I guess, most importantly, you are both a founder and an investor and advisor, and have a background, a really interesting background actually, certainly in academic sense, again, something we’ll talk about a little bit later. So the reason why I wanted you on the show was, as you know, we’re exploring the different types of founders into the space and their founder journey. And you have a slightly unusual one in that you kind of have this academic background turn VC turned founder, you’ve also managed to have multiple successes with startups coming out of the studio model, something notoriously hard to do. So I really want to go into that a little bit. I think you’ve got some really good insights into this interplay between gaming NF T’s crypto and web three, and curve in reference to your academic background, this kind of systems Thinking as a biologist and economist and so very interested to see the analogies between those two disciplines and of course, crypto and crypto economics.

So to dive into a summary of your background, give people context. You studied at Stanford University. Actually, you have an MS in biological systems. Ms. MBs, actually, a BA in economics. You’re also a research assistant then around 2004. You then moved into venture with Newberry ventures where you eventually associate 2010. And then first fund rising tide Fund, which was seed early stage growth stage capital, looking at Mobile financial services, healthcare, ecommerce, etc. But you’ve been consistently a very active angel investor. So I think, according to Angel list from 11 to now, you’ve written about 20 plus c checks, is that right? And you’ve had a couple of exits as well.

Roham: Yeah, quite a few exits. Not all of them were financially successful exits. But teams found at home and we certainly learned a lot.

Jamie: Well, that’s definitely a win. So I think it was 10 exits and counting. So pretty good performance on 20 plus c checks. Then in 2013, you’re a founding partner axiom Zen. And which as I said, is this award winning venture studio not exclusive to blockchain. Although it looks like that is integral to it. you referenced blockchain and AI in the context of the emerging technologies you look at as well as VR, something that very close to my heart. And I want to talk around the convergence of those two technologies in the context of web three. But to give context, the success that you’ve had there as a venture studio is incredibly rare. So you’ve touched I guess, across all of the ventures over 200 million consumers through the different several ventures that you’ve done. One of those includes crypto kitties, but also something like Zen hub. Zen hub is a collaborative solution. I believe for enterprise E to B, which has over 150,000 developers, product owners and product managers using it. Then in 2017, late 2017, one of those projects come out of axiom walls crypto kitties, which as I said, temporarily at least broke aetherium due to the demand, and created a lot of debate around how ready a theorem was for for primetime. And then I don’t have the date, but Apple labs was spun out of axiom and you followed Apple labs in 2018. So it would be great if you could just give us a high level on on Apple apps itself.

Roham: That Labs is the world’s first blockchain entertainment company. You know, we like to say Our mission is to bring the benefits of blockchain to everyone and to do that we got to make it simple and easy to understand. So the first step was building crypto kitties, which as you mentioned, was one of the most Successful blockchain projects to date. But really what we realised was the gap between where the promise of the technology was and where we needed to get it to. And so most of our focus today has been on building the flow blockchain, which is almost ready for release. And we’re launching it with NBA top shot, which the project we’ve been working on with the NBA and NBA players Association, as well as a new version of cryptokeys that I’m excited for everyone to play.

Jamie: Fantastic. Well, I think everybody can agree who’s working in this space that we need, you know, more gateways to onboard users, developers and end users. So maybe before we go deep into all that kind of world, it’d be interesting to just explore that the journey a little bit. So you’ve almost done the reverse of what is normal in the space. You started out in venture. You created a studio and then you became a founder. Normally, it’s a founder, maybe they might do a studio but they usually flip from founder to venture what why that way around. Was it intentional or accidental What? What? What was the journey there?

Roham: Yeah, so the thing that maybe doesn’t show up on LinkedIn is all this series of side hustles throughout the SIR University academic journey for me you know, academia was wasn’t really the day job. It’s, it’s what I was interested in and what I wanted to learn about while I played around with websites and affiliate marketing products and things like that. And so after college, it was really about how do I break out of the the sort of, you know, the circle that I’ve created for myself and meet as many other entrepreneurs as possible see as many patterns as possible to try and figure out sort of where the puck is going to quote, quote, Wayne Gretzky, so that venture was really the path for that. And I am so grateful for the team at Newbury and the team at rising tide for taking a chance on me because it’s very rare that you know, someone straight out of college will be given significant responsibilities out of venture firm, but for me, it was absolutely fantastic met hundreds of thousands of entrepreneurs every year and that’s really what pushed me to start making small angel investing. that taught me quite a bit about the failures coming more than the couple of successes. But it was all about sort of trying to figure out what what the patterns are. And the reason I went into a venture studio model after that was really after seeing so many great startups get started and failed, because of the sort of cycle they had to go through raising money hiring a team, failing to find product market fit in time, and then that team disbanding, and then another great entrepreneur having to spend the same amount of time all over again, putting their team together. So a big part of the thesis with axiom zen, and you know, there weren’t a lot of venture studios, you know, there was idealab, there was a beta works at the time. But the idea was to bring a great group of people together, and then just iterate through multiple ideas and products so that we can, you know, learn from our failures, but not be forced to sort of lose great team members and then have to re hire them. And that model has worked really well in the sense that the vast majority of the data labs Engineering Leadership and to certain extent business leadership, or folks I’ve worked with for many years. And so, you know that shared Trust has given us the ability to pivot quickly and to actually weather the sort of pace of the venture startup as well.

Jamie: And where did you so you were kind of one of several founding partners, with those other founders from startups that you backed as an angel that you like working with? Or how did that team form?

Roham: I think some was a very small team, you know, it formed largely out of the, you know, just the demands that we were seeing. So I was still working with a group of companies in the valley, and my current co founder and Chief Business Officer was at that time CEO of a gaming platform called called fuel. What was a game company called fuel and they had just sort of discovered this platform play and we’re going to pivot into it. And we formed axioms essentially, to help them build out that infrastructure. And that’s what led to our first sort of big success, which was a gaming platform used by companies like Sega like mini clip, they end up onboarding well over 100 million users into it. And we actually sold it in 2016. Before my co founder Metro me full time at Axiom zen, and then later dapper labs.

Jamie: At what point? Did blockchain become part of the thesis at Axiom zen?

Roham: it was really when Dieter joined our team. So Dieter joined us in April of 2013, if I remember correctly, and he had been a big fan of Bitcoin for for some time. And so he started sort of introducing me to these ideas. And, you know, our first instinct was, well, let’s build something on top of it. And so, in 2014, we tried a couple of different apps that sort of use Bitcoin as a payment methods are within them, but obviously, the confirmation times the costs and unreliability made it quite impossible to imagine those things becoming widely widely adopted, but we did buy some Bitcoin which was which was good. So that’s sort of how we how we got into it in the sense of, you know, we’ve been trying to build products on the internet. Since since we were kids, right, and so the openness of the internet was so attractive and, and the fact that this is a form of money that is native to the digital world was an idea that was just so it was intellectually exciting, but also just felt it just felt right. And it felt like we should be able to build applications that use this thing. it much easier than we in the current world. But of course, it’s taken many years for sort of the tech to catch up with the promise, I would say.

Jamie: yeah, I mean, I feel the pain. So I founded Outlier, roughly around the same time, so 2014 and initially, we were also a venture studio model just because there weren’t any things to invest in, you know, as you say, besides Bitcoin and then eventually eath. And so we got first hand experience of the technology allowed us to be better investor certainly put me off trying to do venture model again, that definitely wasn’t as successful as, as you’d made it. Now, since then, you’ve kind of referenced the AEC blockchain as the biggest thing to happen to the internet since the iPhone and Really around this idea that it can reshape how we interact with digital worlds, presumably, within that digital assets? Could you kind of unpack that a little bit more? So, for you, you know, what is and I’m sure it’s evolving, but what is the big vision around blockchain as an emergent technology? And again, I see, you know, you reference it alongside things like AI. VR, do you think there’s a relationship between those things in what we call Web 3?

Roham: I do. I think the way I like to think about blockchain, the way we think about it, adapt for Labs is really simple, actually, you know, just the same way as today, you run software on the cloud, which is, you know, a server behind someone’s firewall. This is simply a way to run software in the open. And so the fact that it can, you know, just like the move from sort of, you know, locally hosted software to client server architectures, unlocked a whole bunch of different business models, a whole bunch of different use cases, including websites and email, but also Uber and whatnot. We think the move from The applications that can run in the open without anybody being able to control them will similarly lead to many different types of improvements to products and services that we use every day. So sort of Bitcoin is one example, right? It’s one application that runs in the open, it has a certain set of rules that nobody can change. And, you know, it’s it’s, at this point been running for 11 years, it’ll probably run for the as, as long as sort of humanity can operate the computers. And that’s just incredibly powerful. I mean, what a theorem did was say, well, let’s programme this global computer, this this thing that exists out in the open to be able to do anything. And so, you know, the initial use cases that we’re starting to see with around digital assets, you know, whether it’s sort of tokens or crypto kitties, or you know, NBA top shots is very interesting. And so you know, the concept that because the programme that defines the asset scarcity runs in the open, it’s not controlled by anyone, and therefore everyone can trust it. That’s a very subtle idea that once you understand it, you can start applying to many other uses. cases as well. And the sort of the powerful thing is that because it’s in the open, anyone else can build on top of it without asking for permission without taking platform risk without being able to sort of have a have a tollgate or a something to to sort of slow down their their access. And that means that we are a small company in Canada created this this digital asset called the crypto kitty. And the fact that it was open meant hundreds of other companies have now integrated it into their products. And you know, you can open up any blockchain wallet and visualise your crypto kitty inside of it. You can create games on top of a crypto Kitty, you can take it into VR worlds, etc. And it’s things that we didn’t have to go around signing big deals, and those teams are not they’re tapping directly into our community without us ever being able to, you know, throttle their API access or any other any other things. So, at the end of the day for consumers what it means that blockchain asset and blockchain application just keeps getting better over time. It keeps getting other Developers adding functionality into it and sort of accelerating it. And we’ve seen this once before. With open source software like the when open source software started becoming more and more prominent in the web applications we use everyday. Consumers didn’t care in the sense that, you know, something that use open source was probably in the beginning, worse quality than then these apps that were built by large enterprises, but the difference was they evolved faster. And soon you had, you know, kids being able to spin up Facebook clones, or Friendster Chrome’s or whatnot. over a weekend, you had Mark Zuckerberg being able to build Facebook in his in his dorm room. And so that sort of compounding effect is already happening where today for an entrepreneur, it is easier to build a FinTech company on Ethereum than ever has been the history of the internet. So two kids can create a product that can store billions of dollars of value, without any sort of help, any access to sort of regulated permits and this sort of thing. So that’s why we think it’s incredible. Powerful it basically democratises the ability for people to create new products and services for customers. And it lets those products and services build on top of each other in a way that’s really exponential.

Jamie: Yeah. And I think that’s a really powerful point. Now, if I look back at your background, this academic experience in economics and biological systems, it seems obvious that the use case you might go to consciously or subconsciously when you’re entering a blockchain space would be crypto kitties. I guess given the firm’s background or successes in gaming, that also then makes it slightly more obvious. Was that intentional? And I mean, did the use case seem obvious to you that it would be the it would be the killer app at that moment or the kind of first runaway success or was it was much more experimental than that?

Roham:I actually can’t take credit for the cats themselves. That was A Chief Creative Officer Mac who and you know, cats have been the lifeblood for so long. So, right, we definitely pick the kitties very intentionally, in terms of whether we we thought, Well, you know, it was going to be a success out the gate or build up over time. I mean, honestly, we built it as a something for the blockchain community of that time, more of a proof of concept of what’s possible with the technology and a little bit out of, you know, frustration at the Icos that were you know, raising hundreds of millions of dollars and kind of making promises that we knew were were not not realistic. So a big piece of crypto kitties was actually trying to take concepts of blockchain and make them a little more biology is just something that we all as a biological beings understand. And so, you know, when we talk about sort of digital scarcity, I wanted to put that in terms of, you know, the these are, it’s the generation of the cat, as in you know, that it’s this empire. eration is only 50,000 of them, and they’re there. won’t be any more. So I would say the biggest piece where biology and economics and sort of the system’s thinking and you know, evolution and stuff tied into blockchain, for me is understanding that these systems are all ecosystems. And, you know, when we created crypto kitties, I don’t think we realised the extent to which it would create an, an ecosystem on top of it, and where our success is more about the emergent behaviour that happens between our customers, other developers and sort of the community at large, rather than what we’re driving as a singular corporation or company, then the entire blockchain space has been this sort of emergent evolution between the so many different teams that are building Lego pieces that eventually break through and killer applications for customers. So we wanted to take all of the Lego pieces that existed at that point, we added one of our own ERC 721 the non fungible token standard, and then we create a cryptokeys a sort of the You know, step function of all these pieces representing something that others can use. But we were caught by a little bit by surprised by how much it captured the imagination of people outside of crypto. We don’t really share those numbers usually. But, you know, three, three and a half million people came to kick through websites to try to buy a cat 100,000 actually succeeded because it part of it was capability. You mentioned, scraping theory and all this stuff. But the user experience of using all of these sort of disconnected tools was quite chaotic, as you know, and evolution is messy. So part of that stress test, I think, catalyse that big, big sort of interest and improvement across the board.

Jamie: So then you build this stack from the ground up, and it’d be interesting to know what components of that stack you think are required to enable, I guess frictionless frictionless experience around lfts non fungible token guns or these kind of digitally scarce assets?

Roham: Well, it starts with having a scalable foundation. At the end of the day, we try building a lot of these things on Etherium. You know, we built Apple wallet, which is a first consumer smart contract wallet, really trying to make the user experience on cryptokeys better. And many, many teams have built, you know, credit card on ramps and things like that. But if the if the underlying network is has unpredictable guests fees, your transaction fees and unpredictable finality times and unpredictable speed and throughput, it just makes it really difficult to build good user experience on top. So you know, that’s why we built flow. It’s we didn’t start the company with the goal of building a blockchain. But we just we just saw that how much are our theses different from everybody else building blockchain so it starts with a foundation that’s really solid and that includes this idea of acid compliance so we know the reason we will turn blockchains every other blockchain system out there is relying on a technique called sharding, which is breaking up their network into multiple smaller networks and makes it incredibly hard for developers to build cohesive and performant user experiences on top. So first thing is starts with a scalable foundation. And then it goes into the things that you use sort of alluded to making the payment experience very smooth, it should feel like Shopify or Apple Pay, not today’s crypto ecosystem. And so we built this sort of wrapper around other people’s tools. So like I said, I really want to, we want to create a ecosystem around the products that we build. We’ve built sort of a layer one Foundation, we want it to be as open as possible. And then we’re building things like NBA top shot, and in between, we want to enable other people’s technologies and other people’s platforms. And so our wrapper is essentially trying to take the user from saying hi me a fan. This is a thing you want to purchase and then meeting them where they are. So if they have a credit card, we have credit card integrations if they have Coinbase account, we have a Coinbase integration. If they have crypto if they want to pay with their meta mask, they can pay with their meta mask and their aetherium. wallets. If they want to transfer us Bitcoin from their ledger, they can transfer Bitcoin from their ledger, and then all sorts of gets gets funnelled through this user experience that sort of holds your hand and says, Well, you know, I’ll keep you safe until you don’t want me to anymore. And then you can flip to a sort of self sovereign wallet, hold your own keys on your own ledger, pay with flow token directly, and actually keep your stuff in a cold wallet that is again operated by one of our partners and or multiple partners that you can choose from, but we we as dapper, we take responsibility for your safety essentially. And your if anything, your peace of mind is maybe a better way to put it. And we’ll sort of hold your hand in between all of these different providers until you’re used to that makes sense. And so maybe we could go into the the assets themselves a little bit more. I mean, obviously there are almost innumerable possible applicants nations have the standards and technologies for different types of assets. Presumably, you’ve had to think about go to market strategy and which segments you’ll be going after first. What is the kind of scope of different types of assets that can exist? And how have you as a business, prioritise them as a go to market?

Jamie: Well, I would ask that question to birds, I mean, on flow as a general purpose smart contract blockchain so you can you can build anything on top of it.

Roham: And we already have, you know, hundreds of developers and it’s a pretty even distribution across gaming decentralised finance, and then even folks that are using blockchain assets to track physical goods or you know, supply chains and IoT, things like that. dapper specifically, and sort of our team’s focus is on games, entertainment culture. And so we we spend a lot of time thinking about obviously, sports is is one of our most key verticals, because it’s a human activity that brings billions of people together and with a very A few other things do. And so we’re trying to figure out how do we represent fandom in the physical world into the digital world because as we individually and every successive generation spends more and more time living digitally interacting with our friends digitally, you know, the realisation is that the things we do are in these sort of Instagram. And these large digital platforms are kind of locked inside those platforms. And everything that we’re doing is the value is accruing to the owners of those those platforms. And so we want to be able to sort of take create things that the brands can sell directly to fans and fans can take with them wherever they want. So that’s a big sort of initial initial focus because we saw with crypto kitties, when you give a fan of real stake in the thing that they’re supportive of. They just turn into superfan they turn into an evangelist. When you treat people with respect and you let them do what they want to do with the things they pay for. They’ll they’ll pay you way more for it. They’ll keep coming back months and years afterwards. And so the NBA Our partners really got excited about this idea and it was very important to them that, you know, these assets are truly on the blockchain, they are truly decentralised because they want to be able to sell something to the fan that is bigger than any of the companies involved in creating or distributing it. So that’s that’s really our first focus is digital assets that tap into large existing fan bases or can very quickly create new and dedicated fan bases. So you know, for when we bring crypto kitties when we’re bringing MVA to flow, that’s a huge opportunity for other developers to build their own communities with digital assets that that tie them together, sort of try to build their own crypto kitties and once you know eventually we’ll want it such that you know, a artists eat whether a digital artist or a music artist can come and mince their own class of assets for their own community as easily as as you know today. They can engage them on you know, with with stickers on Instagram or WeChat or or whatever it is.

Jamie: So, I mean, clearly you’re definitely in the right time, the right place at the right time with everything that’s going on with COVID. Of course, you know, the kind of numbers associated to gaming are off the charts in terms of growth, digital work, digital play digital wealth are experiencing a huge growth curve, perhaps, that that future is that metaverse future is somewhat accelerated. Do you have a thesis around the direction of all this stuff in the context of the metaverse because as a founder and investor, I know you must be thinking in kind of 10 year cycles. Is there a big vision of where you think all this goes in the context of metaverse?

Roham :Yeah, absolutely. One of our game designers, Rafi Omar Otto. He joins us from EVE Online. You know, probably the gold standard in terms of open economies pre blockchain. He always like saying the metaverse will not be designed. That’s sort of the The philosophy he’s brought that I agree with in the sense that, you know, the metaverse has to be and will be this emergent ecosystem where anybody can tap into it, anybody can build on top of it. Anybody can move in and out of it. And by anybody, I also mean any company out there any any company should be able to sort of tap into this, this global network. And I think when you think about it in those terms, there’s no way to imagine it not being at some level, anchored onto a blockchain. Because if we end up with a metaverse that is dominated by a single company, or by a duopoly, or, three or four massive large tech companies that are sort of controlling our digital lives, as well, as you know, feeding us advertisements and knowing everything about us in our physical lives, I think we’re going to be, it’s going to constrain innovation enough that it just won’t be that the most interesting things won’t exist in a closed ecosystem. And so our thesis from the very good beginning has been if we believe that openness is fundamentally can always outcompete closed ecosystems, then then this idea of a metaverse will have to exist at a very broad open scale and on top of a platform that actually lets millions of people build a livelihood on top of it. And so the the the thesis was flow as a blockchain has been to start moving us in that direction where, you know, our initial products bring initial users, our initial developers build the initial Lego pieces on the use cases and the things that they can do with their assets. But because we’ve sort of taken the philosophy of being open that every step, what we’re creating here should be able to compound over the years and decades and eventually be a thing that, you know, every large company would want to tap into, just like the internet, where you know, everyone, all of the incumbents sort of resisted in the beginning tried to set up their own side networks, but eventually the force of openness overwhelms the sort of benefits from having a your own small walled garden. So that’s been our thesis from the start, in terms of in terms of sort of digital worlds. And where you had kind of mentioned AI earlier where AI fits into it is, you know, when we have all of these all of when data becomes the lifeblood for how applications monetize themselves. And when sort of, when a software product, there was more about us than we know about ourselves than control over that data and sort of controlling access to it. And knowing what’s done with it becomes very existential. And, you know, it’s a it’s a thing that, you know, there’s a little bit of consumer awareness about there’s increasingly more over time. But that’s also where blockchain can play a big role where, you know, a consumer can be sure that their data isn’t being misused. But the bigger contributor to the flywheel will be the developer network effects and the developer rejecting platform risk and, and wanting to build on open ecosystems rather than consumers demanding privacy.

Jamie: Yeah, I mean, that was a really beautiful articulation of something that we hold very dear at outlier. It’s interesting we have a portfolio kind of has just gone through the recent accelerator that is working in the portable identity space called crucible, again, leveraging blockchain technology. And they talk about it as a white mirror. So you know, as we’re looking at the metaverse, as you say, we can’t we can’t design it, but we can, or having people like yourselves, creating some of the building blocks, we can imbue the system with the DNA that has the characteristics of the white mirror scenario, versus the Black Mirror scenario. So I’m grateful to hear that you kind of share that vision and that you are kind of pioneering a lot of the Lego the infrastructure that’s going to inform how this system takes shape. Roham it’s been a pleasure to have you on fascinating episode, I’m sure how can people follow You as a Twitter handle and stuff that people can catch up with you on?

Roham: My Twitter is @rohamg. And yeah, please give me a follow and shoot me a message if you have any questions.

Jamie: Awesome. Thanks for coming on. Thanks for having if you enjoyed today’s podcast, please make sure you subscribe rate and share your feedback to help us reach as many people as possible with the important mission of Web 3.