Anna (00:07):
Welcome to zero knowledge, a podcast, where we talk about the latest in zero knowledge research and the decentralised Web. The show is hosted by me, Anna.

Fredrik (00:19):
And me Fredrik

Anna (00:27):
This week, I chat with Rarible co-founder Alex Salnikov. We talk about the Rarible project and how the NFT space is developing. I also get to ask all of the questions I always wanted to know about NFTs, but was too free task. Fredrik was not able to make this episode, but he returns next week. Now, before we start in, I want to say thank you to this week sponsor Trail of Bits. Trail of Bits has recently published a new guide for building secure contracts with their critic offering. Critic is a SaaS-based GitHub application created by Trail of Bits that continuously assures that your Ethereum smart contracts are safe and functional. It reports build status on every commit and runs a suite of security analysis. So you can get immediate security feedback, check out the guide, which I've added in the show notes for tips on how to build security into your depths from the start, as well as how to use the trail of bits, suite of tools for automated vulnerability detection. So thank you again, Trail of Bits. Now here's my conversation with Alex about Rarible.

Anna (01:30):
So this week I'm catching up with Alex Salnikov, the co-founder of Rarible and the chief product officer there. Welcome to the show, Alex.

Alex Salnikov (01:38):
Thanks Anna. Thank you for having me here.

Anna (01:40):
So this episode, we're going to be talking about Rarible the project. We're going to kind of revisit NFTs once again, just recently to Dieter from dapper labs on the show. And we also talked about NFTs a little bit there there's also an episode we did, I think last year or two years ago on the ERC 721 standard. Both of those I'll probably add in the show notes of this episode, there might be someone listening who doesn't know what an NFT is. It might be a good place to start by defining it here on the show. So what is an NFT?

Alex Salnikov (02:11):
A NFT is a new standard for a token on the Ethereum network, the best way to think about it. And the best way I like to think about it as just it's a digital item, it feels like an item that belongs to you. You have it in your wallet, it's tangible. It feels like, like a card from a collectible card game. From one point of view, it has a visual attached, it has a name, it has a description. So it basically probably the first occurrence of digital items at all, the works on Ethereum or any other network is just, you have a unique number associated with the item. And this item is basically is your item. Another way to think about them as just a unique record on the blockchain that you own something. So just consider the blockchain. There's a big registry of anything and your own, something on it. And that can be represented as a form of NFT.

Anna (03:16):
Cool. Do NFTs, like in your experience to NFTs live purely in the digital form or are they sometimes also attached to like a real world thing?

Alex Salnikov (03:25):
That's the most difficult question about all things, uh, in blockchain because people always try to touch them into physical world and, and this is super hard to achieve because all that exists on chain is more or less and closed in on chain environment. And the only way to attach something on chain to the physical world is to create incentive. That would motivate you to have an actual presentation like DAI did with the digital dollar. It isn't DAI to the dollar or like in the real world, but you have an incentive that allows you for, for the DAI to have the same value as they have chain things. So sometimes NFT can be tied to the physical world. For example, in the Rarible, some people have after the purchasing of NFT, you have an instruction how to obtain the physical copy of it, but it creates a lot of, a lot of hurdles because if the physical copy of that moved, how do we verify that on chain copy is also moved. So it's all about this creating this DAI and I don't believe it's solved. Yeah.

Anna (04:35):
So tell me a little bit more about like what Rarible is and maybe when you started it.

Alex Salnikov (04:40):
Okay. We started Rarible about a year ago. It was a beautiful sunny day when we sit with the team and we were brainstorming like, okay, what's the next big thing in blockchain? And almost all things on blockchain are purely financial though. Those are numbers, yields profits and all of this. So this space a little bit lacking of emotions. And that was the whole idea behind working with NFTs because it provides you with your whole like bunch of emotions. And I believe that ownership is an emotion also. So when I say that, it feels like an item here, you have this experience of owning something. NFT space is underexplored, it's small. I believe like 120 million worth of NFTs was traded so far in this space at all. And that, that number is small compared to any other financial stuff on blockchain. That's why we believe that we need to expand this space. And that's the whole idea of Rarible. Rarible initial, is it issuance by forum and marketplace? So what we were trying to achieve is just having this slick experience of creating an NFT and listing in on the marketplace, just like 32nd experience.

Anna (06:05):
Cool. What is it feel like, what, I mean, I actually have explored the platform but for listeners. Like what exactly does a user see when they get to this platform? Because this is like a user facing outward facing, we're not talking about like low level code stuff. This is like any user can actually arrive on the Rarible website and do something. What can they do?

Alex Salnikov (06:27):
Okay. So again, from the very start, that was just two pages. Create NFT, a simple form. When you upload the picture, you said the name, you put the description and there is a small toggle, put it on sale and you put the Ethereum price on it and we're allowed that's on the marketplace. Now it's listed. Then the second page is just the market, with that had all of the items listed for sale in, in just one single big sheet. We definitely outgrown that in terms of the number of NFT on sale. So the discoverability is one of our focuses we will solve this, but yeah, that's the whole structure.

Anna (07:08):
Do you know how many NFTs are now or like how many of these unique digital pieces are listed right now?

Alex Salnikov (07:13):
I don't have the exact number of listed NFTs, but I do believe that around forty thousand NFTs were created on the platform.

Anna (07:24):
Cool. And so when you do one of these, like you upload this thing, is each one represented one time, or would you make duplicates of that?

Alex Salnikov (07:32):
That was one of the big introductions that we created in ay. We supported the next NFT standard ERC 1155, that allows you to create additions, multiple additions of the single NFT and only paying gas price once. So you actually can create almost any number of NFTs, just in a single transaction, 10000, 100000. And these would be identical. This would be identical. Yeah. It's called semi-fungible.

Anna (08:01):
That's interesting. And that's actually, maybe that's something too for our listeners also to, to understand the NFT and is it actually stands for non fungible tokens all based on this ERC 721 standard, which we talked about in a previous episode, this is actually the first time I'm hearing about the ERC. What did you say? 1125, 1155, ERC 1155. Like, was that a proposal that your group put together or was this like something that the community was working on for awhile?

Alex Salnikov (08:28):
This is something that community was working for a while. Actually, we didn't like put together this proposal as Rarible. I believe though, we kind of picked it up early. So before us probably Engine supported 1155 and probably OpenCL did that.

Anna (08:48):
Okay. I understand what you're describing. Like the problem that you might be facing, the idea that now you actually have quite a bit of this and you're going to have to take sort of search principles or like curation principles from maybe some web two products into this web three project, because to like help people actually figure out what they want or find what they're looking for. Especially if you're talking about like 40,000 or more items.

Alex Salnikov (09:17):
Well, I wouldn't make a distinction between Web 2.0 and Web 3.0 here, a big, uh, I've heard a lot. That Rariable feels like that 2.0 side because we've invested our efforts heavily in UX and UI. But what I'm talking about here, it's more or less an abstract concept that we as a marketplace, we have to connect buyers and sellers in the better way. Uh, right now we have a leaderboard for this, for example, and search that allows you to dig into the stuff that's going on in the marketplace deeper. But in the end, we need to create this principle functionality of matching buyers with the sellers. And actually they can be done on chain using our governance token. We are intended to solve this in a Web 3.0 manner.

Anna (10:07):
Got it. Actually want to come back to the governance token in a bit, but for now I still want to understand, like, one of the things that has always left me curious is like, what do you do with them? Like you buy this digital item. It's like, usually, I mean, when I've looked at it, it's usually like a picture or a GIF or something. What do you do with it? Like you own it. I know that you can sell it onwards maybe for more money, if you want to. Or does that, does the price usually like stay from sale to sale?

Alex Salnikov (10:39):
Yeah, but let's get a step back here. So I feel like the whole idea of NFTs and why it picked up or the art markets at first is that NFTs as a technology was able to recreate a set of psychological aspects of ownership. So in the real world, we have a thing that is called social signaling. You can show to the world that you have something that you spent a specific amount of money, on purchasing something that can be an expensive car or purse or anything. And this is a signaling that off status with things and the art market. I believe that's NFTs again, just recreate that a specific set of mechanics working in the art market. So right now this is more close to the public art. I would quote Andy from Snark.art here, I really like how he describes it.

Alex Salnikov (11:42):
So imagine you have this sculpture that is staying somewhere on the square, publicly in the city. And there is a little tag here, like who owns it, probably something like this happening with the art inside the NFT space now. So everyone knows that there is a specific author that he has several additions of his specific artwork. And there are people who are publicly like own them. If this artist then gains more popularity or his idea that he transferred to the world, that he's idea that he can't wait to the world why his artwork, uh, getting more, more popular, getting more traction than the work will be more pricey.

Anna (12:30):
Hm. Are you finding people are also sharing this, like you talk about it being in the public square, but currently the public square is partly the Rarible platform. Like you can see that somebody has it, like you see the creator and you can see who owns it, but like, do people put it in other places?

Alex Salnikov (12:47):
Of course they do it. One big example of showing off or just exhibiting the artworks that you purchase is Metaverses. There are bears form of games that allow you to take your NFT in display it in the virtual reality world. One big example of this are Metaverses. Um, there are several games in the virtual reality in which you can just hop and look around and there are exhibitions, crypto walk and Decentraland, Somnium Space VR. All of them have some sort of artists exhibiting their works or collectors. For example, in this Somnium Space, they are, there is an exhibition of MoCA - Museum of Crypto Art, big collectors from Rarible. They collected something like $300,000 worth of Crypto art and they're exhibiting it.

Anna (13:46):
Wow. I forgot to ask this question just before, but like you talked about how many unique pieces there are, but yeah. How much, like, do you know the value on Rarible? I think you didn't just mention it a bit earlier, but like, what is the value of all of these NFTs so far?

Alex Salnikov (14:02):
I don't believe we can value all of the NFT is at a specific point in time because I would like to get back to this question, but it's actually hard to valid NFT. The only way to valid NFT is to sell it. So until it's sold, you don't know the real price of it. And after it's sold, you also don't know the real price, because if the price has decreased, you don't know about it.

Anna (14:28):
I see. And so just on that point of sale where you have a sense of it, do you know how much the value of things for sale is right now? I'm trying to get just sort of a ballpark idea of like the size of this thing. You just mentioned sort of the 300 K that's like the value of that exhibit. So that already gives us like an inkling of like how big the market could be. This is one small or one portion of it.

Alex Salnikov (14:52):
I believe the best answer to that question is just the total volume on that was like a total volume of sales on Rarible. And that's around $11 million from the very beginning of the platform. And I believe just like 5 of them happened last month.

Anna (15:14):
Wow. Really? You're seeing a lot more action right now, I guess.

Alex Salnikov (15:18):
Um, the whole NFT space sees more action. Yeah.

Anna (15:21):
That's amazing. Okay. So now I want to hear a little bit more about the NFT governance token that you have recently. Have you actually, has it, is it already live? Is this something that's been introduced or is going to be introduced?

Alex Salnikov (15:33):
We went live on July 13.

Anna (15:36):
Okay, cool. So you have this governance token. What is it? What does it do?

Alex Salnikov (15:42):
I believe there is a bigger picture to all of the governance tokens, that are like sort of waiting right now in this space. And the whole idea is that when governance tokens allows you basically to cover on the platform, there are Barrows worms of governing. That's mostly some sense of voting of what will happen with the platform, what should be happening with the platform voting for some system parameters, for the features for better stuff. But I believe that's just the beginning of all of it, but the whole idea in general is to prove the users who the platform is made for at the wheel of the development of the platform. And that's the powerful idea. There are several venture funds that are working with this thesis that the next set of successful companies like Google, Amazon, or any other company in the app 2.0 will be built on the principle of community governance and ownership of users. I don't know if there was a conversation at some point about that Twitter should basically belong to its users.

Anna (16:53):
The thing that I wonder about, like, I mean, this is a more general governance question or issue, but it's this idea that like, if you look at like voting in general and like the world, the turnout is not that high. And so I wonder like when it comes to governance tokens on these blockchain projects, DeFi or NFT, are the users interested enough in how it's managed or do they kind of want like other people to make those decisions for them? I mean, I think empowering them is very good, but I wonder if every single decision, if like most of the community would even care.

Alex Salnikov (17:27):
Should going into the deeper questions of the whole governance of this world. And I believe people have been questioning themselves. So was those set of difficulties, but in general, of course, voting like just plain voting on every single thing is inefficient. So we consider a governance as the part of the product. And if you can make the better governance tools that also beneficial for the platform. So right now we see the early days of community governance, probably the plain voting. It was the first thing that was discovered here, but they're out there as forms of, of building delegation. For example, you can delegate your votes to somebody else to perform decisions on your own. This goes to various set of like next difficulties. Like what's your incentive to delegate that vote. Some people are, there are platforms that are doing staking. And when you delegate your vote on behalf of someone, you receive a portion of their staking rewards, but that comes to the problem of buying votes. So this whole world of governance is just unwinding at our like eyesight, basically totally. There is DAO stack. They have a technology called holographic consensus, I believe. That's an interesting idea of something like staking on the proposals that you believe, feel a bit past, and that decreases the quorum for that proposal to be passed. So there are various techniques of making this process more efficient, and this is what this whole governance race will be all about, about making the governance efficient.

Anna (19:16):
In your case, in the case of the Rarible token, what's it called?

Alex Salnikov (19:21):
It's called RARI.

Anna (19:23):
RARI. It's the RARI token. What does it do? So like governance and defi I think is somewhat understood because it's this idea of a lot of it will be like voting for emissions. It's like voting for an amount amounts, like the value of something here or there. And it's all connected to a financial system. In your case, what you kind of mentioned that the governance would be used potentially for like product development, but like, what is the vision for like these governance tokens and what they're actually going to be used for in your particular case?

Alex Salnikov (19:56):
In our particular case, the overall global vision resembles what happens in DeFi right now. So in the foreseeable future, we will have a Rarible DAO that managed the protocol. We will have, uh, upgradeable contracts. We will have all the DAO making decisions on how do we upgrade the contract? What feature do it? Well, probably decision on emissions too. So the overall idea is all the same, but the way how we get there as a little bit different, they guys basically at Rarible, we have much more need for community to perform decisions on a lower level basis. And what I mean by saying that is that for example, we have a moderation system, or we have a curation system right now, we rely heavily on community when taking the decisions, who do we verify, who do they remove from the platform who we need to highlight this all can be done in a more formal way, like more, more formalized in code and more like more strict by still with the help of community to make all of this. And that's the big part of our roadmap is how do we involve the community and the governance token in making the decisions that really matters to them.

Anna (21:26):
In this case, what you're talking about is curation in a way, right? You're, you'd be using this governance principle to help curate the actual platform I E verifying and potentially like ranking or yeah. Making groups about what are the best, who are the water quality? What is interesting? It sounds like, is that true? Did I understand that right?

Alex Salnikov (21:47):
Yeah, that's completely true. So we have been avoiding of the curation process done by ourselves because it's an easy slippery slope to, to fall into biggest. If you became the single source of truth, you become the single point of failure. So we are avoiding this and that basically created some problems for us, but long term we'll have the better decisions for this. So this curation, decentralized curation is again, one of the biggest ideas on the roadmap that we're about to perform. We want to allow everybody to curate the stuff that they believe is the best one. And our job for the platform is just to put the best items on top. That that's what, how we defined it. We got to create a tooling, a system that would allow our users to signal what is the good stuff and what is not. And then to combine all of it and to show the best stuff on top. And that's the idea

Anna (22:55):
Going back to the token itself and like, so the decision making, I kind of understand now better how you imagine at least a few of the ways you could imagine this being used, but do the governance tokens, do the RARIs, like if I participate in the Rarible governance using these RARI tokens, do I earn something from doing that? Would I buy these tokens and then use them for something I'm trying to figure out? Like what motivates people to do it?

Alex Salnikov (23:20):
Oh yeah. Again, let's start from the beginning here. So they whole distribution of RARI governance token. So again, it's based on, on the several mechanics. So one of the mechanics, 10% of the total supply was airdropped to various communities of NFT holders in general, not just on the Rarible platform. And actually this would happen one more time. Uh, so we are collecting the data of who is the owner of NFTs in general, the serial network. So those people had the RARI token when this whole started. Another big portion. 60% of the total supply is distributed to the people are buying and selling stuff Rarible. This is called marketplace liquidity mining program. We are distributing 75,000 tokens each week proportional to the volume of buyers and sellers that is happening on the platform.

Anna (24:17):
There I'm starting to see the DeFi connection. You're basically bootstrapping activity. That's it's like, instead of you providing liquidity or you're doing trades kind of

Alex Salnikov (24:30):
In some sense, that's, that's the same thing. So what is DeFi? In general DeFi projects are just money marketplaces. There is supply side and the demand side supply side provides the liquidity of money and demand side basically consumes it. And this is the liquidity in terms of DeFi. Liquidity on Rarible is a general marketplace like Uber or Amazon, Airbnb. You just have a set of buyers and sellers and you need to connect them. When you're growing a marketplace, there is always this chicken and egg problem. The more buyers you have, the more sellers will come. The more sellers will come. The more buyers will go to buy their stuff and liquidity in terms of marketplace in terms of general marketplaces, just the amount of buyers and sellers that are on the platform. So in the sense of providing liquidity for DeFi is just having more money on the marketplace. And when we're talking about Rarible, providing liquidity to the Rarible marketplace is to have more items on the marketplace to have more sellers and more buyers. This is the liquidity in terms of the general marketplace.

Anna (25:43):
And then the RARI token would be distributed on a, I guess, are you planning on doing that sort of on a regular basis?

Alex Salnikov (25:49):
It's weekly.

Anna (25:50):
Oh, it's weekly and it's, you're distributed. So like say I bought and sold a bunch of NFTs on the platform and I hold none at the end. Would I still earn these tokens?

Alex Salnikov (26:02):
Yes. This happens proportional to the volume transacted.

Anna (26:06):
Okay. Um, but if I have them and then I just sit on them, do I also get anything?

Alex Salnikov (26:12):
Well, if you have them, then that means you bought them. When you bought them you transacted. So right now we incentivize transactions. Yes. That's when you earn it. But if you just then hold them, you won't receive any subsequent quick rewards.

Anna (26:27):
So then you receive the RARI and then you, I guess, put it into something else to vote. If you wanted to like participate in the actual governance, I guess you can also buy them.

Alex Salnikov (26:37):
Yes. In order to vote with your RARI, you need to go to the voting portal. Basically we use a snapshot.page for this now. That's the easiest way to vote with the tokens right now, because it's off chain. It's based on signature. That's why your vote is free. You don't need to pay gas for it. And snapshot just aggregates the total wall on any specific case. And it shows you the results. Again, this is subject to development and improvements. We've picked the snapshot as the easiest tool to go. You don't need to stake or use your RARI or anything like this in order to vote. You just need to have them by the specific block at which the voting was initiated.

Anna (27:27):
In terms of the supply of these governance tokens. Like, I guess if you're constantly emitting them, then there, there isn't a circulation supply max, like that could continue to increase.

Alex Salnikov (27:38):
You're getting this right. But, uh, right now there is the total supply cap. It's 25 million tokens. Uh, there's liquidity mining program that is emitting new tokens is here for 200 ways. That's more or less four years. And this is when it bill ends. But it's all subject to the governance process. Also potentially token holders can vote and change that in the foreseeable future. Of course.

Anna (28:11):
This is interesting. So it's like the Tarun has mentioned this on a previous episode, say, do you have like using like the AMMs and the liquidity is just, it's literally bootstrapping communities. It's, it's a user like a user-incentive program in a way. And then there's this token. And then what you're trying to do with is make the token also useful after the fact, so that they don't just dump it. Right. Is that always what everybody's trying to do?

Alex Salnikov (28:38):
Yeah. So we're creating an new utility for RARI. We will be able to buy and sell items with RARI, and then again, the curation and moderation. So overall the whole idea is about to have the, as much possible, like use cases for the token, uh, as we can achieve. And I like this space a lot. So you said something like, uh, user incentives. So when we talk about Blockchain and incentives and user incentives, we feel like we're constantly losing ground by going more abstract. So DeFi is money marketplaces and Rarible a marketplace. We just get rid of the liquidity term tied to the real ground here. So we're constantly getting more and more abstract. And this whole game is all about just coordinating people. The core value proposition of the whole blockchain is just, we use digital signature and distributed ledger to better coordinate people to achieve the specific set of goals. And our goals are to put all the digital content, all digital rights, all intellectual property rights on chain, uh, and coordinate people around them so that we can have a signature market. We can have initial market, we can have, uh, just, uh, governors. We can have provenance of all of it. So this is what it's all about

Anna (30:10):
When you start to talk about like bringing in the digital rights. And this is a topic that I used to be very, very into like long time ago in my studies, I like would read a lot about copyright law. And I was, for some reason, this was like a thing. All of a sudden I'm realizing that there could be that link that you could. I mean, I know that in the case of Rarible, you are mainly dealing with like visual entities, but you could also potentially deal like this type of platform could also be used for digital rights management or like these maybe. And I think the most obvious examples would be like a music thing or film or something like that, where this transfer of those rights, or even like distribution of them could be done through this NFT process. Anyway. It's interesting. I don't know that you're dealing with that all. Are you thinking actually, are you thinking past just the visual?

Alex Salnikov (31:01):
Yeah, totally. So NFT is, uh, that's the whole thesis and NFTs are a great programmable and liquid representation of digital rights, visual, just the first simplest form to tie NFT to video, 3D models, VR. All of it, it's coming to onchain in form of NFTs, basically. Right now, digital, right? But just intellectual property rights management is completely inefficient. You literally need to write a contract on paper in order to do all of this. It doesn't have this wall street style, liquid trading away. There is no secondary market to it. It's also slow inefficient and software is the world. And this part of the world will be eaten by software. Like, like better song.

Anna (31:51):
Wow. Because it's true. It's like, there's all the tools to like track the stuff. And then it tracks back to a paper contract, which is kind of ridiculous. And then it has to be enforced through like actual courts where people have to get mad and Sue you, or I guess YouTube, if you look on like YouTube and some of the more like large con media content platforms, you are seeing more immediate effects, like take-downs and blocking and stuff like that. But man, this is super interesting. It is. It's eating into that part of the process that still remains in like, you know, paper documents in legal offices. That's cool. Tell me a little bit about like, how one could think about like yield farming in this NFT context. Cause so far I've only heard about it, like in a very DeFi context.

Alex Salnikov (32:40):
Yield farming is a name that originated in a deFi world and it's just a simple explanation of this governance token report system. So, okay. DeFi is a minor marketplace to bootstrap liquidity of a minor marketplace. You need to supply some money in exchange for supplying money. You receive some governance token on top of it, and that governance token has a price and you can sell it. And, uh, and that would be the exact dollar gain on your initial money supply. That's why you can calculate the, the exact like yield on your money supply. Let's say you supply 100 yields and you received ten yields over some period of time that makes you like just to get 10% of yield. And when we're bootstrapping the marketplace like Rarible, you receive governance token in exchange for trading real NFTs that you created, and you don't need to supply money in them in order to receive the governance token.

Alex Salnikov (33:39):
And that's why you can't calculate the exact yield on down. So you're, don't receive yield on your money, but you receive yield on your effort, on your creative power, on your like items created on your value transacted. So we can't apply yield farming, just words to the defi, to the NFT world. It's a little bit different, but in the end, this name is just an explanation that you can earn something by doing something in defi, you supplied money and, and NFTs creating, NFTs you're trading, NFTs you'll buy them and you sell them to another person that wants them more. That's what task is here.

Anna (34:21):
I mean, think about the governance tokens. And I don't know what you think about this. They're like, aren't they supposed to be kind of valueless, technically. Like isn't the whole thing that you have to have sort of a valueless governance token, and yet they all have value. I'm very confused about this.

Alex Salnikov (34:39):
We are getting again and the deepest, hardest questions of this world. I do something like Karl Marx or somebody somebody else was, was talking about basically going on token and should represent power and power should shouldn't be able to be bought. Yes. And I have an interesting idea on that and I believe you would see the result of that idea development in some time on Rarible. So we have some interesting ideas on how to make this non purchasable. Basically that's just some set of economic rules that we can add to the whole process. Though that you want to be able to buy votes or buy power explicitly. I believe that idea is very powerful and that's why I'm not sure that I want to say it out loud. Exactly. But this has some idea of time. So you need to be sticky to the platform. So if you were on the platform for two months or three months or five months or so, or, or from the beginning, and you showed that your incentives are aligned with the platform development, that you're a long supporter, you're here for a long time. If you're here for a longterm to support the product, then you would be entitled to some days, reputation like power, I would say.

Anna (36:08):
And that's so different from what it was before. Like when you were early in the music scene and you like found the band first, it meant like you had some "cache" and you can be like, I was when I got to see them when there was only like 200 people in the audience, but that was it. Like, that was the power you got. And if they became very successful, you didn't see any of that. And then you have like digital communities where like, if your first, especially in like an Ethereum, you did often get the benefit if you were early, because you were actually owning a token. But if you were say early on like an indie video game, you were part of the first crew who like really pushed through. You never really see the benefit. Although I say like, one of the things about video games is if you're in it long enough, you also have collected a lot of the gear. So yeah, maybe it's sort of playing a little bit on that direction where, but instead of it just being like in game gear, you're actually getting like responsibility and value for real in the project.

Alex Salnikov (36:59):
That's the whole idea. Uh, the time is crucial to this world and that's the, like the most valuable resource that they have. And if you spend some time on something, that's your contribution, not that supply of your money, that you're your most invaluable contribution is your time span alongside the guys who are developing it. Totally. We see this space well in the whole social network world, because there is an interesting idea that if you've been one of the first in some network, then you receive most of its value. Uh, it's called preferential attachment from the network science. But in general, if you was early on Facebook, then probably have more of the subscriber base right now, if you were first on Apple store, like WhatsApp, for example, WhatsApp was one of the first 500 apps on the app store. And basically it grew with the app store.

Anna (37:58):
Wow. I didn't know that actually. That's interesting. One of the last topics that I do want to cover in this interview is a little bit about like the network itself, because we, when we talked to the guys from dapper labs and Flo, they mentioned this idea of like build, I mean, they built their own blockchain and one of the reasons is they needed it to function in a slightly different way. And I mean, I know we've interviewed tons of projects on this show, different networks who are trying to always tackle the scaling issue. Now you, Rarible is built on Ethereum, on ETH1. How are you dealing? Like, I'm just picturing, like the NFT contract must be more complicated than usual. And so you're transferring assets that might not be that valuable yet, like smaller value assets. And yet you're going to be hit with like some pretty mega gas fees. So I'm curious what you're thinking about in that regard and like what you see as like the future of these NFTs.

Alex Salnikov (38:56):
Brilliant question. So actually that's a game. One of the biggest parts on our roadmap is to solve the scalability problem. We started with Ethereum because it has the most developers on board. It has the most number of wallets supported. Most of those are like supporting NFTs. So you can see them that this whole ecosystem is just shaping around Ethereum. And it's so valuable because, you know, then if you're you lost your wallet, if the wallets company is closed, you can have another one that would show your NFTs the same way. So this is why we chose Ethereum, Is just the winner right now. But because gas prices have been insane, especially with this Defi boom, when you have so many users, the gas price is always constant. You can have $1 billion transacted by paying $10 in gas prices. And when we go to NFT space, you have an NFT awards of $100 and you still need to pay this $10 gas to transact it.

Alex Salnikov (40:02):
So in terms of difficulty of the NFT contract, I believe that's probably above the average, but not much above. So the biggest problem is that NFTs are singular. They are not batchable yet. And that's why you need to pay gas price to transact an NFT. And that can result in a big basically cost in terms of percentage to the NFT costs. So again, we want to solve this. Uh, I believe we talk to almost anyone supplying the scale of the go-to solution here. We talk to dapper labs, we talked to Near, Solana, Polkadot, Cosmos. I can count more Vox, Starkware, MATIC, Matter Labs, all of those guys are here to solve the same problem. And I believe that in terms of UX of all of this, if you use layer two solution to solve this scalability problem, or if you use L1 solution to solve the scalability problem for users, it's the same for user.

Alex Salnikov (41:14):
You still need to deposit in withdrawn to any other layer. So for the end user, that would result in the something like, okay, we have an NFT and we have a space where it lives right now, and you can move NFT between this spaces. Right now, we have all the NFT is living on Ethereum. And I believe the future of the bright future for NFT is interconnected layer 2 and layer 1 solutions all bridged to each other. The real battle will be between L2 solutions on top of Ethereum and L1 solutions, reach Ethereum. So something like Near with the Rainbow Bridge and, or a layer 2 solution like Starkware. Long term probably ZKrollups would win in the scalability game on top of a Ethereum. If they come before Ethereum 2.0 is here. So this is the general outline for that.

Anna (42:17):
Now I'm really curious though, like, what are you cause like in a way, this was going to be a question it's like, are you looking at the ZKrollup model? Could you exist on sort of one of those? I know I'm not supposed to say side chain, but whatever, like off chain, whatever those things are, the things that are like sitting next to it and then use the main chain as this checking point.

Alex Salnikov (42:37):
Well, the thing is that we can exist on anyone of them. It's a little bit harder to breach an NFT than... So it can because, when we're dealing is ERC 20 tokens, you can burn on one chain and mint on another and with NFTs it's similar, but a little bit different, but difficult because NFTs have unique numbers.

Anna (43:04):
And us and state matters. That's what I understand too. Like you have to have the correct attached state and data and background. So if you move to a new chain, you might not actually have that extra data. I think we just, we did talk about that in the last episode, too.

Alex Salnikov (43:20):
Yeah. The provenance. Yeah. You want to understand all the previous owners of that NFT and when you moved to another chain, you got to take that with you. It's not unsolvable. It was just a little bit more difficult than ERC20. And there are several teams right now working on that. So provenance again, it's just a technical problem. It can be solved. All of this are, are just technical problems. But I do see the big issue with token ideas. So how it works right now, there is an ID attached to each NFT and a lot of current NFT projects are using incremental ideas. So there is an NFT number five, there is an NFT number six, there is an NFT number seven that is just incrementing with each new NFT created in Ethereum blockchain. If you have a layer 2 solution on top of it or an other layer 1 using the same NFT.

Alex Salnikov (44:17):
And let's say you created a new NFT on both of them. So there can be in NFT with the number five on Ethereum and on other chain. And then when you try to move down, you've got a problem. Yeah. So probably the ultimate solution for that would be cross chain NFT standard. And that would be probably my call to everyone who is listening here to let's build a new end of the standards for multichannel guys. That's my call for, for the developers here. Wow, this wouldn't be easy, but again, that's solvable. Let's do it together. And getting back to the original question, we can exist on every of those chains. We can exist on every layer 2 solutions. This is just the question of prioritization. Like which one do we pick first? Which we will go then to the second. So you have an integration costs and you have the popularity of that decision of that solution. We are ready to take an action, but we are exploring this space to take the best big.

Anna (45:25):
Nice. Something I have not yet had a chance to speak about or like explore is this idea of KYC AML for NFTs. I mean, usually what's happening is NFTs are all being sold and bought with cryptocurrency that's already earned. So I guess the expectation there is like the KYC has already happened beforehand, but is that something that you think will become relevant, especially if there are, and I know you sort of, you don't seem to be as into it, but if you are doing bridging to like the real world real-world quotes, but like the non-digital world, like would there need to be some sort of KYC on then...

Alex Salnikov (46:04):
Very interesting topic to dive into them. And I believe the general idea, okay, why do we need KYC and AML? Because we need to protect some people from something bad happening to them. We need to know for sure that this money wasn't used, like in any unlawful manner or something like this. And it's extremely crucial now for the usual crypto world to understand that because we have seen that some issues are there and with NFTs it's much more easier now because you can't really do anything bad with them right now. They are less liquid. If you purchase art that not guarantee you, that you would be able to sell it afterwards and probably purchased it already with the cryptocurrency. So yeah, you're exactly right. Sounds gateway see happened already, but I believe that with the market maturity, this will just take place. This KYC/ AML techniques apply to the it's basically how to apply it to the real codes. We have a traditional art market when you need to understand, like where did that money came from to buy an art piece for 40 million dollars and the same would happen with NFTs is on when the market will scale. The best thing about NFTs is that I believe you can solve this with the NFTs itself, so it can have a KYC NFT that will sit in your account. And that would mark that your account actually performed KYC somewhere. And then now you're eligible to use it everywhere where you need some authorization.

Anna (47:43):
Oh man, that would be so useful. Like, I feel like if anyone who's in this phase has had to go through that process so often, and it's very annoying and it's kind of scary too. Like you're sharing this private data to like it's. Yeah. I would be very happy to see something like that happen.

Alex Salnikov (48:03):
I think something like that already exists in the space. There is a project, 0x cert that is doing certification in terms of NFTs. So you'll probably want to look at that. I didn't hear about them lately a lot, but I do know that they are solving something like this. There is another project Centrifuge. Uh, I'm not sure how to pronounce it.

Anna (48:25):
Correct. Centrifuge,

Alex Salnikov (48:26):
Centrifuge, uh, yeah. That they're trying to solve of chain assets brought on chain in terms of NFT. It would be awesome to just have a mortgage on your home represented on chain as NFT. I guess I've been, I've been talking recently to somebody from the device space. That person told me that they recently, or was doing like three mortgage of their home and it took eight weeks to do that. Well, and then he basically got into compound and took the same amount of loan in just like 10 minutes, 10 seconds, I believe.

Anna (49:05):
Wow. Yeah. I've heard a couple stories like that. I mean, I've heard them mostly on Twitter, so I don't know if they're exactly how they went down, but no, they're definitely the stuff is happening. I think maybe one last thing before we wrap up is I want to tackle another kind of NFT question that I've had, which is this idea of privacy and NFTs given we're on the zero knowledge podcast. We talk a lot about privacy here. Is there any work around privacy and NFT? It could be privacy and ownership, privacy and transfer actually private NFTs. Is that been a topic?

Alex Salnikov (49:39):
Actually, you're the first person that I'm hearing about anonymous NFTs from probably somebody else just asked me the day before, but no actual work, as far as I know have done on this topic. And frankly, I don't see demand for it. So, so far, most of the people are putting their fathers to accounts that hold NFTs that are going into it are in showing off that they purchase something. So there is kind of the opposite dynamics right now on the market. But I do believe that there are some anonymous collectors that purchase NFTs without revealing themselves. But again, each of them had his own brand, like some anonymous NFT fund or something like this, so that they still know that they are still an entity that has NFTs

Anna (50:30):
They're the digital Banksy or something.

Alex Salnikov (50:32):
Yeah, exactly. I believe we already have a digital Banksy is called Pranksy.

Anna (50:39):
Yes,

Alex Salnikov (50:43):
He's on Twitter. And he was taking the leaderboard of variable for some time. When you think about just the technicals of anonymous NFTs, I do have this notion that it's much more hard because when you're young with privacy, you always have some like anonymity set involved. So the way privacy works right now, everywhere on chain is that you're mixing yourself with other people. So that is indistinguishable from the third party observer. And when we talk about NFTs each of them is unique. It's a quite singular and it would be so hard to achieve a large anonymity set for it in order to distinguish yourself from somebody else. But I don't know. I had real pleasure just thinking about this question.

Anna (51:37):
Well maybe, maybe just talking about it here is like going to put a few ideas in other people's minds so they can start thinking about it too. You mentioned Pranksy, I think, as a sign off, like, is there any community members or artists that you have discovered that you think maybe our listeners should go check out and maybe it's not good for you to pick favorites here, but I'm just realizing like there is this whole community of creators. We didn't actually get a chance to talk about them so much in the show, but

Alex Salnikov (52:06):
That's a good topic for just the whole another episode. I don't want to pick favorites, gearing dead. And the space is so big. If I, if I would pick someone at that would be just my small, like perspective on the market. I don't want to do that.

Anna (52:23):
Fair enough. Well, that's, that's actually, that's encouraging though. I'm now I'm going to go and maybe explore this platform and see which ones I like the most. I want to say. Thank you so much for coming on the show and letting me ask you all of these burning NFT questions and, uh, good luck with the project, with the Rarible project.

Alex Salnikov (52:42):
And I turned on a grateful for you inviting me. Thanks for having me here.

Anna (52:46):
Cool. And to our listeners. Thanks for listening.