Boxer  0:00  

Hey, everyone. Welcome to a new episode of the Weekly Wizard. I think we are on Episode 6 now. And today, I have with me probably the most famous Dune wizard of all time, which is Richard Chen. 

You might know him from his OpenSea dashboard or DeFi users the Over Time dashboard. It's a pleasure to be able to chat with you, Richard, and yeah, welcome. Welcome to the show.

Richard 

Yeah, thanks for having me on, Boxer.

Boxer

If you can just quickly introduce yourself, I think you're a man of many talents. 

Yeah, sure. I'm a VC. I'm a general partner at 1confirmation. We're crypto native fund seed stage funds. 

So, some of our investments include the seed rounds of OpenSea and super rare Nexus mutual Layer 1s like Polka Dot and Cosmos. Yeah, so just know investing in trends early on. And a lot of that's really informed by the Dune wizardry guys spend a lot of time on it. 

So trying to cut through the Twitter hype and see what products people are actually using and make bets on those before they become obvious. So, I first got into doing this in December 2019. I think, on the Wizards page, there's a list of your start dates. 

And I actually think the very first query I did was Open See and Fredrik helped me a lot with that query. I was like…that was back when the dude support chat was…that was before Discord. 

So, that was just like a telegram chat with Frederick and Mots, and then, he was coding. He's the only one who's technical. 

He was spending 12 hours a day coding that website and also answering all of our support questions. So, those were interesting times. Yeah. And the first query I did was on OpenSea’s volume because I was kind of writing a report on NFTs and OpenSea. 

And Fredrik helped me with that. So, it's been a long time. Yeah, it's been a long growth and journey of doing since the early days. Yeah. So, how long has the fund been in operation for years?

Yeah, so we started in 2017. We were really one of the first crypto VC funds. So, no, back in 2017, pretty much all the other funds were hedge funds, whose goal was to trade cryptocurrencies. 

But we wanted to take a long-term, disciplined approach and back founders worked really closely with them post-investment. So, we were really the first ones that are structured as a VC fund, not a hedge fund.

You just mentioned that you are getting a lot of your alpha from noon, and maybe just to get a perspective on how you view the market. What are other good information sources that you're using usually? 

Yeah, outside of dude, I think we see token terminal, because they have…mainly it's like a PE, PS stuff. It's like these have already been pre-calculated for you. I use glass node, which is good for Layer 1 stuff. 

So, if you want to, like internally….one of the metrics we track is to attract Bitcoin or ETH adoption to the store of value. We'll check the number of wallets that own at least one ETH over time. And the last note is very good at getting layer one data because if you try to do a query on Ethereum.transactions in Dune, then it times out. So, Glassnote is good for Layer 1 stuff.

And then, I actually contribute to a repo called…I maintain a repo now called Awesome Crypto Trackers on GitHub, and it's just kind of a curated list of different dashboards for different projects. Am I able to share a link? It's somewhere by…you good? Can I do that?

Yeah. I think…yeah, you don't have access to the chat… on this platform. Okay. But you can post it in a private chat here. And Thomas will take it. We'll take it to the YouTube chat.

Cool, I think people can see that. But yeah, and then there'll be stuff like crypto fees and various stuff for each project.

Okay, see? But other than that…that’s your data diet pretty much. But where are you like getting information on the industry, or how do you keep up to date? Because in the traditional industries, you probably read the financial times or something, how do you like…what's your information diet on that front? 

Yeah, it used to be Twitter. Twitter used to be good at mainly the links of when projects do announcements, but then quickly Twitter got pretty noisy during the bull market. 

So, there are a couple of curated feeds. I like Delphi to telegram chats. Delphi prime is good. Other than One's daily ape by Darren Lau is another good one. And then newsletters…so I think I'm subscribed to Weaken Ethereum news, the defiant ETH. Hub NFT. 

Now, those are the ones that I can remember off the top of my head. But yeah, I'm subscribed to a bunch of email newsletters as well. So among all of those, I think there won't be a project like medium posts on me or a post announcing that.

That sounds like a lot of stuff to read. Yeah, but that's kind of the name of the game, I guess.

Yeah. It's like a big part of my job actually…like what I spend a lot of time on. Just keeping up to date with the industry. Yeah. So, there's a lot of stuff to read.

Yeah, a lot of stuff to research, read whatever. So, I guess a lot of your day is spent just researching and reading then.

Yeah. And then most of the day is spent on portfolio stuff. So, I think one thing that differentiates our fun compared to other funds is that have a pretty small, concentrated portfolio. 

So, we spend a lot of time helping founders and working hands-on. So, I get 20 to 30 telegram chats every day. And just like random requests, questions that founders have, asking for intros to other projects, things like that.

Boxer  6:54  

Okay, so yeah, that was actually…I was just about to ask that question. But what does this…like operational support is kind of like this? I hear that a lot about 1confirmation. 

If you read on Twitter that I've seen quite a few 1confirmation appreciation threads where 1confirmation..I like really like In the Weeds with the founders, but like, can you share a concrete example if you can somehow like…how you actually like how projects…?

Richard  7:22  

Yeah, I guess, let's use OpenSea as a concrete example. Because, yeah, we've been working with them since early 2018. So, external stuff like the Dune dashboard, obviously, that's been hugely underrated for marketing. 

Like the press, always quote the Dune dashboard. It’s like even the late-stage VCs who, when OpenSea goes fundraising, know me as the Dune dashboard guy for the OpenSea. 

Say that, in the early stages, before OpenSea had product-market fit, it was more of just brainstorming creative ideas of what new partnerships and product lines that OpenSea could do. 

So, it was a lot of intros and thinking creatively of what things they could ship in and launch post-product market fit. Their biggest need has changed to hiring and growing a team. So a lot of it has been on recruiting on our network and also interviews, especially with executive hires. 

So, oftentimes, we'll have source hires for executive candidates, say, like Chief Product Officer or something. And we'll also do an interview. So, Dan and Alex can get a third-party opinion on them.

Yeah. Yeah, that sounds very helpful. And also sounds like a very cool job.

Yeah, there's a lot to do. Yeah.

Boxer  8:52  

So, recently, there has been kind of this rise of non-traditional VCs. So, there are tattered Tetra nodes in the space. There's this giant whale who has a lot of power behind him. What do you think about traditional VCs? And those kinds of crypto networks? 

Do they work in the same way? Can the crypto unknowns even provide something more because they're not as limited? I guess because they can spend more time on an individual project?

Richard  9:25  

Yeah, so there are several buckets. When you say traditional VC, there are several buckets when there's the sandhill like Silicon Valley Web2 VCs are now getting to crypto. 

My main concern is this (largely due to FOMO), and I saw this in 2017. They were just excited about crypto, and then just disappeared and stopped being really responsive to founders during the bear market. And actually, when OpenSea was raising their Series A, they gotta log in. 

Tristan went to VCs. But from reference checks, that's kind of what the experience has been like with them. And then there are the crypto native VCs that I know we fall into that bucket.

I think those are the ones if you find the ones that think long-term, and if you are strictly doing venture and not trading, then those are generally the most helpful investors. And then recently, I think we're seeing the rise of trading shops. 

So funds like Alameda, three arrows that are getting into VC. Except, I guess what a lot of founders don't realize is that, at the end of the day, they're traitors. So, you know, as soon as your tokens are unlocked, the vesting schedule might be like three months. 

And as soon as your tokens unlock, then they'll start dumping, or they'll get your token listed on FTX. And then also start shorting your token. So, they hedge their investment position. 

And then what the Anons a lot of that is they are also traders or people who've gotten really rich quick and are looking to get into private deals. There are a few exceptions with a nonce I've heard are helpful and are actually NFT whale collectors, where the interesting thing is they're not online, but they're actually docks to like most people…not most people…a lot of people in the NFT industry. 

And they can be really helpful, especially if you're building a product that's going to cater to NFT collectors. So, that's kind of how I see the investment landscape shape out over time.

Boxer  11:41  

I see. So what do you think makes projects give allocations to shops like Alameda or Three Arrows? Is it just to have the name on the cap table? Was that kind of a signal of value?

Richard  11:53  

For various reasons. One is, I guess, a kind of adverse selection of founders who probably don't know the history of war. Like having reference checks or other founders that those shops have worked with. Another thing is like Alameda is obviously very heavily invested in the Solana ecosystem. 

So, I have heard stories if you're a project building in Solana. You kind of get strong armed by Alameda to take their money out, but they do help. They could help with some stuff like market making. You know, there's a fair DeFi project.

Yeah, I see. Yeah, all right. Very, very insightful. So, I think, yeah, let's jump to the next topic, which is basically, I have a very spicy tweet that you send out. Yeah. So, let me just share my screen. 

So yeah, I think this tweet. Yeah. So, for those just listening, Richard posted yesterday, some interesting Dune shenanigans lately. Some wizards were paying for stars. Those have been rocked now. Yes. We see everything. We are Mentats. Like, don't fuck with us? 

Yes. And then there's also the second point, which I think is more interesting. In terms of this conversation, the founder asked a wizard to take down a dashboard because the unchained metrics were embarrassing relative to Twitter hype. So, are you able to share what dashboard got taken down yesterday, naming names? 

Well, for both of them…was it for the first one? I think it's pretty easy to know who it was. If you just look at the behavior, maybe check the list of top wizards now, and you'll see the one who's noticeably missing. 

And the second one, I guess I'm not going to name it just because it's a rumor right now. S,o I don't want to say it as if it was confirmed to be true. But yeah, that's what I heard, and then when I went to look for the dashboard, I couldn't find it. 

So, I'm actually doing my own queries for that project right now because I'm curious about what the actual numbers are. I guess if you can search a wizard's profile by the most recent queries that they're worked on…if you do that…then I guess that's Alpha Lee. Can you know which project I'm talking about?

Boxer  14:26  

If you don't have them private? I guess one could look, yeah, but I think there are some very interesting points here, and there's really no hiding in this industry.

Richard  14:39  

Yeah, for sure. And I think it was an element of finance, right? That raised their Series A just from doing a dashboard with no pitch deck. 

And that's the beauty of it…that you show them you have traction and you don't need to have any other fluff or try any sales tricks to do a fundraiser.

Boxer  15:00  

Yeah. Has that happened to you as well? Like, have you? Have you had a pitch where there was just a dashboard yet?

Richard  15:07  

Um, I don't think so. I mean, mainly because we're investing seed stage. So, it's a lot of stuff. It's still pretty early on pre-product. Yeah, I see.

Boxer  15:19  

But yeah, love to hear that development. Yeah. And it's like if you have good data that you can just provide…why not just tell the tell the story of your protocol with data? It's the most obvious thing you can really give to the potential investors. Yeah, all right. 

So much for the Twitter drama. So kind of unresolved, but people will know where to look. Yeah. So last week, or I don't even know how many days it has been. But in recent times, there has been a problem on OpenSea or not the problem. Like it's not OpenSea’s fault…like at all actually. 

But there has been a phishing attack on some OpenSea NFT users. And they were basically, the whole case boils down to some people clicked on a phishing link and sign the malicious. It's not a transaction. 

It's a signature on the Ethereum blockchain and an attacker then uses that signature that was not published on-chain until that moment to basically rock a bunch of NFTs from a bunch of users. 

And that basically, lends itself very well to discussing a bit like self-custody. So, self-custody basically describes that we are the National Bank, and crypto you can't…you are the last instance of owning your funds, basically. 

And I guess you must have thought about this quite a bit. So, what do you see are the challenges, and maybe how we could solve these challenges?

Richard  16:58  

Yeah. My advice is like to have like two different wallets. One is kind of what you use to do transactions, and the other one is your cold storage. So, you'll notice a lot of big collectors. They'll have an underscore vault username. 

Because they'll buy their board eight with their normal wallet, and then just transfer it to that vault address. And then that vaulted us. Like that doesn't sign any transactions or interact with any smart contracts? And I think that's good security. OpSec is a way to do things.

Boxer  17:36  

Yeah, okay. See, but if we want to get to a million, I don't know how many million users we encrypt. But if we want this to really go mainstream, I think that sounds like a very complicated approach for normies. 

If I was trying to explain this to my little brother, and he was like, why do I need…what is all of this? Yeah, maybe what kind of user experience and user interface changes? Would you like to see? Or who do you think can really make this happen?

Richard  18:07  

Yeah, I mean, this is true. Like outside of NFTs even with cryptocurrencies, where like the vast majority of users will leave their coins on exchanges just because the user experience is easy. 

And quite frankly, like they're not like as sophisticated you know, how to self custody and they're, like, more likely to like shoot themselves in the foot doing something. So, you're trusting the Coinbase vault to secure your coins. 

And you know, if the exchanges get into the NFT space in a meaningful way, that's one advantage they have is they can be custodial. And then the second thing is they have the own Fiat on ramps on onboarding from US dollars and FTS. 

So yeah, I think exchanges lke have the advantage of being that bridge between purely Web3 crypto natives who know how to use Ledger's MetaMask self custody, have good OpSec, and then just the normies that want to get exposure to NFTs.

Yeah, but basically, we all don't know how to solve these issues. And for the meanwhile, it seems to be that these custodial exchanges will still mostly get the market share of the not experienced. Yeah, the non-Web3 Native people, they just feel more comfortable on Coinbase that is basically your…yeah, yeah.

Boxer  19:44  

Okay, I see. How do you think? Yeah, I don't know if you can talk about this but probably OpenSea and Dharma Wallet. That will probably be an easier avenue for non-Web3 native people to also get exposure to NFTs on OpenSea because Dharma will have…there will be a very clean integration, and however that looks is yet to be.

Richard  20:08  

Yeah, I know OpenSeas are working on Fiat on ramps like that's one of the big priorities right now product wise. So, it'll be easier for non-Web3 natives who don't already have ETH and MetaMask to onboard. 

And if we're the custodial stuff, that's hard to do, mainly because of regulatory reasons. Like nifty gateways and other NFT marketplace where they're able to be custodial because their parent company has Gemini, so they kind of piggyback off of Geminis licenses and their compliance program there. But it's for OpenSea. There's a lot to invest if they want to be custodial.

Boxer  20:51  

Okay, see. Ya, so self custody is hard. But what might be some of the benefits that people have for self ciustory? It’s just like trust. 

Richard  21:02  

This actually happened with top shots. On flow is like…some users got rug pulled because their account got suspended. They spent like five or six figures on NBA top shots and then their account got suspended. So, if they're the NFT, it basically all got robbed. 

So, if you're building, this is why I also see on like, nifty gateways when people will buy a six or seven figure NFT on nifty gateway, they will immediately withdraw it from the exchange and into their own their own self custody wallet because, with that amount of value, you don't want to risk the exchange red pulling you for whatever reason.

Boxer  21:50  

Yeah. Has there ever been any resolvement of these NBA top shots? Or do you know any of the rumors? Why these accounts got suspended? Where they should posting in the chat?

Richard  22:01  

I don't know. I know that there was a blog post a while ago. It's like one of the persons who got robbed, and then he kind of explained what happened with him? But yeah, I don't know if it's been resolved.

Boxer  22:14  

Okay, so I'm not your keys, not your crypto, not your keys, not your NFTs as well.

Richard  22:21  

Yeah, I found that post. Let me share that. In the chat. Yep.

Boxer  22:30  

Yep. So yeah, we're gonna jump topics again. So, I think it's very interesting that option C is as dominant as it is. And I have a query somewhere. Oh, that's actually not the query.

We will have to do this with all the query. Correct query was too simple. This one was straight of open cylinder books.

Richard  23:11  

It was the query dashboard of looks volume, like filtering out the wash trading?

Boxer  23:17  

No, I was trying to…yeah, whatever. Doesn't matter. So, basically, I just wanted to get your take on why OpenSea gained as much market dominance as it has because, in the beginning of 2020 or end of 2020, actually, it shortly looked like wearable might be the go to marketplace. How do you think…what were the factors that made OpenSea the dominant platform?

Richard  23:47  

Yeah, so the biggest thing…like the biggest reason why OpenSea’s Sefensible is a search and discovery and 99% of the engineering work on OpenSea is spent on a front end so lke having better search features and also infrastructure, so hopefully, the website doesn't go down like that often now, which is very different from say, take uniswap, for example, where most of the engineering work is done on the smart contracts. 

And the smart contracts are open source, so anyone can just fork the contracts and then launch a yield farming program on that and see a lot of market share and volume from from uniswap. 

Whereas, if you want to fork OpenSea, I mean, sure you can fork the Wyvern contract, but then you have to be able to have a good friend where you can filter all these collections by their attributes like filter board, apes, crypto, punks, me bits by each of the different attributes. 

And the interesting thing about NFT metadata is that the format is not standardized. So, a lot of this stuff has to be done manually. And he has a whole team that manually verifies collections by filters and FTS by attributes. So, art blocks were one that like lacked any filtering for a very long time.

Because each art blocks collection generative…like collection had to be manually filtered. And that just creates a big defensible mode because a lot of support and engineering hours have to be spent on doing all of that. 

It's also like how Coin Gecko has a big moat there. Because whenever they do token listings, there's a lot of data such as what's the percentage of the fully diluted supply circulating? Like they have to get that data from a team. And that's off-chain and more proprietary. 

And it's very hard for other projects to replicate that. This overall is why OpenSea has been pretty resilient against vampire attacks and competitors…just because it's non-trivial to have to do all this front-end integration work.

Boxer  25:56  

Yeah, I see. So, one thing that I quickly want to throw here. Wouldn't it be great if the non-diluted and diluted supply of Coin Gecko would be open source data? I'm so saddened that there isn't a public database that do Nonsan Flipside that we could all share? 

Because I think that information should really be public. And if anybody from Coin Gecko was listening, yes, please. Please make it public.

Richard  26:30  

But maybe, methodology. It's basically the team just sends Coin Gecko a list of wallets to exclude it from the circulating count. But what are those addresses? So, it'd be helpful if that were more transparent.

Boxer  26:43  

Yeah. Yeah. Imagine if we could track Alameda and Three Arrows and all the other VCs in the space…how they hold and how they dumped holdings. It would be very much solar punk future. Yeah, yeah. So, recently, there has been Jeanne and Jim. So, NFT aggregators. 

And I actually have charged for this. So, let me open this up. This is how the space currently looks. And this is the aggregated volume in a day, and Jim is the orange bar here. And Genie, what color is this purple? It still looks like OMC is doing a lot of the volume by themselves. 

If you visit a gem especially, I think the user experience of gem is actually almost better than what odunsi is offering. So yeah. How do you like? What's your look on the NFT aggregator market in general? And how do you think it could shake things up in the in the big picture of all of this as well?

Richard  27:56  

Yeah, right now, I think, OpenSeas still has like 90 to 95% of the volume on a daily basis. Right?

Boxer  28:05  

Definitely looks like that. Yeah.

Richard  28:07  

I mean, the gym has been doing a great job of just adding new trade execution features. So, you can sweep the floor. You can dynamically adjust your bids. So, they're really innovating on the trade execution front, which they are able to do because they have their own custom smart contract where OpenSea — they've been using the same smart contract since 2018. 

But in terms of an  aggregator, you're supposed to be a routing protocol where you route to many different exchanges. But I think the vast majority from the data I've seen still goes to OpenSea. But they're just offering a good experience from the trade execution stuff.

Boxer  28:55  

So, do you think the rise of aggregators will continue? Or is it maybe the case that we're three native folks who sweep floors who are very eloquent in their trading, basically, and very…I don't know…they're just keyed into the markets, but the vast majority of users will still stay on? The usual OpenSea front end? Is that…yeah, maybe the thesis.

Richard  29:20  

I think aggregators makes sense when the market is fragmented. And, you know, each venue, each exchange is pretty commoditized. So, there's actually a really good Dune chart. 

It's actually Frederick's dashboard of the X metrics, and you can actually have an identified screenshare you try to find it, but basically I have a share of aggregate or market share of taxes over time. So, let me share this right now.

Yeah, so right now it's about 75/25. So 75% of deck volume goes directly to the decks rather than through aggregators, which is still pretty high in my opinion, but it just still shows that vast majority people will prefer just going to the decks directly, even if they could technically get a better trade price execution on an aggregator, and decks is, I think, the most fragmented landscape now compared to other types of aggregators. 

So, we've seen aggregators for options, protocols for bridges, cross-chain bridges, and now genie and jam with NFTs, but I think like the vast majority of the volume will continue to go directly through the projects.

Boxer  30:53  

Which is really interesting, actually, you would think that people follow kind of efficient markets. If you look at the concept of the HOMO economical, or whatever it's called in English. 

So, the rational human being who just decides optimally in every situation? And that, indeed, does not seem to be the case. So? So but do you see with the rise of so if it's kind of a hen and egg problem here. Because right now, nobody really has to go to gym to get the best price. 

But in the future, maybe if looks would have caught on, or I think pseudo swap is also trying to build or pseudo swap is building a competitor to see. Maybe in the future, when those will have adoption, then it might make sense to go to gym, but basically, we're stuck in the head and neck problem. So, that kind of your perspective as well.

Richard  31:52  

Yeah, I agree, this makes sense. If there's multiple different venues to do your NFT buying and selling, but right now, they're positioning themselves as kind of better trade execution features. But that's all routed to can see.

No, right. So pretty much that and in the conversation. Nothing to discuss really. Yeah, maybe if we take a step back from all of this very micro or very focused view on OpenSea, or the audit decks market or whatever. So, if we take a step back and take a look at crypto as a whole, where do you think we are right now undoubtedly? We've seen that crypto is kind of mainstream now. 

Because we've seen all the Superbowl ads and FTX is buying arena names like crazy in the US. But what are we really building here? Is this just a giant casino from crypto traders for crypto traders. And now we get some normies or non-Web3 native people I'm joining new fun, or what's your stance on this?

Yeah, I think immediate use cases like the first product, first users have, a lot of these crypto use cases will be speculation. And mainly because speculation is a good way to Bootstrap and early community. 

And as the industry and community matures, then that's when expands beyond just like pure speculation, use cases, and into other stuff. So, we can take, define example, where defi really took off. Like Darren DeFi summer where people were just speculating on pool twos and these 1,000,000% AP wise before you get round by impermanent loss. 

But now, no device matured. Were you having institutions, I find they're putting in like tens of hundreds of millions of dollars into DeFi to earn yield. So, it's matured beyond speculation into an alternative to existing like TradFi money market accounts. Where you're getting like .05% Like at best on your dollars. 

And, you know, that's kind of been the trend throughout the past in crypto is you have this early core community of users who are mostly interested in price and speculation. And as that expands to more normies then that's where you get to see more Normie mainstream use cases. But it takes a while for the crypto community to grow in that sense.

Boxer  34:50  

Yeah, I see. That isn't it. Like you're saying that legit hedge funds, or I don't know, wealth management, whatever. They're using crypto now. To get better yields, but isn't that so some kind of speculation because it's on the back of speculation? There's still people. The yield has to come from somewhere, right. 

And it's always somebody's buying these tokens and wealth funds are just mercilessly dumping like they're farming the tokens and then dumping them for more US dollars. So, it's still kind of built on speculation, right?

Richard  35:22  

In a sense, yeah. But the risk has gone down significantly because, you know, these hedge funds aren't a farming pool tool, and doing those kinds of things...it’s, I guess, curve is a good example. They're LP in stable coins, and they're earning trading fees. 

And you can argue that the fees come from speculation because, when people are swapping stable coins, they're still earning their yield at the end of the day.

Boxer  35:48  

Yeah, yeah. COVID is actually a real good example for something that doesn't really rely on speculation to work. The curve field would still kind of be there. If there wasn't any curve, total emissions. Although, the toxin emission and total emissions are a big part of it now, and the uniswap, v3 LPs, to some extent as well. 

So, you can probably earn some some good yield there as well. Okay, so do you think NFTs are actually the first real world use case of this whole blockchain space? Because it's literally the birth of a new industry. Really?

Richard  36:26  

Yeah. The phrase we like to use internally at 1confirmation is, “DeFi’s crypto for elites,” and “NFTs crypto for normies.” 

It really does kind of make sense because I'm sure you have this experience where you're explaining crypto to your friends or your family members, and it's just easier for them to like wrap their heads around NFTs like oh, this is an art. It's like some collectible, but it's like on the internet versus, you know, what's a derivative? 

Like what's a swap? What's an option? What is liquidity mining or impermanent loss mean this is too much jargon with DeFi and that's also why the mainstream media and press see celebrities getting into NFTs much faster just because it's kind of like art and culture. These are just things that everyday people understand

Boxer  37:21  

Yeah, I had to take an entire finance lesson, history lesson, whatever when I started in DeFi. Somebody was like, “What is all of this? What are options? What is the derivative? How does liquidity?” 

Yeah, it was a trip, so even for me being kind of crypto native like all of this is very financial like financial technical stuff. It was pretty hard to grasp. Yeah, I definitely see that. 

How many users do you think we have picked up with all the NFT stuff? Since I guess…I think board apes were all niblets. It was pretty much the first NFT hype wave.

Richard  38:00  

Yeah, exactly. On the Dune dashboards, it’s like that total number…the cumulative number of addresses. So, yeah, OpenSea has 1.3…just over 1.3 million addresses that have done at least one trade on OpenSea.

Boxer  38:19  

It's actually not as much as I would have expected.

Richard  38:23  

But these are people who have actually executed trades, not just signups. So, it depends on how you would count users. Yeah, but then when Coinbase announced their NFC platform, I think they got like 2 million signups immediately. But signups obviously are different than PayPal users who actually like to do something.

Boxer  38:46  

Yeah. Do you have any alpha on if the Coinbase NFT market will be on-chain? Off-chain? What do you think they will decide to do?

Richard  38:55  

I don't know. Actually, I don't have any details on that.

Boxer  39:00  

But I think you would, we would both be in very much pain. If it would be off-chain because then we couldn't we couldn't do nice charts like this to see how they stack up. Like how the volume stacks up and now the user stick up and everything. 

Yeah, it would be very painful. I really hope for a custodial but on-chain solution, but we'll have to see how that transpires.

Richard  39:22  

Yeah. The interesting thing is doing charges. Check the Polygon numbers. Yeah, Polygon has over a million now which is not surprising because the fees there are cheaper. So Polygon’s grown very quickly in terms of number of addresses to have used OpenSea on Polygon.

Boxer  39:48  

Yeah, this looks like a very bullish chart. I think it's also…it would be interesting to analyze the average trade size on a median trade size on MC, Ethereum, and OpenSea on Polygon. Because I think stuff on Polygon is just in general way cheaper. And then you might buy an NFT for $5. And if it goes to $100, you've still made 50x. 

Richard 40:16  

Yeah, you could actually do that. Now, if you do the volume divided by NFT. Sold. So, it's on Ethereum. It's about $1,750 on Ethereum as of this month. 

Boxer  40:34  

We will always be rich.

Richard  40:36  

Yeah, so that's like…eat this down. So, it's like what point? How much is eat now? It's like point seven ETHish. Yeah. Okay. Put it on. It's clear that it's like whales and crypto natives that are dominating a lot of the volume.

Boxer  40:59  

Yeah, so the real-world impact has pretty much so far…to summarize this whole like where's crypto at the moment? You're saying that we have some kind of adoption in the DeFi market? 

I don't like…I think there was some like there's AG euros now. And there's obviously stable coin dollars. So stable coin, euros stable, stable coin dollars. But I don't see that any Forex traders are using it yet. All like, except for the very crypto native people.

Richard  41:34  

Except for like the trading funds like jump crypto or things like those that have weather? Yeah, I've gotten into crypto more from my arbitrage strategies. 

Actually, I have like a pretty good insight into institutional adoption from one of our portfolio companies Nexus mutual, because basically, a lot of the family offices institutions go to them first. 

And they basically ask them for alpha of where can I get the best yields and crypto? And as a finder's fee, they'll pay them like 2.6% in like premiums to insure their deposits. So, that's where, whenever you see Nexus, like $40 million cover purchases happening on Nexus mutual, that's where those purchases are coming from.

Boxer  42:24  

That's really interesting. That's really cool. 

Richard  42:32  

I’ll go ahead and turn in from insurance protocol to basically be a broker for advising like your financial clients. Where can you get the best yield and just pay us a little fee for doing that?

Boxer  42:46  

And insuring it at the same time as me sharing. Yeah, yeah. But it's a really good deal for all sides. That's actually really cool. Yeah. So yeah, I need to look at the next mutual charges, I guess.

Richard  43:01  

Yeah. I also built the Nexus. I built Nexus tracker.io. The funny thing is I built this in summer 2019. This was right before…around the time Dune launched. 

So, this website basically exemplifies what I would have to be doing if Dune did exist and Dune has just saved so much time for me…not having to manually pull that log and some Etherscan, and having to parse and clean the data. And create a nice front end.

Boxer  43:35  

Yeah. I think a while ago, you tweeted, I think when we raised 1 billion, you tweeted that. You didn't take…you had the opportunity to invest in Dune and you didn't. What was your like? What was the thing back then? 

Richard  43:52  

One of my passes? Yeah. Yeah, it is like mainly caught up with the business model like SAS. Like how many people would be willing to pay for a data provider? And what's the total addressable market of that? Yeah. Turns out a lot. A lot. Yes.

Boxer  44:18  

Yeah. Oh, well. Can't get him. All right. Yeah, but one thing I didn't cover earlier, and I'm sorry for bothering you with all these OpenSea questions, but what made you so invested in OMC in 2018? And back then, it was pretty much only crypto kitties. 

We had some kind of traction on the ETH blockchain, and it was probably the end. What was it early 2018 or late 2018? I kind of…

Richard  44:48  

Early 2018, yeah.

Boxer  44:50  

So, it was through kind of the bull market. It was not totally…

Richard  44:54  

It was a few months after the crypto kitties bubble popped. So, crypto kitties was like late December 2017 when it clogged up theory and blockchain.

Boxer  45:05  

So, what made you invest in digital pictures back then? I mean a lot of people thought, what is this? What is this guy doing? He’s just the…I can just write it, right? Click and save it. 

What was your like…I don't know. What kind of crystal ball? In hindsight, it's really clear but back then you must have been or you're 1confirmation must have been pretty alone with that stance I guess.

Richard  45:31  

Yeah, we actually published our investment memo from that time in early 2018, explaining our… isn't it always interesting, going back and reading your investment memos, and thinking and seeing what your thinking was at that time?

I remember crypto kitties had their own marketplace, and they were charging like 5% commission on their NFTs. And because NFTs are composable, OpenSea was charging a 2.5% commission and basically price undercutting them. 

So, we thought that was a good really powerful product that NFTs are uniquely enable and is like a trustless secondary marketplace. 

Can I include assets outside of these walled gardens? So, that was one and the other one was just that was around the time ERC 721 standard was invented. It's actually funny. I don't know if a lot of people know this, but crypto punks is actually an ERC 20. 

It's nice. Yes, it's an NFT. But it's not built on the 721 standard. So, it wasn't until later that the 721 standard was invented. And we thought that was going to be…that was just a new asset class that we have this year. 

So, your 20s, which enabled ICOs, was this massive asset class and then 720 ones was going to do the same thing. We just didn't know how it was going to play out, but it was going to become big. 

And then, you know, fast forward a few years laters I would say a lot of these 10k PFP avatar drops are basically like ICO. It’s is done maybe a little bit more tastefully with some nice pictures to look at rather than just some price charts.

Boxer  47:11  

And white papers, so many white 2017. Now, it's the roadmap.

Richard  47:17  

Yeah.

Boxer  47:20  

Did you think it was gonna take this long for this to transpire? But your thesis was probably that it's gonna explode in the next hype bubble cycle. Is that kind of or maybe not? It's not even how you think. So, tell me how you thought about that?

Richard  47:34  

Well, yeah, it's really hard to predict timing on these things. The benefit of being a long-term VC fund is you can afford to be patient like for OpenSea. We had to be patient for three years. Like even the DeFi summer exploded first before NFTs. 

So, it felt like that NFTs missed out on that hype bubble. But, you know, if you have conviction in a good product, a good team, usually that conviction works out in the end if you're just patient enough able to wait.

Boxer  48:08  

Yeah. Yeah, it certainly must have been a very good investment.

Richard  48:15  

Yeah, more or less. Yeah.

Boxer  48:17  

So, I was gonna ask you, is there anything else that you see emerging as a new asset class? That's probably the secret sauce to your success.

Richard  48:27  

Alpha. I will save a few. A big thesis of ours is verticalized NFT marketplaces. So, the analogy here would be like OpenSea is kind of like Craigslist, and when you see the unbundling of Craigslist, each link on Craigslist is a billion dollar company. 

So, things like Uber, Airbnb, Zillow, these are all billion dollar businesses. And a thesis of ours is like the NFT. The total addressable market of NFTs is going to become large enough that music photography, Metaverse, real estate, fine art, all of these are going to become billion dollar like asset classes and businesses. 

We've been kind of leaning in and try and get back the marketplace leader in each of these specific verticals. So, we've got companies like super rare catalog for music slicker for photography and meta hood for Metaverse land. And I'm sure there's more that's coming soon.

Boxer  49:30  

See, that's really interesting. Yeah, the sentence about Craigslist is really interesting because you're really seeing it around in real-time. Pretty much like new companies are springing up all the time, so it's so smart. 

Was that gonna go…so yeah, basically, the whole thesis there is because OpenSea’s a one-size-fits-all model, and we are already seeing, obviously you kind of fit the borders of that. 

And yeah, they have to do all the categorization, and then also maybe the user interface or the user experience. And obviously, it doesn't really fit to the product that you're purchasing. If you're purchasing a really high class thing, it should be a different experience than when you're buying a 10k PFP NFT collection.

Richard  50:26  

Yeah, exactly. Yeah. Okay. Yeah. And this goes back to my earlier thesis of how search and discovery is the most important thing for an NFT marketplace. 

And when you're a one size fits all, it's hard to offer a better user experience. If, for example, you're purchasing Metaverse land and you need to have a user experience that's kind of like Zillow, where there's a map and you can see where in Sandbox you're buying your land and like unopened seed, they just don't have that feature because it's a generalized marketplace.

Boxer  50:57  

Yeah, I see. Yeah, you basically need to use external tools. Exactly. To, make the connection and then biome. See, it's just yeah, it's not. Yeah, okay. I see. Yeah, maybe I haven't asked you that. And it's always a question, but it's going to lead somewhere. How did you get into crypto? What was the story there?

Richard  51:24  

Yeah, so I got into crypto back in school. So, I co-founded the Stanford blockchain club back around like 2017ish. And I got into it. So no, I was doing a lot of research with Dan Bernays, you know, PhDs and getting really into cryptography game theory mechanism design. 

So, I got into crypto more from the academic technical lens. And blockchains and crypto, just kind of cryptocurrencies, happened to be the real-world use case of cryptography is like the way I like to say it. Yeah, so that was my first foray into crypto.

Boxer  52:01  

Okay, so you're coming from the technically interested perspective?

Richard  52:09  

I've definitely gotten less and less technical over time. Doing SQL queries have, at least I’ve kept my technical chops somewhat in shape. You can use SQL queries, I guess. I'm able to build a couple more.

Boxer  52:29  

Yeah, interesting. Where was I gonna go with that? This was not the answer I expected because we see a lot of talent flocking to crypto at the moment. So, what do you think are the key value, or like, what makes crypto so attractive to work in nowadays?

Richard  52:50  

You have a lot of leverage and autonomy in what you're doing. And, you know, one of the crazy metrics I like to look at is total value locked divided by number of employees. 

And for projects like uniswap, it's pretty insane. If you're an engineer, I uniswap. Like each line of code you write, it's the smart contract. It has like scary…so much financial value. 

And that's just something you can't get elsewhere. When you're working at Google or Facebook, and you're just like building some very small part of the stack. You don't have such an outsized influence. 

So, I think a lot of Web2 talents are getting into this space because they want to have more autonomy in what they're doing. And then that's kind of on the engineering side. 

And then, for the financial people, it’s oftentimes the people who work in TradFii and their Boomer partners. They don't understand crypto. They’re spending all their nights and weekends playing around with Dune or just living in Discord and Reddit and crypto Twitter. 

And they're just really excited about this because it's just once in a generation. Wealth transfer by two people who grew up in internet culture and understand online communities. And that's why a lot of young talent is really excited about crypto and moving into this space.

Boxer  54:19  

Yeah, so where should one start? If he wants to get into…people who are watching this already. They’re  kind of in the crypto, so maybe the better question is how to become a Dune wizard. What would your suggested steps be? Right? To Frederick?

Richard  54:41  

Yeah. Or to me as well. I get quite a few DMS, and so yeah, learning SQL is that it's actually like not that intimidating. There's plenty of online courses to do. So, there's also…I think, do you guys also have a bootcamp for learning SQL? 

I actually think the easiest thing to learn is just to fork existing queries and play around with them. And just from getting your hands dirty, forking queries and playing around, you quickly pick up. Like how to work your way around the tables and put together data stuff. 

And also, if you build good stuff, and you can build a very great online presence of being a data wizard. And I think Hill Dobby is a really good example where he just kind of came out of nowhere. The last few months built a lot of very useful dashboards he likes now. 

He's one of the top Dune wizards. I think he's just crossed like 5,000 Twitter followers. That's an example of what you can do if you're really passionate about data and to get your hands dirty and play around with this.

Boxer  55:52  

And maybe from your perspective or somebody's on the other side of the industry, basically, how in demand the Dune wizards are. 

Richard  55:59  

Um, well, projects. I know, there are quite a few projects. They're hiring data scientists or data analysts, and Dune is usually kind of a job requirement. At this point. 

That's another thing. You reach product market fit when you become a job requirement. I think Figma is also a really good example, where now if you want to be a designer…if you want to work as a designer, like you, you basically have to know how to use Figma. 

I think with data as like…if you want to do stuff….anything data related and crypto that revolves around open blockchains, then you have to know how to use Dune.

Boxer  56:43  

Alright, that's good to hear from you. Yeah, this has been great. I'm kind of running out of questions. So, let's take a look into the chat. And maybe, is Thomas here? Thomas, are you there?.

Thomas  57:05  

Yes, I'm here. Yes. Hello. Great. Hey. Ah, great conversation, guys. Awesome. So yeah, we got a few good questions. First one is from given Mahlangu. I'm sorry if I've butchered the pronunciation of your name. 

And his question is… aside from using data analytics, what are the KPIs? What do you consider as a VC when making investments?

Richard  57:33  

What are the KPIs? Well, I guess it really varies depending on the project. So, if you're a money market protocol, TVL is a Northstar metric. 

If you're a marketplace, and it's volume, so in our investment memos, we track one Northstar metric per each of our portfolio companies. 

So, it really depends on the project, I guess. Okay. Like Layer 1s, if you think…if you believe in the monetary premium thesis for L1 coins, then it's number of addresses that are holding more than say  point A one Bitcoin or one ETH and that gauges the adoption of that coin as a store of value, like number of people who believe that it's a store of value.

Thomas  58:32  

Okay, awesome. And this next question I think would be be good to both your answers. This is from Hilldobby. He said, “We have DeFi then NFTs. Do you see any crypto sector that you think could have a similar explosion in interest and speculation in the future?

Richard  58:53  

Let's see. Think like Web3-related stuff. So, decentralized file storage, social media. I think we're still a couple years far like out from that. I think like the immediate use cases of crypto will continue to revolve around money. 

But the building blocks and technology are slowly being built there. So, I do think we'll see interesting products building in that space over the next few years. 

I think Web3 Discord is an interesting product because there's a lot of interesting things you can do with NFTs as utility like token-gated communities. But Discord is a very Web2 product, and they're not focused on building any of these interesting Web3 features. 

So, I know a couple of teams that are kind of working in that space. It's kind of using NFTs as the tip of the iceberg to get into Web3-Discord related ideas.

Thomas  59:56  

Interesting. You have anything to add? To Florian, kind of, obviously, I'm not as technical or as well read as Mr. Chenier. 

Boxer  1:00:01  

The technology needs to scale first. Usually, developments happen in various short, sharp races. 

And then the basically the database infrastructure needs to scale up first before we can reach the next level of productivity, and this kinds of feeds…like we're heading to productivity plateaus. 

But even though, if you look at the Solana blockchain or something like that, a lot of stuff would be possible there today. But if we look at our basic level, like Ethereum, there needs to be a lot of technological improvements. 

And also all these roll-ups, decay, chains, and whatever coming live. So, I'm not certain about that thesis, but I've seen this reference in the past and I kind of feel like it fits.

Richard  1:00:55  

Yeah, yeah, there's definitely a lot of work that needs to be done on like, you know, roll-ups and all these scalability and privacy technology.

Thomas  1:01:09  

Another interesting question again from given Mahlangu, given the blockchain data, given the blockchain transparency enabled us to read the data and create metric dashboards. Does that mean that privacy solutions could actually be a bug and not a feature?

Richard  1:01:29  

Ha, it's an interesting one. Well, I guess, you know, it depends on the use case.

You know, privacy is a double-edged sword. Sometimes, you need privacy  if you don't want to dox yourself. But at the same time, privacy is…people use privacy to launder money. 

So, I guess, Tornado Cash is one where you can…the data is transparent. You can see deposits into Tornado Cash. But as a mixture, like D anonymizes. 

The inflows and outflows, although there are more sophisticated tools that people have built, or using heuristics to try to identify outflow addresses, like map them to inflow addresses. 

I guess the thing about the blockchain, though, is it's just a permanent ledger, like storage of all the historical transactions and actions you've done. So basically, you just have to doxyourself fuckup ones. Doctors dox yourself once, and then the entire paper trail becomes revealing. 

And that's actually how they got the Bitfenix hackers that the couple is…they fucked up once when…I think it was when they were trying to cash out Bitcoin into Walmart gift cards. And that got linked in the law enforcement. It just went back from there and traced it all the way back to the Bitfenix hack. Because the data sits there forever.

Thomas  1:03:08  

Interesting.

Boxer  1:03:11  

Yeah, it was like $100 Walmart gift card or something like that.

Richard  1:03:14  

Yeah. That's tied to them. 

Boxer  1:03:21  

Yeah, it's a really strange thing. I actually don't know how ZK rollups will look inside of Dune or even if there's some kind of Etherscan that will be able to track what's happening inside of rollups because if we still get event logs, but D anonymized event blocks, we could still produce over all metrics. 

And I would think that is the case. But I'm not certain. I haven't looked much into the UK rollout technologies yet. But I don't think it will be totally opaque. Like it won't be a total black box.

Richard  1:03:57  

Yeah, so there's a difference between…just to clarify…there's a difference between czukay rollups and ZK rollups. So, ZK rollups are just a scaling solution of batching transactions into some proof and then ZK rollups add zero knowledge privacy on top of the scaling solution. 

So, we're still, I think, a bit far off from having a pure privacy and anonymity on rollups. But with the current scaling solution, I don't think there exists any Etherscan product for Stark net or the casing, but I mean, there will be in the future, and that's definitely something that dude can figure out. Like how to parse the logs and trace mudra…yeah.

Thomas  1:04:52  

All right. I think that's it for the questions but really interesting answers.

Boxer  1:04:58  

Cool. Richard, it was great to finally get to talk to you to see the man behind all the greatest student dashboards. I think your C dashboard is by far the slickest dashboard on your…like by the biggest margin.

Richard  1:05:16  

And most starred until someone else figures out how to buy a bunch of stars.

Boxer  1:05:23  

No more. No more. We'll take care of that now. Yeah, it's been a pleasure. Keep building cool stuff on Dune. Yeah. Thank you so much for all the cool work and like also adoption you're driving through these great dashboards. 

It's great to hear the perspective of you and the doers using Yun actively all the time. Yeah. Thanks so much for coming on. And yep, see you next time. Bye. Bye.

Richard  1:05:48  

Great. Thanks.

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