Web3 Galaxy Brain 🌌🧠

Nicholas: Welcome to an unusual episode of Web3 Galaxy Brain. My name is Nicholas. Each week I sit down with some of the brightest people building Web3 to talk about what they're working on right now. On February 17th, 2023, Context and Mint.Fun co-founder Worm Emoji, aka Luke Miles, tweeted, can someone have me on a podcast to discuss how Blur used OpenSea's own protocol to defeat them on the royalties slash creator fees issue. I responded to the call and a couple of hours later, Luke, John Palmer from PartyDao, Jacob, the CEO of Zora, and I all got on Twitter spaces to talk about Blur, OpenSea, and the proxy war being fought over NFT royalties. This is a fantastic episode that covers a good chunk of Blur's history, discusses the battle between the two biggest NFT marketplaces on Ethereum, and provides insight into the thought processes of founders at the cutting edge of NFT product strategy who are jockeying for network effects. If you enjoy this in-depth technical and philosophical discussion, please scroll through the episode list and download something else that catches your eye. Subscribe to the show or join me for a live recording on Twitter, at Nicholas, with four leading Ns. Would you like to speak to my audience? Buy a 30-second ad spot NFT at Web3GalaxyBrain.com. I read all the ads live on air and include them in the podcast feed. My thanks to everyone who attended. I hope you enjoy the show. Worm has entered the chat. How's it going, man?

Worm_emoji: Oh, it's great. Thanks for having me on such short notice. And I just saw that you were doing a different space. So yeah, I guess this is like your space marathon.

Nicholas: Number two, number two of the day. Yeah, I do every Friday at 5pm Eastern Time, do the Galaxy Brain Show. And then I mean, I couldn't resist the opportunity. I just want to hear you talk about, because I've been following a little bit what's going on between Blur and OpenSea, like everyone, but especially the last week of post-Airdrop drama, I didn't keep entirely up with it. So maybe, I don't know, is it worth starting with just like a summary or how have you been thinking about this? I know this is like a psychological, this is like a cathartic thing for you that we're going to go through this.

Worm_emoji: Yeah, yeah, this is just me doing therapy. No, but I think that, yeah, I'm happy to kind of like, just tell the whole story about what happened. I think that I'm excited to talk about it because I have been following this with like a very close level of detail. And I've been tweeting about it and deleting it because I realized no one cares. But I think that we've kind of reached the dramatic head of like, everything that's happened now that the Airdrop has happened or there probably will be more drama, but I'm excited to kind of retell the story or explain why it's interesting to people. It seems like some people are interested. Maybe we can get other people on stage too, like John or Jacob or whoever else is here.

Nicholas: Yeah, I'm just gonna pull them out here. Let me make you co-host also. You know, it's interesting what you say that nobody cares because it's like, everybody can't stop bitching about royalties, the death of royalties. And yet it seems like almost nobody knows the actual details of the Machiavellian machinations between Blur and OpenSea that are driving the narrative for the past few months. It's like too hard to follow or something. It's too technical. I'm not sure.

Worm_emoji: It's just like, you have to be a policy wonk to know what's going on. But yeah, should we just start now? Should we wait for more people to join? I don't really know how Twitter spaces work in terms of engagement and stuff.

Nicholas: Bless your heart. I invited John up. Let's see, people got to get on mobile phones. Let me see. I invited Jacob. Who else? Wouldn't it be crazy if we got Pac-Man or Zero Age or whoever? I'm sure we could.

Worm_emoji: Yeah, that would be crazy. I've kind of heard what Pac-Man... I listened to one of the Pac-Man interviews and I've listened to the...

Nicholas: The Bankless one?

Worm_emoji: Also, no, it was like a Twitter spaces. And I also listened to Devin from OpenSea chat. And I don't blame the way they're talking about it at all. But it's also like, Blur and OpenSea have this very specific messaging that they're using. Not that they're wrong, but they just have to tell their side of the story.

Nicholas: Okay, so they have to speak about it in a certain way, you're saying?

Worm_emoji: Oh, yeah, just because like, you know, it's marketing also. All this stuff is marketing. Yeah. But I'm happy to get started. I'm not trying to stall here.

Nicholas: And yeah, so we got John. Hey, John, how's it going?

John Palmer: : Hey, happy WyrmWyndsa.

Nicholas: Awesome. I love... Where are you, man?

John Palmer: : I'm at the gym on the bike.

Nicholas: Classic. Classic. I normally picture you at this time of day running around New York City.

John Palmer: : Yeah, usually I run every day or play tennis, but it's raining and stormy right now. So I'm at a gym.

Nicholas: When he's not drinking a Starbucks. All right, we got John. I invited Wilson. I thought maybe Wilson would be fun. Let me know if there's anyone else. And I invited Jacob too. I think we could probably launch into it. But if anybody has sage thoughts, please request.

John Palmer: : I would just want to say if you don't pay your creator royalties, please raise your hand and we'll be banning you from the room. Just do it now. It's better if you just do it now because if we wait and find out later, that's just really not going to be good for anybody.

Worm_emoji: Yeah, so Reservoir did make a tool where you can see your creator royalty debts or creator fee debts. So I would recommend, I don't have a link handy, but I would recommend going there and paying up right now.

Nicholas: Damn. I got to check if I made a mistake somewhere. I did use blur a little bit along the way. So geez, I'm going to get banned from my own room. Okay.

John Palmer: : We will be checking this. Just so you know, we will be checking this.

Nicholas: All right, we got to share the link. Someone's got to pin that link to the Reservoir thing.

Worm_emoji: Okay, cool. Well, I'll just jump in because I feel like I'm stalling a little bit. But it was great that you introduced yourself, John. I'm sorry, I didn't mean to not introduce you. But I'll just hop into where the drama began or maybe not drama, but where the story began. So I believe it was October when blur launched. Blur launched marketing themselves as a marketplace for pro traders. Very cool. And blur kind of builds on like their initial feature set builds on gem and genies ability to sweep floors and aggregate from other marketplaces. I don't believe that they launched initially with ability to list NFTs, but they quickly added that as sort of their own place for liquidity. But the thing that they did launch with, I believe, once they kind of came out of beta was they launched with a promise of an airdrop. And so you could go to blur and based on your historical trading activity, open boxes, and the boxes would be rare or common or legendary in status. and blur promised that these boxes would correlate to future rewards including a blur token. And it's important to mention the airdrop because the airdrop was a major part of it incentivizing people to check out blur in the first place. And I think it's a big reason why they have market share in this current moment. But I also think the thing that blur had, which was pretty cool, is even compared to the products it was building off of like gem and genie, it had a very responsive real-time trading interface, which for new NFT launches was really important. As someone who like mildly trades NFTs, it was kind of impossible to use gem or genie or open seed for a collection that had a lot of trading activity because the floor would just get sniped out from under you and like all your transactions would fail. Anyway, when blur launched selling NFTs, the thing that they did, which kind of was copying other or taking strategy from other marketplaces such as looks fair x2 y2 is they made creator fees or creator royalties completely optional. When you listen to NFT for sale, you could type in the fee amount. It was just like a text field. And you could do stuff such as like, you could say I want one ETH for this NFT and I don't want to pay any fees or royalties. Oh yeah, by the way, blur had zero fees and open seed up until today had 2.5% marketplace fee, which the marketplace fee and the creator royalties are two different things. Anyway, so blur had no fees, open seed had fees. You could do something like when you listen to NFT on blur saying, okay, I want one ETH for this NFT, but if it sells on open seed, actually make the price higher. So it's like, calculate the net. So if there's a creator fee, you know, bake that in to make it a higher price, but I'll get one ETH if it sells on open seed. So this was also like a part of their strategy, which is, okay, you could still to traders, like the proposition is, you don't have to worry about listing your NFTs on just blur and maybe you miss out if someone only uses open seed, you can actually just still get low fees on blur and get the advantage of being seen on open seed. So you could sweep NFTs across marketplaces and be seen on open seed.

Nicholas: And we should maybe be clear that the fees are paid by the seller. If you list an NFT for sale, you're the one who's going to pay the fee to open seed, right?

Worm_emoji: Correct. Yeah. I mean, or paid by the buyer in the form of, you know, the seller now has an option to list it for a higher price on marketplaces that do have fees. Right.

Nicholas: Sure. Because blur introduced this interesting, you alluded to it there, but they introduced this visual feature where it would increase the price of your listing on open seed, the exact amount that open seed would charge in fees, including also what are now called creator fees or what are often referred to as creator royalties.

Worm_emoji: Yeah, exactly. So this like UI thing actually led to with the also with the promise that blur would, you know, give future benefits to people selling on blur down. the line led to, you know, I think some anxiety on open seed. And so blur also kind of did this like three phase. part of their airdrop, which was very interesting, which was the first phase was before they had the marketplace, they just gave people rewards just for being NFT traders. The second phase, I believe, was more tied to buying, were you buying NFTs on blur? And the third phase was, were you providing liquidity in the form of asks on blur to like in terms of placing offers and locking them up in their contract and buying NFTs via the form of offers. Just trying to give some background on how blur works. I can talk about the specifics now of like what's next year. But the cool thing about or the interesting thing that happened next was once blur started getting decent market share and actually after kind of making these promises, blur in terms of where people were buying NFT from was looking like it was getting reasonably high market share. Most of the liquidity in terms of the items listed were still on open seed, but more volume was going from blur's interface to blur's own market and open seed on some days than open seed. And this also kind of culminated with the art gobbler's release, which was I think the first day that like blur really started to flip open seed in terms of volume.

Nicholas: And maybe for context also like gem had become an enormous force in a huge amount of the volume of trading was happening on gem. Gem sold to open seed for $150 million or something like that. And then development on gem seemed to slow down quite a bit. And blur just stormed in and started eating up all of the liquidity, all the volume. And art gobbler's was indeed the culmination point. I remember people were making jokes that because it's a paradigm funded blur is paradigm funded and gobbler's was made by paradigm. People were making the connection, obviously not relevant. But that was kind of the moment where things started to shift like, oh, wow, blur is actually starting to control the narrative.

Worm_emoji: Yeah, exactly. And also, I think paradigm has invested over $100 million in open seed and led blur's seed round and created art gobbler's. It's kind of funny how like these things work that way. I imagine open seed maybe is a little bit annoyed with paradigm for that. But I mean, I think blur would have come out anyway. So yeah, exactly. So around the art gobbler's release, and I think that's when open seed I think really started to move here in terms of turning like doing something about blur. And so I think what open seed did here, their strategy was just okay, blur is getting traction because they're not paying creator fees or making creator fees optional. And it turns out when you look at the data, when you make creator fees optional, nobody pays them. Like, that's just the way the market works, I guess. And

Nicholas: so in terms of UI, we should explain that in the blur interface, it pre filled the like EIP 2981 style creator fees that contracts declare and that people can marketplaces can query in order to get them or royalty registries like an interface on top of that, whatever the details don't matter so much. It would pre fill in the blur interface, those royalties, but it would allow you to edit the value and set it to zero. So you could opt out of paying those royalties.

Worm_emoji: Yeah, and actually, this is that's a really good point. So blur was pulling in the desired creator fee from these on chain decentralized solutions. It's actually worth noting in that until very recently, open seed did not support any of these royalty solutions. If you want to be paid for royalties on open seed, you actually have to like make an open seed account, set it in their interface, it was completely off chain solution. And I think that I want to bring this up because this matters later in this saga. Because I think that actually, this might have been part of one mistake or misstep that if open seed had architected things slightly differently, it might have helped them down the road. But anyways, yes, that's completely correct.

Nicholas: And 2981 came from just for context, Zach Burks, Vexie Cats, who I think is the known origin founder and was not something that came from yeah, totally different. for like all the open seed royalties are handled off chain in open seed database not related to anything on chain in the smart contracts of the NFTs at all. I don't know if it's worth going into royalty registry at all. It seems like maybe not a necessary side quest.

Worm_emoji: It's a bit of a tangent, but like the short of it is like there has existed for some time now a way to get royalties on chain. It was kind of interesting when you're making an open seed competitor, because even if you wanted to make a royalty respecting marketplace, most projects didn't like do these on chain royalties because open seed didn't respect them. So you would be kind of forced to like get it from open seed somehow. Like it was actually not even simple to make a royalty respecting marketplace in the world where most volume was on open seed. And the royalties were then like being processed, you know, just as part of like off chain order creation. But yeah, so open seed makes their first step to compete with blur here, which is the first step that they do is they announce operator filter. I want to say about a week after the art gobbler's sort of volume really started to dominate on blur. And the operator filter, Nick, please like stop me if you want to like explain this in a more clear way.

Nicholas: No, no, please go for it. I mean, I think frankly, how many people do you think know what operator filter is in the world?

Worm_emoji: Probably like, you know, yeah.

Nicholas: 150 people? 400 people? Not a lot more than that. And operator filter, the name is doesn't reveal exactly what it does exactly. But there was, I guess maybe for a little bit of context, people were talking when sudo swap, when sudo swap came out, everyone realized that NFTX had never been honoring royalties, creator royalties, because sudo swap didn't and sudo swap made a big point of advertising on their front page. I think with 0.5% fees total or something like that. The point was that they were not going to honor creator royalties, regardless of where it was set. on OpenSea or 2981 standard that had come out of the previous year, or on royalty registry, they weren't going to pay any attention to it. And then this started the conversation again about what's happening with royalties, are royalties going away? And when Blur came out, the conversation reached like a fever pitch. So operator filter was the answer to that from OpenSea.

Worm_emoji: Yeah, correct. Yeah. To Nick's point, that's very important. It's like there were workplaces before Blur, X2Y2, Looks Rare, sudo swap, NFTX that all attempted various forms of not respecting creator royalties to get market share. But because of a number of reasons, including like airdrop strategy and product quality, Blur was the first marketplace that like really used this as a threat to OpenSea. And I think OpenSea thought that like, you know, this was actually a good thing that kept people on OpenSea. So they created the operator filter. The operator filter, the easiest way to explain it is, it's a piece of code that you put in your NFT contract that basically asks a contract that OpenSea controls, that's like a registry of banned NFT marketplaces. And so if you put the operator filter code in your NFT contract, before like being transferred, it asks, hey, is this an NFT marketplace attempting to move me? And if so, just like revert the transaction. That's like how the operator filter works. And OpenSea, when they released the operator filter, it was super controversial because they announced the operator filter, but they also said, and by the way, you have one week to put this in new NFT contracts after like a week from today, which is just an arbitrary date they came up with. And after that date, if you don't ban other marketplaces, and I guess the thing I didn't mention is the operator filter bans every marketplace like PseudoSwap or NFTX and importantly Blur. that wasn't respecting creator royalties. So if you don't include this code that bans the royalty disrespecting marketplaces, after this date, we will make your royalties optional too.

Nicholas: Nicholas, do you want to explain? I'll just, I think you did a great job. I'll just say it again, just in case people didn't follow. But basically, if you integrate the operator filter into your contract, before you transfer a token or set an approval or do any of the fun things you can do with an NFT, moving it around, the operator filter code will execute at the beginning of whatever set approval or transfer you actually transfer from that you execute. And it will check is the recipient of this or the person who's being approved one of the banned marketplace contract addresses. If so, don't allow this transaction to happen. And I guess one slight correction is OpenSea created the thing. But ownership was in some sense passed to this creator ownership research institute Cori or COR Institute.co if you want to check it out. She's like a consortium of Zora and Foundation, SuperRare, Nifty Gateway, Manifold, OpenSea. And they're essentially they do control it, but they're like an alliance of marketplaces that wanted to find a way to maintain royalties in a world where the game theoretic resting point would be that royalties would go away. They kind of banded together to control this list of which are the banned contracts, which are the banned marketplaces.

Worm_emoji: Yeah, great explanation. And I was gonna get to Cori. It's just so much to explain.

Nicholas: Hi, Jacob. We also have someone from Cori.

Worm_emoji: Yeah. Yeah. Jacob, if you want to interrupt, please do.

Jacob: No, keep going. I feel like... The lamb's on a roll.

Nicholas: We should keep letting him go for it. Totally. Let the man cook.

Worm_emoji: Yeah. And I think it remains to be seen, especially after today, how decentralized Cori really is or if it's just like OpenSea. I mean, I don't know how much Jacob can say. I think we can even get to that later. But yeah, I want to keep going here. But yeah, definitely please interrupt anyone if there's something I'm missing. Yeah. So this immediately caused a bunch of controversy from a bunch of people. Some people said that this code that is controlled by a centralized organization or organizations makes NFTs maybe too centralized. A lot of people were upset because OpenSea was saying, we're not going to pay creator royalties unless you include this code. They seem to do this without really contacting anyone in the space. So popular platforms people, creators were using to create NFTs such as Zora or Manifold were not... They didn't get a chance to update their code, their platforms to now support this new code.

Nicholas: The communication was very, very bad at first. When they announced this thing, there was a Twitter thread that was barely coherent that announced this incredible change. And I believe this is specifically. they said that they would continue to honor royalties for contracts deployed before that, that didn't have operator filter. But going forward, if you didn't include operator filter, they wouldn't care if you used ERC-2981 or any other form of royalty. They would only pay attention to the operator filter.

Worm_emoji: Yeah, yeah. And that's a very important detail too. So essentially OpenSea creates this arbitrary cutoff where you need to follow our rules and ban our competitors that are not paying royalties after this date, but before this date. because the other thing about all these NFT contracts is like Bored Apes, for example, they have a royalty. I believe the royalty is pretty low. It's either 2.5 or 5%. But Bored Apes can't go back and add this code into their contract. It's an immutable smart contract. Most NFT contracts are not upgradable. You can't just go back and upgrade it to do this operator filter stuff. So they're also in a tough spot too because it's not as if they can take the NFT contracts that have royalties with the most volume and ask them to include this code. That's not even a possibility with the blockchain. But yeah, so and it was also the thing about the thread I thought was really funny was in the first thread they make, they didn't mention Blur by name. I think that they were maybe even a little worried because their Twitter account has a lot of followers of like talking about Blur or sending them more traffic. But yeah, it was very bizarre. And the short of it, there was like a little bit of back and forth, but in the interest of like trying to get to the interesting thing I want to talk about, the short of it was they did this, they started not paying out royalties. And a lot of creators didn't see the Twitter thread that was published only a week before. And like projects got delayed or canceled. I believe Adam Bob squad, they were going to drop their NFT on the primary marketplace for OpenSea. Like they're going to do a new NFT drop in OpenSea. And they got so mad at OpenSea, they like canceled the drop in OpenSea and like I think did it either on their own or with another platform. So the thread was very confusing. Most people didn't understand it because they spoke in this very like policyful language. And then they made the change a week later. And a lot of creators like completely blind and none of the platforms like Manifold or Zora were updated to even like include this code. And which by the way, like, you know, this is solidity code. Like you would imagine like a lot of the stuff gets audited or stuff a week is not enough time for you to like get your code audited.

Nicholas: I recall being particularly worried like, okay, so let's say I put this operator filter in. Does it mean that like? the big concern was this is DRM for NFTs. It eliminates the essential property of NFTs for a lot of people, which is that it's yours and you can move it as you want. Aside from the dark reality that on Ethereum, it's actually all happening inside of a contract that you don't control. But it wasn't clear if you would be able to turn it off. I guess I think in the end, the code does allow you to an NFT that does integrate. it can turn it off at some point if they want.

Worm_emoji: Yeah, to OpenSea's credit, the default code that they suggest lets you change like the source of truth from the default one to a different one, lets you turn it off, etc. So that is all possible with like the default way that they recommend. But yeah, it was. there were a lot of questions. And the short answer is, they had this live for a couple of weeks. And there was so much confusion that they decided to postpone the launch of this new policy, which was like the policy being like, you have to have this code to get any creator royalties. They postponed it, I believe, until like January 5th or January 4th. I think it was like the first Monday or Tuesday of this year. And am I missing anything? Great time to do a policy change. Yeah, yeah. Which like, I think like. they also had kind of the same effect again, by the way of like, you know, a creator deploys a contract the day after and they're like, why can't I set a royalty on OpenSea? Or like, why can't I get royalties? The other thing that they did announce that they did start doing what in starting in January is they also started respecting, I think, partially the 2891 registry. So they started respecting on-chain royalties. You no longer have to like make an OpenSea account to get royalties. You have but you do have to like, if you want royalties that are optional, you have to then like, you know, integrate the operator filter.

Nicholas: Sorry, I think we need to take a step back because we're very in this shit. ERC-2981, the NFT royalty standard, which is the most standardized way to do things, is just a read function that marketplaces can call if they want to find out how much royalties should be owed if this is the price that's being paid for the token. But there's no obligation. This is the state of affairs before operator filter was. Market marketplaces like OpenSea, if they wanted to, could go check how much royalties they should be paying to the creator. But there is no requirement because at the end of the day, the marketplace is just wrapping a basic transfer from. It's not. the NFT is not aware that it's being traded when OpenSea moves it as the result of a successful trade. So the royalties are not implicit to NFTs as much as they were sold that way in like 2020 or something.

Worm_emoji: Yeah, that's exactly correct. Yeah. I mean, an NFT is just like a way of assigning ownership. You know, the only affordance for marketplaces is you can delegate someone who can transfer it for you.

Nicholas: But an NFT is really just a list of numbers and every number corresponds to an address and the contract lets you change which address. And an NFT is a very simple thing, really. Even the metadata is optional.

Worm_emoji: Yeah.

Nicholas: Anyway, OK, sorry, I didn't mean to derail you.

Worm_emoji: No, that's good. So just to kind of like, yeah, take the interest of taking a step back. So beginning of this year, here's like the state of affairs. Royalties are optional on Blur. OpenSea says if you, you know, starting with the first week of this year, if you don't include our royalty blocking code, we will... Our code that blocks other marketplaces from trading this NFT, we will not... We'll make your royalties optional by the seller. That's what OpenSea's state of policy was. And one thing that happened, I believe, actually in between the first announcement of their operator filter and this that I actually think is kind of interesting is Blur came out with a with an announcement that they would start enforcing royalty collection on collections that have enforced this operator filter code. Although, of course, since the operator filter blocks Blur, they forked it and they made their own operator filter that has all the other marketplaces except for Blur. And then they, Blur publicly asked, hey, they're saying, hey, you know, we will respect this operator filter policy just like you, but can you take us off the list? And OpenSea made a Twitter thread saying no.

Nicholas: But wait, they said that they would, Blur said that they would comply with creator fees?

Worm_emoji: Well, sort of. So Blur said, we will comply with creator fees for collections that have, you know, implemented, chosen to implement this operator filter DRM. But there was still gonna be the same for the long tail of NFT collections, which at this point, OpenSea was still enforcing mandatory royalties on. Does that make sense?

Nicholas: Yes, it does. I guess one piece of context that we didn't provide here is that there are a lot of people who are traders who feel that it is not fair that they have to pay 5% or 10% to some PFP collection creator, like three years after the thing happened. And those people, whatever, collection creators of collections that people are fed up with, don't deserve this like forever on any kind of volatility in that collections price. So even when something very bad happens, they're making money because people are selling them whatever they're selling out of them. So it can be a kind of toxic relationship. Also, it's not always virtuous, or at least some people feel some have feelings that sometimes the application of royalties is not, it has like rug vibes. Almost. Yeah.

Worm_emoji: Yeah. Yeah. So I mean, anyway, yes, Blur tried to comply. They're like, okay, we'll play ball for collections that block marketplace, don't respect royalties, we'll pay royalties. But we're still gonna, for like the board apes of the world, which existed before this new policy discussion, we're still going to make royalties optional. And then Blur publicly announced this and OpenSea came out a couple days later basically saying no, like, we're not going to take you off the block list, the default operator filter block list, unless you like have the same policy as us. And so it was just kind of interesting because, you know, Blur tried to like kind of get on a similar page to OpenSea and OpenSea just was like, nope, not happening. Okay, and I think that was that happened at some point in December, I believe. But yeah, so we're in January, the feature goes live. And I think like at some point near the mid or end of January, we're actually starting to see high profile NFT collections release that are including this code. The one I remember that like, was maybe the first to have the operator filter was Yuga's do key dash, is that what it's called? I believe a sewer pass. It's like a pass for their NFT collection. So very notably, this pass was one of the higher profile things to include it. And you could not trade it on Blur because they had this code in it. So Blur, I think, you know, in this quest, because Blur has now announced at this point that they're going to have an airdrop on Valentine's Day, and Blur is very hungry for market share. They've launched their bids feature, which like allows you to, you know, make on-chain offers to buy an NFT or deposit ETH and make an off-chain offer actually. And actually like Blur is continuing to eat market share away from OpenSea, kind of despite all of this royalty, you know, this public spat. And I think that like, my analysis is someone just sitting on the sidelines here is like, OpenSea is kind of rapidly eroding creator trust, while not like losing their footing in the marketplace. This is like, I realized that like even getting to the really interesting thing that Blur did with Seaport is like taking a long time to get there. But I hope this is interesting to people.

Nicholas: If you want to skip ahead to anything, feel free. Or I don't know if Jacob wanted to say anything. Or John also. I don't know if you're still at the gym.

Jacob: Let the man talk and then yeah, we'll see where we go. I think getting to the Seaport part is probably the right word.

Nicholas: The right stuff to talk about.

Jacob: I feel like that was really a judo move.

Worm_emoji: Yeah. Yeah. So this is where it got very fascinating. All right, go ahead, John.

John Palmer: : Well, I don't know. Maybe I can wait till the end. But can you say like, you just kind of, if you really wanted to simplify what's happening in the dynamic, one marketplace being OpenSea, Seaport is trying to basically defend their fee capture by appealing to one audience, which is the creators, which matters more for primary sales and like

Worm_emoji: basically, but

John Palmer: : Blur by removing the fees is basically appealing to traders, but buyers and sellers on secondary. And that's in secondary volume, basically dwarfs volume. That like, one of those options is kind of obviously more strategic. Just looking at the incentives of like, everyone wants to make more money and pay less money. Maybe you could say this for the end. But I feel like this has all been pretty predictable. Not to try to like flex or something. But I feel like the whole thing at the very beginning before all this started when people were like, you can't enforce on-chain royalties. And then like kind of the midway curve meme was like, everyone trying to prove that you could but I feel like we're basically just finally saying that you can't, which I feel like felt kind of obvious at the beginning.

Worm_emoji: But I don't know.

Nicholas: I don't know. Is operator filter dead? Is that I didn't feel... That's not my feeling. I'm thinking about operator filter.

John Palmer: : Yeah.

Nicholas: Well, is it dead now? What's the consequence?

John Palmer: : Actually, it's not really about dead or alive. It's about market share or like amount of volume in the market passing through the operator filter versus not. And I feel like it's trend. It's going to like trend to zero. But I could be wrong. But I feel like in crypto, like economic incentives, we're not against almost anything so far.

Nicholas: Yeah, but if economic incentives are aligned with what is popping and what if popping chooses to have operator filter, then like Manifold has operator filter. I don't know if Zora does in the creator stuff yet, but I guess... Yeah, we've had it.

Jacob: We had it within like a week of it being announced.

Nicholas: Do you find people using it?

Jacob: No, not as much as you'd think. No. Yeah, but I think what John's saying is quite right. And maybe the underrated dimension to the kind of competition here too is the UX as well. Like. I think the fact that Blur has gone deep on the trader focused UI and like real-time features and basically reducing the size of the JPEGs to like 12 pixels by 12 pixels feels like an underrated part of the discussion here too. And I feel like it's revealed just how trader heavy the secondary market share... Like how trader heavy the secondary market is. And I think maybe in a lot of people's minds, OpenSea was seen as this more consumer-focused. that was as trader heavy as you could get. And then Blur has just revealed this whole other end of the spectrum from a user experience standpoint. And of course, the savings on royalties is a huge part of that incentive to move across. But now I feel like OpenSea is at a point where they have to choose which direction and on the spectrum they want to go. They want to go way more consumer, way more primary, or start to go more kind of like degen and aesthetic and experience and actually compete on the UX front too.

John Palmer: : One other piece and then I want to let Worm finish his story so we don't fuck up this segment of the recording where you just get to listen to Worm's whole narrative. But I will say just to remind for a comparison at the end, there's a similar argument happening right now with Bing versus Google search, where there's maybe this choice between let AI-enabled competitors cannibalize your market, or just do it yourself to defend market share. And I think that's what's important that Worm keeps calling out as a first-class citizen of this whole thing. What you're competing for, what Blur's main goal is, is market share. And it seems like that should maybe be top of mind. If you could go back, maybe you would just say like, fuck it, we're just removing all the fees to just absolutely maintain our dominant market share. But I'll come back to that later.

Nicholas: They have been making a killing this whole time. 2.5% on everything.

Worm_emoji: Yeah, I think OpenSea made more than a billion dollars in revenue last year on chain. But anyhow, yeah, thank you for that analysis, both Jacob and John. And actually, it's interesting to me, Jacob, that you said a lot of people aren't adopting the operative filter on your tools. But okay, so to kind of get to where I think the story got really interesting, and it like kind of broke my brain of like, what happens, I think it's just supremely clever. Is so? I think this happened at about the end of January, roughly speaking, two weeks before the Blur airdrop. All of a sudden, you're able to list collections like Dookie Dash, Superpass on Blur. And like, it just works. Royalties are enforced. So like, you know, that whatever the creator fee was set, is set, but you can listen on Blur. And, you know, this, nothing changed in terms of the operative filter. So what happened? Well, it turns out that, you know, OpenSea uses their protocol, Cport. Cport is a very complicated protocol, or like, you know, maybe configurable is a better way of saying it's very configurable. You can kind of set up an order on Cport to do whatever you want. It's almost like you can program each order to like say, hey, I want this NFT. And then send money to these places. So like a normal Cport order might say, okay, I want to sell this NFT for five ETH. And then that five ETH, you know, some of it goes to me for, you know, because I own the NFT. Some of it goes to OpenSea and some of it goes to the creator. And all of this happens when you kind of create the listing on OpenSea, like the message you sign in your wallet to list something on OpenSea. You're signing a Cport order that later can get filled. Like that's how Cport is set up. Well, Cport is an open protocol, as OpenSea likes to remind people. So what Blur started doing was they just started creating Cport orders for if a collection was blocked on Blur, they just started creating a Cport order for it. Now, the thing about Cport is like royalties or even like the OpenSea platform fee, that's not baked into the protocol. That's baked into the order. So like what Blur did was they said, okay, great. So you want to list this, you'll list it on Cport. You know, Blur will take care of this order. 0% goes to OpenSea, we'll still pay the creator royalty, and you can still now buy this on Blur. It's kind of interesting because what that means is it hurts OpenSea because it means that like maybe the cheapest or the most liquidity might not be on OpenSea, it'll be on Blur. But it helps Blur because they can still have people come to their site and list things directly on Blur. So maybe I should just pause here because I just think that that's like a pretty interesting development because they kind of got past the operator filter altogether. And the other thing I want to add before like maybe letting Nicholas interject is the fact that they were even paying creator fees. in this moment, whether using Cport was completely up to Blur and their choice. Because it was just they decided to enforce that in their UI. Nothing about Cport pays royalties or even pays OpenSea. And you could imagine a world where, hey, maybe Cport had creator royalties baked into its protocol where like, hey, you can't trade NFT on Cport without paying the on-chain royalties. But since OpenSea never, until very recently, supported on-chain royalties, they didn't build it that way. That's actually like very like important for what happens next. You have anything to add, Nicholas?

Jacob: Well, there's one detail that it's like OpenSea can't upgrade that instance of the protocol. So it's one way deployed too. And they can't obviously block their own protocol.

Nicholas: I feel like...

Worm_emoji: Well, they can do one thing, Jacob, which is when you list something for sale on OpenSea and like and Blur, you're not granting Cport directly access to your NFTs. You're granting the OpenSea conduit. So like, for example, before Cport had OpenSea, they used this thing called the Wyvern protocol. It kind of is dead now because like all the orders that were previously approved no longer work because OpenSea can revoke its conduit. So OpenSea can kind of turn off old versions of Cport because they can just say that the intermediary contract that you're actually approving to like approve your orders, they can revoke its access to that. And I think that Blur was not asking for new approvals, but just using the conduit function. So what I'm saying is if OpenSea really wanted to block this specific version of Cport, what they could do is revoke the conduit so no longer anyone's approved and then add to their operator registry. So they can do some stuff, but yeah, it would still take a new version of Cport. Anyway, yeah. So fast forward to the Blur airdrop happening. Blur's gaining more and more market share. I think Blur is regularly having days where they're doing more volume than OpenSea just in terms of trades initiated from the Blur UI. Although OpenSea still, I think even to this day, has most of the liquidity. But I also saw some analysis saying for like the top 10 collections, Blur is like eating their cake mostly because of this whole issue of royalties. Like Ward Apes or whatnot, which have a royalty, like are getting trade on Blur overwhelmingly. So the Blur airdrop happens on Tuesday. And I think somewhere around this time, this is not like well known. If someone knows, I'd love to know. Somewhere around this time, Blur decides to change the way that they're interacting with these Cport orders where royalties now go from being mandatory if they're using a Cport order on Blur. Now royalties are optional. So now this is what prompted what happened today. Orders on Blur are essentially like, this is not what OpenSea set out to do at all because now Blur has optional royalties. They're using Cport, OpenSea's own protocol. And they have the best of both worlds, more or less. So that was kind of how we got to all of this is why we got to where we are today, which is more or less OpenSea adopting all of the same royalty policies as Blur and dropping their fee. Because Blur was clever enough to use OpenSea's own protocol against them. Just like as more or less a vampire's attack to steal market share, because that's what Blur cares about. John was very right. It's about market share. I think I kind of said everything I need to say about this, but I'm happy to answer questions or clarify anything. But that's my understanding of what happened.

Jacob: What would you say the next three months looks like then? So it's like today. they've announced 0% fees for a limited period of time. How long do you think that limited period of time is? And then if you're in the... Another detail here too is that Blur doesn't have $1,155 yet. OpenSea does. That actually seems to be a big gap in the Blur offering at the moment and has seen growing market share in the past couple months. But yeah, if you're in the driver's seat of either cap now, what would you be doing? And where do you think this actually shakes out?

Worm_emoji: Yeah, I think one part of the meta here is like OpenSea, along with kind of everyone else, was waiting to see what would happen when the airdrop happened. There were some people... I talked to a lot of people in the space like traders, VCs, other people in FTs. A lot of people thought that, hey, after February 14, volume will just kind of like rapidly come off a cliff as people claim their airdrops that they farmed for the last three months. But that's not what happened.

Nicholas: But I don't think people were using it because of the farming. It wasn't about farming for most people. It was because it was a marketplace. And they're actually very good at product and they're very fast.

Worm_emoji: I agree with all that.

Nicholas: Yeah, it's impressive.

Worm_emoji: I was trying to make a cynical VC look. That's to be clear. Yeah.

John Palmer: : I wouldn't be the first person to bring up this idea. But I think people often refer to airdrops and crypto as being like a web3 equivalent of your CAC or your customer acquisition cost. So you're basically even hinting at the airdrop. It's the initial reason you pay or promise to pay people to initially check out your product. And from that point on, you survive or die on the strength of the product alone. So I think that's basically what happened where the promise of the airdrop was get people to check it out. They actually won over a lot of consumers. And then the airdrop at that point is falling through on that promise, not necessarily the only reason people are using the product at that point.

Worm_emoji: Oh, yeah. To be clear, I never really intended to say that. I think...

John Palmer: : No, no, sorry. I also didn't intend to say that you intended to say that. I'm just kind of laying out what I think happened.

Worm_emoji: Gotcha. Yeah. I was just saying, I think OpenSea and other people were waiting to see if the airdrop would actually change meaningfully the market dynamics. And I don't think that's what happened at all. And I think it's because of the reasons you both are laying out, which is it's actually a better product for a lot of trading use cases.

Nicholas: And they just rolled out. I haven't played with it yet, but they have UI for collectors now. When you log in, you're presented with, are you a trader or are you a collector? And collector has bigger art and whatever they'll like. Product, they'll like Walmart us into it being a better front end. because the reality is for a long time, OpenSea, I mean, the metadata stuff was not great. The refreshing metadata, the standard that they laid out for metadata, a lot of things, even the product is kind of could use work and Blur seems to have that energy. Gem really had that energy for a minute. It was doing like when they were showing in-flight transactions, you know, even like mempool you in the UI. There is creativity that's exciting in this building a better product in this space.

John Palmer: : In terms of what the next three months look like, and to Jacob's question, like how long is temporary for the 0%? My hunch is that temporary is a lot longer than people think. Like I don't think it's like a two week or one to two month thing, unless something unpredictable happens to me. When you're charging fees in a product, like there's a reason for that. Either you have a monopoly and you're the only solution in crypto, you could be winning on application like product feature set on the front end, or you could be winning from an on-chain network effect. So until either competitor establishes one of those things, I think it is a race to the bottom or since it's already at zero, stays at the bottom for a long time. So the two options there for either person are one, build a better front end that has features, even if they're just client side that are worth paying for. For example, hey man, seeing those in-flight transactions, it's actually saving me gas money. So I'm willing to pay a little bit of extra fees for that feature. Or you establish an on-chain network effect. Uniswap doesn't have fees, but if you were to point to like a DEX use case, there's actually liquidity network effects. I'm getting the most efficient pricing on whatever the dominant DEX is because they have the most liquidity. And so I'm actually willing to maybe pay a small fee on top of that. as long as net-net is still below the slippage I'd be paying on the next protocol over adjacent to me. So to me, you either have to evolve your protocol to get on-chain network effects or you have to build a front end that's worth paying for.

Jacob: Yeah, maybe Blur actually has the best shot there right now because they've got growing TDL for that bids feature where they actually have like $80 million worth of fees in that contract. That's not even a race to zero. It's negative zero technically because Blur is incentivizing it. But at least they are getting some sense of on-chain liquidity. That as far as I know, I know OpenSea has collection offers, but they're not kind of accruing a single store of ETH on-chain that is geared towards that feature.

John Palmer: : Yeah, that's a great point.

Nicholas: If you're Blur right now, what's the product you need to make next? You've just owned OpenSea at their own game by using the holes they left in so that they could be the ones to charge a fee against them. Now you have options. Season 2. I feel like season 1 was a big payout and then it created the myth that season 2 will be able to be a cheapskate about. People are excited about it now. They want the next airdrop. So there's already attention to... You don't need to make promises. People are already desiring to farm. this token, use the marketplace. It's got a better UI. What do they build next?

Jacob: I think I mentioned it a bit earlier. They need to cover up the $11.55 pot in the market because that's currently a missing piece of the market right now. You can't trade any $11.55 on Blur. That probably would be one on the secondary market.

John Palmer: : I mean, like. there's a kind of like cover your base case features like optimize the whole site for mobile, work with $11.55 and then there's maybe like the pro slash like worth paying for features which I could see. I don't know. Maybe a lot of stuff you would already see on like a prodex or wallet being integrated.

Nicholas: Maybe even delegation or something. Some security features built in. It's more like a wallet. It's like an on-chain wallet for you somehow. We're doing the like. you give them ETH and you can bid from it or something. They built their own WEATH style bidding.

Jacob: Could be that. Or if this is like analogous to kind of like the coinbase Binance battle back in 2018. You know, they start heading into even more heavy financialized products where it's like. maybe they figure out how to do the margin trading and get extra leverage and options are all sorts of like the trader heavy financial products on the market.

Nicholas: There was a time like nine months ago where it felt like OpenSea's vision of like Disney, Walmart America being OpenSea users. OpenSea is the next Facebook or something. Where it did seem like, oh, that's going to be the biggest part of the market. But right now it seems like Blur's energy is coming from like winning on price basically. But in a kind of dark mode default aesthetic. Like it's not trying to be like partnered with Nike necessarily. Although they might well do it.

Jacob: Yeah, I didn't come back to that UX thing I was mentioning. And I think that metrics don't show this where there's a very small number of traders that drive a huge amount of volume. So although OpenSea has many more traders every day, then Blur is winning the top end of the market, like kind of the institutional equivalent. And that feels like the big fork in the road where maybe if you're in OpenSea's seat, it's like, well, maybe we actually don't want to head towards the speculated trader use case. We actually want to see what it looks like to push more onto the consumer side of the spectrum.

John Palmer: : I kind of...

Jacob: You go, John.

John Palmer: : The first time I used Blur, I found it quite difficult to use. And I felt like the pro language was coming through in like aesthetic and vibes, but not actually usability. And it's improved on that front pretty significantly since the launch day. But I'm actually curious if... I'm actually curious what would happen to their usage if they offered like an alternate theme that basically looked like Gem or Genie. And I wonder if everything is just price. Everybody just wants the best price. And maybe the pro people would pick that theme. But if they also offered like a really basic looking Genie clone theme, if their usage would go up or down.

Worm_emoji: I had one question.

John Palmer: : With the idea of maybe it would actually go up and the pro UI didn't matter as much as the pro UX and price elements.

Nicholas: It's interesting what you point to pro. We're just accepting this terminology that it's pro. It definitely did feel more alive and certain data like the bid volume, the depth of... Listing depth graph was pretty cool. But yeah, I mean, Amazon competes on price, right? Everyone uses Amazon because of the price, not because of the UI. It has good search, I guess. Yeah, right.

John Palmer: : Or if there was an Amazon Pro competitor and they had a dark theme UI, but worse prices.

Nicholas: Yeah, $500 a year.

John Palmer: : Yeah, yeah, yeah. Yeah, I don't know. I actually wonder if...

Nicholas: Once they become really mature markets, like yeah, we get 10 kinds of soap from the same four companies in whatever lifestyle they chart out for us or whatever. So I could see many, I don't know. There's also like reservoir, there's...

Jacob: That's what I was about to say. The API actually feels like another interesting surface area, which has been an area that I think OpenSea's historically been quite restrictive on opening up the API to other markets. And I don't think Blur's API is completely live yet. I know they've got like an intake form for it. But that feels like a really important dimension in winning or expanding market share. Now it's like, how do you actually start to enable more of those third-party marketplaces? And that's where obviously Reservoir is sitting squarely in that realm right now. So yeah, maybe Blur or OpenSea go for Reservoir. Just cover that off or they just try and build it themselves or fix whatever issues they have on their own side.

Worm_emoji: I had one question...

John Palmer: : People here, if you have thoughts between the on-chain value capture versus front-end off-chain value capture. Like Jacob, I know you obviously wrote the hyperstructures piece. But I think an interesting pushback to the idea there that Wilson Cusack has talked a lot about and written about recently is like fees that add value or fees that make the protocol better. And I kind of wonder, I think I would be asking myself if I were in Blur's position, if I wanted to focus on doubling down on client-side features and liveness slash access to pricing. And with the idea that I'm going to compete on product and win there and eventually, I'll be so good at it that users will pay. Even as a portion of volume, maybe that's still possible. Or if I start to see tens, hundreds of millions of dollars locked up in the Blur contract, I've now started to get some on-chain liquidity mode or network effect. Do I try to double down on that piece and find a way to capture value but in a way that maybe makes my protocol even stronger? I feel like that is a really fundamental decision that most crypto companies have to make. And it's been interesting to watch different crypto unicorns over the past few years choose one way or the other or try to split the difference on both. And in my opinion, that's a tough thing to do.

Nicholas: So you're saying, I'm thinking because you're saying charging in the front end versus and like maybe Cport is kind of like that, right? OpenSea was charging in the front end basically and got ganked pretty much. A better product now exists. The OpenSea plus no fees at the same time exists elsewhere. And it forces their hand to kill their entire revenue stream. Their entire business, the whole OpenSea business until now is now zero. And for me, it's forever. They're never going back to that. They'll have to charge for something else.

John Palmer: : Yeah, yeah, exactly. I mean, I think maybe someone else can provide a stronger example for me. I'll play pretend for a minute and just say, imagine that Uniswap turned on a 0.1% fee across all pools. I think they would have a decent shot at defending that and just being fine and maintaining all of their market share because someone wouldn't just have to undercut them by that 0.1% to beat them. They would also have to beat them on the price you would pay from slippage. And that means they would have to find a way to get the liquidity, the LPs to migrate from Uniswap to whatever their new DEX was. And that's hard to do because there is like an on-chain mode there. Or you can take... So imagine that business existed. There's actually like on-chain value capture. It's not happening on the front end. It's happening in the protocol. And the reason you're paying it is for benefits. that's happening in the protocol versus something like OpenCC port. You're paying at the client level. Fees are not baked into the protocol. And there really isn't an on-chain mode in that protocol. There's some network effects in terms of like order standardization, configurability, more people are... If you're spinning up a new marketplace today, you might as well like fork C port or deploy a version or just create your own zone or whatever. But what you're paying for there is actually something that's not in the protocol. It's the UI plus the liquidity that's listed on that UI, etc. So if you're... Yeah, you're right. So OpenCC kind of abandons that today. And I think both of these companies have a choice to double down on front end and find a way to charge fees that happen outside the protocol, or try to build an on-chain network effect that's worth charging for. And maybe way harder to figure out how to do that, but way more defensible if you can do it.

Jacob: Yeah, I think that's right. We haven't really seen anyone crack that code at the protocol level for the NFT market yet. The closest we probably have is like ENS is one example and then Nouns is another. But in terms of actual marketplaces capturing protocol level fees, it's almost exclusively at the platform level. And the protocol base is just a commodity with almost zero network effect.

John Palmer: : Yeah, like imagine you attached... So Blur has like their contract, like their Blur pool or whatever, right? So when you place a collection offer, you deposit your ETH into that contract and then it sets the offer or whatever. I actually don't know the protocol that well, so correct me if I'm wrong there. But imagine like...

Jacob: There's an off-chain order. So you deposit it into a contract and then you can place off-chain orders using the ETH in that contract.

John Palmer: : So yeah, as long as that's like loosely correct, you can imagine Blur being like, you know what, we're going to build some kind of like yield farming service. Like we're actually going to take all the money in that contract and like passively lend out some of it. And so like, hey, while you have collection offers on Blur, you are actually earning yield. And now there's more reason for people to have a collection offer on Blur, because you're actually making use of the capital. And so you start to establish an even stronger liquidity mode there, which means better prices for buyers because there's always more collection offers. And maybe you can create some kind of self-perpetuating loop there. Maybe the thing you get for whatever, maybe they basically automate the airdrop with like the inflation of the token where you just directly say like, value of collection offers you have that are like within 20% of the floor times time you have them there equals number of tokens you get as a percentage of inflation every month.

Jacob: That's like the primary way to earn Blur.

John Palmer: : Yeah.

Jacob: Yeah.

John Palmer: : Yeah, it'd be cool to just like make that deterministic and transparent and just put it all on chain and double down on that piece. Although of course, you may also want to create value for the token in some form other than just vote on the fees. Like, I don't know, I have other ideas there.

Nicholas: So you talked about earning money either in the... Like there's kind of. the best business model for open source software is to have a network effect like an LP, where moving the liquidity makes it hard to... Is a moat, like the challenge of moving the liquidity is a moat. But there's also this question of like, they're also operating kind of... We've been talking a lot about secondary, secondary, everything's secondary so much bigger. But at the end of the day, there are other like dimensions of network effects, like say, safe, Gnosis safe. There are things that regardless of like the standardization and the frequency of use of protocol can make it transcendently resonate through projects that even though they can displace them in some ways, they have to adhere to some notions we have about how things work or what is safe. I've worked with many projects who treat safe as infrastructure, like it's not a contract.

Worm_emoji: I wanted to touch on...

John Palmer: : Yeah, I think... I don't know if Wilson's still here, but I feel like he has interesting thoughts on this. I guess that one interesting thing about safe slash cport, as opposed to something like Uniswap is that the network effect is around the implementation of the contract versus the instance of the contract. So more and more safes get created, like safe is the dominant multi-sig wallet. But every time you deploy one, you're just deploying another instance. So there's many instances. And they're not really all connected together in some way versus like the Uniswap pool. It's like one instance for that pair at least that everyone is using. Or I think Wilson uses the term like actor. protocol, like the protocol itself is an actor. And like the instance itself is like where... I guess that's all I mean when I say like on-chain network effect is that there are many forms of network effects. But I think maybe the thing that's not been seen frequently enough in crypto is an on-chain network effect in the form of like the specific instance of the contract, not just like developer networks or like expectations.

Worm_emoji: Yeah, I think you have something there, John. Because when Blur announced its bid contract, you know, OpenSea forbids they use... You give OpenSea Seaport permission to access your weed. But as you mentioned, Blur, you deposit ETH into their bid contract. And Blur has talked about this many times as TVL, total value locked, which didn't make sense to me at first for like an NFT protocol, why you'd be talking about TVL when you're not gaining yield or anything like that. But maybe this is... Maybe that's why, you know, like now we can actually see them getting yield. I think that's very interesting. I also had one quick question and it's totally fine if you can't answer this, Jacob. But one thing that did happen today is OpenSea did modify who was on the operator filter, like via Cori, I guess, you know, removing Blur from the list. I'm curious, is there like a process? Because I know Zora is a part of Cori. Is there a process like where they say, hey, we're considering removing someone or is that just kind of like, you know, is that just kind of like something they decide unilaterally? And if you don't want to comment, I totally understand that too.

Jacob: I believe there's some process around it. I'm not fully up to speed on it. Tyson, our CTO, is actually better to talk to you about that. But basically, like the way Cori emerged was trying to get that operator filter registry into a similar position as the royalty registry, which was the royalty registry was like a really great initiative. that kind of like unified a bunch of competing marketplaces around both 2981 royalty standards and backwards compatibility with contracts that were created before it. And I think OpenSea was listed on that, on the royalty registry, but never got around to implementing it, which is interesting for a whole bunch of reasons that you mentioned. But yeah, so I think Cori is being set up as an effort to try and like, hey, this is a pretty large and powerful piece of protocol that has a lot of downstream impacts on a lot of creators, NFTs. Let's try and get that into like an industry-controlled multi-sig, but it's still very early, frankly, in that process. And, you know, everything's been moving and changing in the past six or seven weeks, and it's largely OpenSea driven. So yeah, that's kind of like the current state of it.

Nicholas: How do you think about, I know you've been spending a lot of time on, well, my impression is on NounsBuilder or Builder is the product. What's the name now?

Jacob: NounsBuilder. That's what it's called.

Nicholas: Okay. Okay. How do you think of, or I don't know if, because the other dimension I was going to say before is that there's like primary and secondary. And in some ways, OpenSea has had a big role in primary over the time. But Manifold and Zora and I don't know what else other people are using, honestly, like some combination of some chat GPT contracts everyone's putting out, I assume. Actually, Mint.fun must know, what is everyone using for contracts?

Worm_emoji: I think it's like, I don't have the numbers in front of me, but just anecdotally, it seems roughly like it's Manifold, Zora, and then like Cdrop. And I'm kind of going in order of like...

Nicholas: Cdrop? I've never heard of Cdrop.

Worm_emoji: I'm going in order of like, not number of contracts, but like volume of primary sales. And then like a long tail of everything else.

Nicholas: Is Cdrop OpenSea?

Worm_emoji: Yes. OpenSea has its own protocol, sort of way of doing primary drops.

Nicholas: Is it new or is it the old shitty shared contract?

Worm_emoji: It's a new thing. It's a new thing. Yeah. So like you can basically conform to the Cdrop protocol in your NFT contract. And then OpenSea can like sell your NFTs for you. Like on a primary level. Yeah, it's a new thing. It's not very public yet, but they have partners. Like on Valentine's Day, they did a drop with Heritos and another like Web3 native brand. Yeah, it kind of lags behind other ones. Anyways, I didn't mean to interrupt. But yeah, I would say Manifold, Zora, Cdrop are like the big platforms involved right now. And also Bueno Art. I see a lot of Bueno projects. But I'd be curious to like get the hard numbers on this too, because I don't have it readily available.

Nicholas: What is that?

Worm_emoji: Bueno is like a... Yeah, they kind of help you. I'm not super familiar with their platform. So they help you like make your generative art projects and launch on chain. They're generally 721s hosted on IPFS.

Nicholas: Yeah. Cool. I'm checking it out right now. Yeah. Okay. It seems like you can... I think it's like a... Yeah, Bueno Generator. So it's like generative collection minting tool, which is so hard to design. So hard to... Actually, I haven't played with the Nounce Builder one for doing the... There's an SVG module, right? And that can even be swapped out.

Jacob: Yeah, you can... There's a simple drag and drop tool where you just upload your JPEGs or PNGs. And then if you want to put it on chain, then you can create your own custom metadata render. Yeah, just upload it.

Nicholas: There's like a thing where... You can download a folder and put more sophisticated quantities and properties, right?

Jacob: Yeah, exactly. But yeah, I feel like you had a question growing around the primary market and how that fits in.

Nicholas: Yeah, well, because I think that... Maybe we started talking about this before, but like OpenSea could go very consumer. I don't know the whole narrative around Polygon, whatever. So many things are driven by the narrative of consumer is the next thing. And of course, the next billion people, whatever. Whereas Blur, I think it could evolve into that. I think it has a good shot because it has a money engine or something. But Blur seems to be more... I mean, Blur seems to be more like... How many people do you really think are trading NFTs? Like it's not a big number on Ethereum. I assume it's like... I always... I'm undershooting it, but like the really active people. I don't know, 10,000 people or something? Maybe 100,000 people?

Jacob: Yeah, something like that.

Nicholas: So it's like a very small audience.

Jacob: John's got his hand up. So I kind of opened up a little bit.

Worm_emoji: I have to run. Thank you so much for hosting me and having this discussion, Nicholas. Yeah. Thank you.

Nicholas: Thanks for telling us the whole story, man. I really appreciate it.

Worm_emoji: Yeah, thanks. Let's do another one. John, go ahead.

John Palmer: : Yeah, just one other question. Coming back to the creator, royalty piece, especially for people here involved. more with creators and mints would just be... If the whole point here started with royalties and whether or not to pay them or creator fees or whatever. And now both marketplaces have gotten to a point where they're super low. I am curious what people would recommend on primary for people creating new art projects or otherwise via NFTs. And if you all see the norm becoming just reserving a percentage of total supply, as opposed to setting up a royalty contract or even like what you, Jacob or anyone else working with more artists, like what you even recommend people do at this point.

Jacob: Yeah, I'd say that's the new default. Just reserve supply and then no one can take that away from you. And I think what Nicholas is starting to get at is what are just fundamentally new models in the primary market that are available to creators and communities. And maybe that actually is more of a systemic shift away from the secondary. And I think you could point to the nouns model as at least one of a few options that seem interesting there, given that it's a perpetual primary market that's running every day. And then the royalties that go to the creators of that project are taken in the form of an NFT every 10 days. And that's kind of like flipped the volume that we see on the secondary for traditional kind of like 10k PFP projects where it's 0.5% or 1% primary for the initial mint or some cases like basis points on the primary mint and then it's all secondary. To now flipping it where the majority of the market is actually on chain in the primary market and the secondary is in the smaller model and actually has 0% royalties by default because the royalties are captured in the chain. So I think we're starting to see there's been a lot of education and discovery and experimentation around the nouns model generally. And I think we've tried to make that easy for people to create their own projects using that same model with the nouns builder. But I think that there will undoubtedly be other models and a lot of experimentation in the coming months on primary market and setting up your own credit contracts just generally given that it seems the secondary market will no longer have royalties for the foreseeable future. So yeah, I think holding back supply is one answer. I think the nouns model is another answer. I'm sure there'll be a lot more to come up with given the changes.

Nicholas: Yo Chris, go for it. How's it going, man?

Chris Martz: Hey, what's up? Yeah, I wanted to build on something you said you guys said earlier. So like, Blur isn't multi-chain, correct? It's only on Ethereum, right?

Nicholas: I mean, implementation detail.

Chris Martz: Yeah, yeah. So I'm curious, like, I mean, I know it's in their roadmap to like go multi-chain, but I wonder sort of what that is, like what that's all about. And then OpenSea is multi-chain, like very multi-chain. I think it's like, even on Solana. That's just something that popped into my head. And then also this idea of like, Blur really is just really fast and responsive. And I think that like, I'm curious if you guys think OpenSea can get that fast. Like at the size they are now, is it even possible for them to be that responsive?

Nicholas: For sure. There's a lot of Facebook front end devs looking for work right now. They could just write a new front end entirely. I don't know if it's felt so far like they've just been hanging on because it's been such an insane growth curve that I'm even impressed at what they do. Like even, you know, I couldn't do better than them.

Chris Martz: Yeah, yeah. No, I'm not even saying it's bad. It's kind of different. It's a different UX to like...

Nicholas: Fresh start. Yeah.

Chris Martz: But and then another thing that popped in my head was like, so do you think that maybe either of these companies might like start cannibalizing stuff from pseudo swap? Like, John was talking about like LPs. Like, that could be like a totally huge thing if either of them started to get into that. Like, I could see Blur having like, I don't know, like NFTX or pseudo swap type pools of NFTs or things like that. But that was pretty much it. Those are just some like things that popped in my head.

Nicholas: Yeah, I think it does make sense, especially because it's like they're winning right now because the majority of the volume is between a very small number of addresses. And those addresses, like you can have the majority of the volume or the fees that you can generate is from savvy customers. So this pro moniker that we've associated with them is where all the money is. And then they just grow from there. So it makes perfect sense that those kinds of motivated people would want to optimize by yield farming, you know, in addition to doing what they're doing. It seems very scary to me personally, but yeah, I don't know how much I want to send my NFTs to vaults that are also terrafuna.

Chris Martz: Like, I don't know. And I mean, I was even surprised that Blur didn't have staking for the token, just like basic staking. And then also like, or if not staking, like discount. Like, maybe if you hold Blur, then you can like, I don't know, get less fees or something like that. I'm surprised that the token was just like straight up a token. But yeah, I don't know.

Nicholas: In the thread where they announced it, they're very vague about what the purpose of the token is. It's like...

Worm_emoji: Yeah, yeah.

Chris Martz: I think that's a lot of legal stuff too. Part of that.

Nicholas: But yeah. I guess so. But it's like, it almost feels like, okay, so why then? Like, there's no reason why you're dropping it. It has no purpose. Yeah.

Chris Martz: I mean, governance for sure.

John Palmer: : A token is a very malleable tool. I think that's kind of okay. Like exactly what Chris is saying. The idea that like, oh, you know, what. if we want like, you know, Discord Nitro, like Blur Nitro, if you hold this many tokens and you whatever, you lock them up or something, you don't have to pay the 0.5% creator royalty. because guess what? The Blur treasury donates a certain amount of the tokens to a creator fund or whatever. Like, you can easily add that later. And I think it's like, totally okay to start a project with a token. I mean, usually provided it doesn't float and you don't airdrop it and stuff. Even when your plans for it are still malleable. It's like going on a camping trip with a knife or something. It's like, I don't know what I'm gonna do with this knife. But there's a lot of different stuff I could do with it. And it's going to be a useful tool. And a token, like is literally just an ownership table. And you can write contracts later that read into that ownership table and change behavior based on ownership level. So I think it's kind of cool and smart to have a token with no plan as long as you're agile and it seems like they are. So I kind of think it's pretty smart.

Nicholas: We didn't really finish the thought earlier, but like primary does seem like something where there's a natural direction to expand also. I mean, just even featured collections or maybe you hold a token or I don't know, they do partnerships, whatever, just to start to do more of that promotional element using the real estate they have.

Chris Martz: Do you mean to OpenSea or Blur or both?

Nicholas: Blur. OpenSea has always been kind of hamfisted about creation, even though it has been very, very popular. And they were kind of happy to give it to Manifold to whatever extent that they have. But Blur doesn't do any of that. And it seems to me like some like Mint.fun kind of features or, you know, like basically trending. Trending is huge.

Chris Martz: Yeah. Yeah. I mean, I feel like it's like a UI thing with Blur. Like if Blur just had like flavors of UI and one was like, here's foundation and you can it has the speed of Blur, but you can look at all the cool art in a nice way. I feel like that's what it's missing. It feels so trader-y that you don't really enjoy the imagery. I'm always amazed at how to get to a collection. I have to do gymnastics on clicking the text of what the project is in Blur to be able to see it, to just open it. And it's really silly. Yeah, I think that if they made like an artist-focused theme or scheme of Blur, then I think that would be really popular. A lot of people would probably bring a lot of people in and sort of be like reverse engineering what OpenSea's kind of process is.

Nicholas: Okay, so we've got a few ideas about what the product, what the next thing can be. So yield farming opportunities on the basis of the value of the NFTs, maybe staking the Blur token to get pro features in the UI for free or reduce fees. Or maybe some minting, either minting tools seems less likely, more likely trending discoverability that catches the eye of the creators and the creators start to try and create against because it's eyeballs.

John Palmer: : I think focusing on one user group for a long time is smart. And so I would say, you know, I think all these options are valid. But if it were me, if you dropped me into the founder role there for a simulated, whatever, simulated decision or something, I would...

Nicholas: God, that would be a great game, wouldn't it? No one's working on that. They should do VR for that. Fuck.

John Palmer: : Exactly.

Nicholas: Be Pac-Man for an hour.

John Palmer: : I would definitely double down on the current user, which seems to be the trader. They probably don't even care about the art. They care about the prices, adding more features that let you access faster liquidity, better prices, lower fees. Maybe that's a cynical view, but that does seem like the person who's gravitating towards...

Nicholas: Okay, but what about making hits? They could be making hits. They could be making them like Mint.Fund, I presume, makes them.

John Palmer: : You mean like in the creation of a new collection?

Nicholas: Well, they don't need to be... You can create it on Manifold. They don't care about that. You just need to be trying to sell it on Blur. Targeting the audience of people who are looking at Blur, minting new primary sales or whatever.

John Palmer: : I think that's totally relevant to the same user group. But I don't think minting tools as in deploying new collections would be relevant.

Chris Martz: But maybe the social ability there of seeing what top traders are doing in a visual way or being able to follow... Maybe they just added that with their list. I haven't even explored that thing. But yeah, just more messaging, more following type stuff. Right now, it's very solo.

Nicholas: They seem to be very good at writing software. Yeah. And their designs are often very sticky.

Chris Martz: Yeah. Also, it's not mobile ready. They need to just make it for mobile.

Worm_emoji: I think that's a huge, huge thing.

Nicholas: Alright, well, I guess we've been talking for a while.

John Palmer: : It's dinner time for me, so I got to hop anyway. But yeah, this was... Nicholas, thanks for putting this together on short notice.

Worm_emoji: Thanks, y'all.

John Palmer: : Worm's story was awesome.

Nicholas: Alright, thanks, John. Thanks, Chris. Thanks, everyone, for coming through.

John Palmer: : Peace out.

Nicholas: See you next time. Blur Pwns OpenSea. Transcribed by https://otter.ai.