This time, Tim is joined by Alexander Salnikov, the Co-Founder and Chief Strategy Officer of Rarible, a community-centric NFT marketplace that allows users to create and sell digital collectibles secured with blockchain.

Alexander is a blockchain trailblazer and an active developer in the crypto space since 2012. In the episode, Tim and Alexander discuss Rarible’s new DAO, potential pitfalls to avoid when starting a DAO, and the growing relationship between NFTs, blockchains and the metaverse.

To find out how Grindery is building a Swiss army knife for existing DAO frameworks, head to grindery.io.

Transcript

 [00:00:00] Tim Delhaes: Hi, my name is Tim and you're listening to DAO Talks. In every episode, I sit down with my Web3 leading guests and demystify Decentralized Autonomous Organizations, DAOs, share the builder's stories and discover how we can better use DAOs and hopefully improve the world we live in. Hey, Alex, how are you?

[00:00:25] Alex Salnikov: I'm doing great.

[00:00:26] Tim: That is awesome. You are in New York, right?

[00:00:29] Alex: I'm in New York in our Williamsburg office in the famous Brass Factory. We're home to a lot of the free startups and funds and infrastructure. A lot of things that's a real community, we enjoy it. It's a creative building so to say. Absolutely amazing.

[00:00:50] Tim: Great. How long have you lived in New York now? How long have you been there?

[00:00:53] Alex: I just moved this year.

[00:00:55] Tim: Wow. Before that?

[00:00:56] Alex: Before that, I was living in Moscow.

[00:00:58] Tim: Wow. Good time to move, I say. Alex, you are obviously a co-founder of Rarible. You guys just launched Rarible 2, you launched the token, you launched the DAO. What's the big thing about it? Why should anyone care? Why should everyone care?

[00:01:15] Alex: It is the major upgrade of our platform. If you remember, Rarible started as the art trading platform, and we expanded to everything trading platform. The liquidity for PP projects are relatively low on Rarible. That's why we've made a major revamp of the system and turned Rarible into an aggregator that allows you to buy any PP project out of any major marketplaces.

Rarible is now really feasible to trade PPS and it has a great UI/UX to do that. It has our own order book, which is just by far better than other order books with the token program. We'll just talk about it. In general, Rarible 2, its aggregator plus token. We've seen aggregators, we've seen tokens, we haven't seen aggregator with the token yet. It's an amazing way to trade your favorite items.

[00:02:11] Tim: Does this actually mean that Rarible is really fundamentally changing, so to speak, its business model from being a marketplace to being an aggregator? Or is it going to coexist? What is the change in the business dynamics for you guys?

[00:02:27] Alex: You're absolutely fair to ask that question. There's two business models that will coexist. We do not monetize the aggregated orders, aggregated liquidity. You come to Rarible, you buy an item from open tools or pseudo swap and you don't pay any extra fees. You combine multiple items in the same cart and purchase them all together. That's all like for free. You're even saving on cash a little bit.

There is a Rarible order book. You can list on Rarible with better fees than in other marketplaces and earn rewards when you use the marketplace part of Rarible. It's like aggregated marketplace as we call it. It has other liquidity, but it has our own liquidity, and our own liquidity just comes with better terms.

[00:03:14] Tim: Very good. Understood. Since the launch 10 days ago, what have you seen so far? How are people using it? Have the user dynamics changed? What are your analytics, and what are the results saying so far?

[00:03:26] Alex: We're seeing like three to six acts of just daily GV and many of that is done in the collections that are part of the rewards program. Even outside of that it is like more or less to actually increase.

[00:03:41] Tim: Got it. The other two things, there's obviously changes. I know that you guys launched a foundation around it. I know that you launched the token and you build a DAO. One could say, well one thing is to change or extend the model from Rarible to Rarible 2 into the aggregator model. What is the role of all this other components? Talk us through it. What's the importance about creating foundation? Why do you need a token now or not, and why do you now need a DAO in this context? What's the idea behind it?

[00:04:13] Alex: Okay, let me try to frame the whole picture. If we would take everything that existed Rarible today, we would see the base layer, the lowest pieces of the pie. It is the Rarible protocol. The Rarible protocol, if you imagine genus swab you would have a fairly similar mental model. There is an on-chain layer, the smart contract that actually changes the items, the exchange contract.

With the NFT, that's not enough. You need an indexer that can tell you, oh, what are my NFT at all that I can sell? What are the NFTs that are on sale currently? What are the NFTs that got sold? What is the activity? What is the providence? What is the providence and activity on other marketplaces? What are other items on other marketplaces that are sold? All that is combined, we call it infrastructure. All of that is combined with the product Rarible protocol.

This product is open source. It is built by all the DeFi principles that we know. Open source, free, resilient, you can run it as your node. If you need a NFT API, you can just like copy the source code, run it on your own server, and you'll have an NFT API. The token is the integral part of this foundational layer that incentivizes the usage of the order book. It is the token that grows the order of this protocol.

On top of this protocol, there is multiple marketplaces. One of them is Rarible marketplace. There is a thousand more marketplaces on top of that protocol. Actually 10 of them are launched by Rarible and our Rarible partners together. 900 of them are launched by the Shopify tool that can generate your marketplace. Again, it's a big foundational layer that is decentralized, token-powered, foundation controlled and there is a front end layer on top of that which is like Rarible Inc. is doing. That's everything that we have currently now.

It all started more or less like blended together. You can't really understand what's going on, what's where, we are gradually separating that and crystallizing the vision for everything. Before that, the found the protocol, there wasn't even a foundation created. The token was more or less like just control the team. The last year, there was the first experimental DAO that we launched, and this is the second DAO that we launched now proper, separate company, separate entity, foundation fully controlled by token holders, on-chain governed, by on-chain just voting on strategy, full independent. This structure is the one that launched incentives that coincided with Rarible to launch. Now it's two separate.

To this, one of them controls the token and the idea is to make it all like resilient. You say why token? The token makes everything more reliable in the sense of it's an open source token govern product. If you're a big company or if you're a new project and you want to start building, what choice do you have? You have a choice to use an API of some company that is closed, that will charge you, that can close you, that can cut you off or it can pick an open source protocol which is like based on this principles. I've been now talking decentralized this and decentralized network.

[00:07:42] Tim: Thinking about other entrepreneurs and builders that are building stuff in Web3, when you started, did you actually have a vision of this separated elements or where did you start? Did you start with, hey, there's an unsolved problem and let's try to solve that and then figure it it out later? Run us through the like the origins of the project and how you looked at the product and the protocol back then, and what changed over time that you learned that led to these changes.

[00:08:15] Alex: First of all, when we started as the tool that allows you to create NFTs. There was just like no NFTs. There was a concept of NFT but there was no assets. Then we've got popular as a crypto art community. Then we looked at taking the look at the market and what we saw is the market is going to grow a lot. That's the understanding. The platforms, the marketplaces, the central hubs of the space are not going to remain the same. They are going to be unbundled into different categories, different verticals, different vertical directions. There is going to be a thousand of separate vertical marketplaces that are going to trade everything in the future.

To power that vision, we wanted to create an infrastructure product that would allow everybody to create their own marketplace, and not to put two years of effort into that, how we did when we were creating the marketplace. That's the vision behind the protocol.

[00:09:22] Tim: Can you talk a little bit more about what do you see the role of the DAO for Rarible as a Rarible DAO today? Because it's fairly new. You said it's already the second version. What was the first version, what's the second version doing? What do you see as the long term vision of what the DAO is going to do here?

[00:09:41] Alex: The first version of the DAO, it was called an adoption DAO. It was a grants DAO that was helping projects that are adopting the protocol. If you want to build something on top of the protocol, come to the DAO or get the grant, there was like marketing business development, all of that operations, turns out running operations as a DAO is extremely hard. That's very inefficient, and so we spent almost a year trying to make that true.

Then we understood, okay, we want to run a new iteration of DAO, which will be governance minimized, which wouldn't have a big operation body that would have a very small team barely like handling Discord and community calls. This mandate of the DAO would be to grow the infrastructure, to grow the protocol but not in a way of, oh, we're doing grants to people but in a way that we wanted to run algorithms and processes that are going to improve the adoption of the protocol. To say, like incentives there is an incentive program, fairly extensive incentive program and it needs to be tuned.

There is a multiple, there is maybe 50 parameters of that incentive program. How do we want this incentive program to work? There is an inflation, there is deflation. All of that it needs to be covered by the body to make sure that this is actually fair. That there wouldn't be some whales inflated everybody out of the borders. It is done to bring the transparency and resilience to the infrastructure space.

[00:11:20] Tim: In practical terms, because you already pointed to that. How's the DAO operation now working and where do you see this heading?

[00:11:26] Alex: It is just bootstrapping now so it's a very early days of Rarible DAO, of Rari Dao, very foundation that is just launched two weeks ago basically. It is structured in a way that there is a Discord, there's a governance forum, there are community calls and there's on-chain governor, opens up on governor that fully controls the token, that fully controls the community treasury of the remaining undistributed Rarible supply.

Anybody can come up and put up a proposal for how are we distributing that. This is all governed by the rare token holders, but it is governed not by people who just hold, but also by people who commit. In order to vote in proposals, you need to log your Rari for the specific time to show your long-term commitment to the system, to the project.

The goal of the DAO is to make the infrastructure really big and wide and everybody to use it and achieving that, not by hiring 100 people to the DAO team but by putting out an algorithm like liquidity mining, like governance mining, like delegation program, a very robust automated algorithms that will make this vision to come through.

[00:12:51] Tim: In this iterations, as you said, you had a DAO before, this is the second version, you might have a third version who knows. It can keep on evolving. Looking at it from a general perspective, what are the three things that you think are important that work, and what are the three things that anyone who's thinking about decentralizing into a DAO should avoid?

[00:13:10] Alex: Really great question. Let's try to unpack that. I guess the first thing that was done good is to launch a DAO really fast when people needed that, when that was important in the market, when there was good market conditions. It was just hyped, that was a good thing.

The bad thing that came was that we were unprepared to run the DAO in the independent manner. There was a lot control by the team and we thought that's a good thing in terms of that the team would be able to guide the participants but in reality, the team was just not able to keep up with the amount of things that this community produced and was just gatekeeper and the bottleneck of the system. Not the guiding power but the real bottleneck that made everything slower.

That was a big learning for us. While that's not cool, everybody who was deeply interested into doing something and didn't get the proper timely answer left, that wasn't right. We made the second iteration of the DAO, which is fairly unconstrained, anybody can do anything. We gave a certain power to the community but we did the guide the community.

What are the mandate of the DAO? Somebody said we should do investments right now. Our G is to grow the DAO, that would be our way to grow DAO, let's make investments to the projects. Completely unrelated to the infrastructure, completely unrelated to the protocol, just the projects that we like. We'll give them money and they'll give us money back. Let's do the token swaps.

Somebody said, "I'm doing this project for the greater good, let me do a grant." Somebody said, "Oh, I'm adopting the protocol, let me get a grant." The community started to vote yes to everything because everything sounded like a good idea in theory. It wasn't like prioritization happening then. There was just a lot of unconstrained, unstructured activity at some point that DAO had like 50 people doing something and like spending a lot of money.

That was not a great thing. A great thing that was, it was more open now, there was more activity but the bad thing that you wouldn't want to do was to not have the vision constitution guiding values, any guidance of what the DAO is for and what we want to achieve, and at least what are the principles by which we're achieving that.

[00:15:47] Tim: I see. In this iteration of more of unchained company structure where you guys produce the bottleneck for the community, you move to something that was the opposite, where you go like, ah, everyone can do whatever they want which became unstructured and chaotic and unproductive. The logical step obviously was how do you bring the two things together? How do you bring some type of structure but maintain freedom and agility to make it community driven? Would that be the way to look at it?

[00:16:23] Alex: Yes.

[00:16:24] Tim: Very good. What are the steps that you say to somebody that would do this today?

[00:16:29] Alex: First you need a goal. You need to align people behind the goal because that is the novel concept. Oftentimes when people build a DAO, the goal becomes to build a DAO. If we translate that to the previous terms, it becomes let's build a company. It's not like building a company, it's not a goal. It doesn't give you any guidance of why are we here. You usually say, oh, let's build a car and we'll start the company to do that. You need a goal of your DAO.

Then you need some guiding balance on how to achieve that. We set our guiding to be the governance minimization, to not blow the supply, not blow the people working in that org to only grow the DAO through making the infrastructure better and then capturing value from that infrastructure so there is a clear boundary. We're not doing investments into other projects, we're not doing bono projects just to enlarge the space. We're not hitting the universe.

Our goal is to grow the infrastructure, a Rarible protocol, particularly today. There might be a vote to add the second project or infrastructure, but so far we only work on one infrastructure product. We're growing that product and we're capturing value back from that product and that's our way to grow the DAO. That is enough of the guiding values.

Then on-chain, we have a fairly high threshold that you need to have like 5,000, the Rari tokens which is more or less like $10,000 to into the prices to even submit the proposal. Then we have a committed set of people that will be voting. It's not like everybody would vote, but only committed people and the core is also high, pretty high as well so that there is a certain just like technical filter for the proposals to come through. The next thing that we are going to do is we're going to assemble the delegation board of people who again are very targeted to do certain work and we're going to implement the DAO budget, so this is all necessary.

Previous DAO we had this question like, oh, let's spend $300,000 on marketing on this particular marketing activities to this hackathon and outside with the vote. It is very hard to tell if that's a good amount of money or not. Well that's a great hackathon, that's the best hackathon in town. Are we ready to spend X money on that?

We know, but if we say, oh, there is a goal of the DAO, there is a constitution, there is a yearly budget and that yearly budget says that there is a total of hundred thousand dollars in marketing, then you have a certain guidance now to understand. You can't even do that with the current budget. You want to start very high level and you want to draw the boundaries of what you can't really do. You want to incentivize and be completely open in the activity that you can do inside those boundaries.

[00:19:49] Tim: Who does budget allocation? Is that community driven or is this imposing the rules? How do you decide on budgets?

[00:19:57] Alex: It's all still decided by the community but it is decided in a recursive way. At first, you decide on the big question and then you decide on the small, and not the other way around. It's not that, oh, a specific team decides the budget. It's still the community that decides the budget. When community decides the budget, you're incentivized to think about like, oh, okay, how long do we want to sustain the organization? Oh, we want to have a multi-year runway for the organization?

Oh, we want to spend this amount of money this year. This means that this is what we have. What are our priorities development, marketing, incentives? 50% goes to incentives, 10% goes to marketing, 20% goes to development. If you do that in the right order, you are not skipping to the last point when you try to optimize and try to decide whether we're spending 200,000 on the marketing activation without thinking this high-level questions first.

[00:20:55] Tim: The funding for the DAO, where does it come from today, and where will it come from tomorrow? How does that work?

[00:21:03] Alex: Every undistributed Rarible token was transferred to the Rari foundation. The foundation from now on manages all the UN-distributed supply, which is more or less 40% of the network. This is the sole source of the funding, and there's no any other sources and foundation fully controls that source. It is the treasury of the foundation, and it is under full control of the tokens.

[00:21:33] Tim: When you guys went out and designed this, do structure and it goes hand in hand with the token? Obviously, what other DAOs that are currently operating or that have operated? What did you look at, and what were you inspired by where you said, "Hey, these guys are doing this, and we really like that about it. We're going to adopt this and these other guys are doing this thing which we really like?" What were the inspirations for you guys that where you drew examples from and guidance?

[00:22:02] Alex: Acoin DAO, they were very clear in articulation. The idea, the guiding values, the motivation, the governance process, all that. Very clear, very straightforward. If you'll go to the website, you will understand how to submit a proposal instantly. What we didn't like about that the votes are done on the snapshot, and there is governance board that is gatekeeping, even the forum, so that didn't sound right to us.

That's why we combined the on-chain part and on-chain DAOs that are quite famous. As of today, it would be Bitcoin and ENS. Those are great in that regard. We use Tally as the on-chain interface, the interface for on-chain governance, and we use the open openZeppelin governor, to develop escrow logging contract ourselves, which is the inspiration from the curve dial.

[00:23:03] Tim: Very good. Good inspiration. From your vantage point, being deeply involved in the space, what are the NFT use cases that you personally are most excited about? What is the stuff that you've seen over the last few weeks and month that you looked at and you went like, wow. There's somebody doing something that I hadn't even thought about. If somebody's doing something, I always thought somebody should do and they actually did it. What gets you excited these days? Not about your own product and protocol, but about what's happening in the NFT space in general.

[00:23:33] Alex: That's a great question. I've been thinking a lot about it, especially during the brave market. When we stop seeing flasher things that gets sold 10X the next day. I have this following framework, the NFTs are pretty much about to become the E-commerce of the Metaverse. It is pretty direct alternative to the physical item. They have a physical item in the physical world and now you have all the same but digital.

We started with art which is the most simple item because it doesn't do anything. It just is and there is just a picture uploaded on-chain. In that sense, it is almost one dimensional in terms of the operational complexity. It is beautiful. It is very deep in thoughts, but in technical terms, it is a picture uploaded to blockchain. What we've seen next is we've seen a little bit of the increase of the depths with the PPs. PPs are randomly generated. They got revealed after they started. You can put them on the avatar.

There is a Twitter integration that you can connect the wallet and put in on the avatar and somebody would be able to check if you have that energy in real life or not. That increases the complexity. I think what are the most cool things. There is a million use cases that are complex. In this optimized way of being something simple, but being cool, I like to do those two, which is they release the boxes that are going to have Raribles inside these boxes and you can attach these Raribles to your Dood NFT. This NFT can wear certain things and then you can use that avatar as your net avatar.

[00:25:36] Tim: Very interesting. Just connecting to that, what are the most promising things happening in the space on your perspective?

[00:25:43] Alex: A lot of people understand Metaverse as this. I'll have VR glasses, I'll wear them and I'll go interact with other people as they do in real life and that will be Metaverse. I think that we live in the Metaverse today. I think the structure of the Metaverse today is somebody said to me that, "Oh, Metaverse is just the rebranding of the internet."

Internet is old and not cool and the Metaverse is near as cool, but we spend so much time online.

Making that Metaverse interoperable and free with blockchain is great. I love it. I live online all my life since the fifth grade when I first got a computer. I was struggling with the things that are not mine, the things that I can't accept money online, because I'm too young.

Now, we have the Metaverse, that like, oh, I can truly own and don't care about what anybody thinks. The Meta is doing good too. I have a Meta Quest at the office. I play pingpong and it feels very real to play pingpong in VR. The physics are absolutely the same. You move your hands and sometimes you can't really tell that it is not real. That still has a lot of potential.

[00:27:05] Tim: Very diverse. I see your perspective there. How do you look at this relationship between NFTs and blockchains? Especially when you get out of the hardcore center, art market, that of people that are already a long time and very early in the space and that trade art specifically. When you start looking at this NFT towards merchandise and all of this other use cases that are beyond art, how do you see it? How do you look at the different chains?

[00:27:36] Alex: Rarible is on six chains today. We support a lot of them and we had a multi chain vision for over a year now. We're seeing more and more bridges to come to the space. In future, we are definitely having multiple chains connected with bridges and abstracted away from the user.

For sure, that will happen with EVM chains. We'll have optimizer, Polygon, Ethereum to all of that ImmutableX, EVM chains that use the same address space, that use the same bullet. Currently, if you want to transfer between Ethereum and Solana, you need to have Solana wallet in Ethereum wallet and you need to sign on both ends. That's not so advanced. At first that happens with the EVM chains and then we'll see, maybe EVM will become a standard at that point, or maybe we'll see more chains to catch up. Just the amount of funding down to alternative layer ones, suggest that tremendous number of very bright people will spend time on building that future.

[00:28:48] Tim: The future is multi chain. When you look at it from an NFT perspective, you expect most of the chains to be around? You think it's going to evenly spread out, there's going to be more chains or do you see it rather reducing and centralizing somewhere?

[00:29:02] Alex: Just currently, I would bet on EVMs on the layer tools such as like  CK Sync or optimism. If you make a decision today, take a look at that and if you're making a decision tomorrow in figures, there's going to be a big question like what is the place that this new chances are going to take? Aptos, Celestia, this chance that promise us extremely fast execution, but we haven't seen the good use case for that yet.

[00:29:32] Tim: Last question, picking a brain. I'm helping to co-produce a movie from a street band in Malawi. One of the ideas was to leverage NFTs to help fundraise for the movie, but do something interesting in it. In terms of in community engagement, any good ideas or models that you've seen?

[00:29:53] Alex: Yes, unfortunately, we've seen quite a low penetration of that's public, NFTs, fundraising and those things. If I would just try to take something from the top of my head, I would say do the characters NFT that can still be used as the PFP and then make sure that they're featured in the film after, but I'm not sure that's a great idea. It's just something that's first to the market.

I've seen a lot of people try to say, okay, we're selling this hundred NFTs to raise the film, and they just don't sell.

[00:30:33] Tim: Exactly. Very good. Alex, I very much appreciate the time. I learned a lot in this talk about NFTs and your vision on it. I also found very interesting to see hands on because it's very fresh, how you guys have been moving towards decentralization and building a DAO. Thank you very much for your time here.

[00:30:54] Alex: Thank you, Tim. Thank you for inviting me over. That's a great conversation. Not standard, not the list of the questions that get asked every time. I love it. Thank you so much.

DAO Talks is brought to you by Grindery. If you enjoy this podcast, consider subscribing to Dao Talks on Apple Podcast, Spotify, Google, or any other platform you fancy. To find out more about Grindery, visit grindery.io. Thanks for joining me. I'm Tim. Out.