Let's Get Digi-Physical: From 'Tap' Chips to Taylor Swift

Speaker A

Hi all. Were back with all new episodes and with that, new updates about other shows that you might want to listen to too. If youre looking to stay on top of the changing nature of work and how that work is changing us, then I want to tell you about Linkedins flagship podcast, hello Monday, hosted by our friend Jesse Hempel. To thrive as work changes, and this theme is relevant to many listeners of this show, were going to have to be more flexible, more curious, and more connected to purpose. So each week on the hello Monday podcast, Jessie helps listeners tackle career challenges like asking for what you're worth, finding new, better jobs, and addressing burnout.

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Robert Hackett

Welcome to web three with a 16 z, a show about building the next generation of the Internet from the team at a 16 Z crypto that includes me, Robert Hackett, your co host and an editor here. Today's episode explores the merging of the physical and digital worlds, as well as what that means for the future of our interactions and identities. Our guests today are Chris Lee, co founder of IYk, a startup that's bringing the physical closer together with the digital through NFC chips. And joining us is Michael Blau, a deal partner at a 16 Z crypto who creates generative art in in his spare time. In the conversation ahead, we cover new consumer experiences in everything from concert going to commerce, the intersection of high tech and high fashion, and differences between building in web two versus web three.

We also dig into the power of open standards, the challenges posed by bots and counterfeiting, and debates over terminology, including whether digital should be a thing. As a reminder, none of the following should be taken as business, legal, tax, or investment advice. Please see a 16 z.com disclosures for more important information, including a link to a list of our investments. Okay, so you've got the physical world, you've got the digital world. These two things, people consider them to be separate.

Speaker C

Why would we ever want to break down the barrier between these two things? Don't we want to keep our digital worlds digital and our physical worlds separate? Like these are two different universes. Why are we even thinking about joining them together? So I think the reality of it is because so much of our lives are lived online, it's just helpful to have some of the real world elements as part of our digital identity.

Chris Lee

And so one big example that comes to mind is the Taylor Swift eras tour debacle. Let's lay out what happened. So Taylor Swift, she announces this giant tour, and everybody is super excited to go buy in tickets. What happens? So what happens is you have this mad rush of bots and normal people who go to the site to order their tickets, and because of that, it actually, like, crashed their servers.

But the problem there, to me, is actually a data problem, where when you're going to that website to buy a ticket, the creator is not able to differentiate between who is a bot and who's a real human or a real fan. So the real impact to me was you had a lot of real fans who might have been to multiple tours, who've been following her for years, who weren't able to get tickets because either a scalper or some bot got the tickets before them. You know, it's amazing to me that this is still an issue because, you know, you can think back to the nineties. Pearl Jam was talking about this stuff like, they were going up against Ticketmaster, saying that they were annoyed by all the fees that Ticketmaster was taking, and they testified on the hill about it and tried to, like, break up Ticketmaster as a monopoly. So, like, these issues with online ticket sales have been around for literally decades, and it seems like the situation hasn't improved.

Yeah. But to me, the real opportunity about what we're doing is being able to prove that you were actually at the prior concert or that you own lots of merch, and using that as a measure of how real of a fan you are. Where I think part of the Ticketmaster situation was also, like, maybe their servers weren't set up to handle all the loads, but the other side of it was just the inability to differentiate between different users who showed up to that site. To be fair, Taylor Swift star power is on another level. I don't think many servers can handle.

That load for sure. So explain to me exactly how this works, because this idea of being able to tell a human from a bot is a problem that we're hearing a lot about now that AI is on the rise, and it's certainly on the minds of everybody with this upcoming election, and there's going to be deepfake videos and stuff like that. Now, you're talking about a very specific instance of this problem, being able to attest to your humanity and your presence in the physical world. How do you accomplish that? Yeah, so the primary way we do that at IyK is by utilizing NFC chips.

Speaker C

What is an NFC chip for? People who don't know? Yeah, so it's an acronym for near Field Communication, and it's basically the technology that powers mobile payments. So if you've ever use your iPhone to pay where you just, like, tapped your phone at the register that was using NFC? Yeah.

By the way, the New York subway system switched over to this, like, tap and go payment system, and it has made my life a lot better. Yes. So it's this super seamless technology that has been around for a while, actually, but it's been primarily used for financial use cases like payments. And so what we're doing is using that technology, but more in a consumer app type capacity, where every time you tap the chip, you're collecting a signature from that chip, and you can use that signature to prove that you interacted with it. And so we have actually two main categories of use cases where the first is we're embedding chips in physical items by having these chips in t shirts, handbags, sneakers.

Chris Lee

It's not only a better system of authenticity, but collecting these signatures serves as proof that you possess that item. And for us, we also think there's a huge opportunity where this is a new data primitive that brands can use to create next generation loyalty programs. And the other way we use the chips is for events. So if you're at a concert or a sporting event or at a conference, people have been using our NFC chips to basically allow people to memorialize their attendance. This is actually not a new behavior.

Michael Blau

This is not a new consumer behavior. People do this all the time already on social media. That's kind of the point, right? Like, everyone will go to the Taylor Swift concert and they'll take a selfie at the concert with their friends and post it on their Instagram story. And why do they do that?

Well, part of it's fomo, and the other part is they want to show off to their friends. Look how lucky I am that I got to actually attend the Taylor Swift concert. And then the next step of that is Instagram. A while ago, added this feature where you can sort of save your Instagram Stories to, like, a folder on your Instagram profile, and you could label it concerts. And so if you went and, you know, took a selfie at every one of the concerts you've ever been to, you could save it to this folder.

And now when I go to your digital profile on Instagram, I can go back through and see all of the physical experiences that you're showing off to your friends, and it enhances your profile. It makes you more interesting. It brings up more things I could talk to you about, things I could relate to you about. And so the idea that a consumer or a person will want to show off their physical experiences in a digital world is not new. Right.

This is something that we're all used to. The problem is that now, look, on one hand, you have a generated content where people could fake that sort of thing, but the other side of it, too, is all of this data that people are posting on Instagram, all of this showing off that they're doing is siloed to Instagram. It's stuck in this one place, and people can't really take it with them around the Internet. Like, you could if I bought a Taylor Swift t shirt, for example. Like, if I buy a Taylor Swift t shirt, I can walk down the street and people could stop me and say, oh, I went to that concert, too.

It was great. Right? I can take it into any store that I walk into, any restaurant that I walk into. It comes with me because I actually own it. Right.

Whereas today, when you do this digitally on Instagram or whatever, you don't. It's siloed in this one place, and it just kind of stays there. Yeah. And going back to, like, the top of the conversation, if you think about, we have these digital identities. Right?

Chris Lee

Like, you have your LinkedIn profile, your Instagram profile, all of that. Being able to hydrate our digital identity with various, like, real world behaviors should help with this problem of being able to differentiate between a bot and a human. Did you say hydrate? Yes. All right.

Speaker C

You're going to have to explain what that means to me. Like, enhance. Why hydrate? I think that's more maybe of an engineering term where, like, we hydrate properties into an existing object. Okay.

So I'm down here in Florida right now. I'm actually doing this. I escaped the cold New York weather yesterday was 90 degrees, and I did a lot of hydrating yesterday. But I. Sounds like this is a different kind of hydration.

Chris Lee

Yes, different kind of hydration. We are basically enhancing your digital identity with various real world actions. Okay. Enhancing your real world identity with digital actions, you said? Yep.

Because you can now attest to being at a show, and that is just done digitally, but you've collected that signature by physically being at that location and tapping that chip. Okay. Did you go to the Aristor concert, Michael? Absolutely, I did, and it was incredible. I mean, her ability to command the audience is just outstanding.

Michael Blau

I know this is off topic, but it's sort of like this is on topic. This is highly on topic. Well, you know, it's funny, there's this great video online of Freddie Mercury at the Live Aids concert. Yes. And he's sort of, like, yelling ao into the audience.

Speaker C

Incredible. And they're all singing it back to him, and it's just this, like, larger than life. This man is commanding power, and it's just incredible. The whole stadium stomping and clapping. Unreal.

With we will rock you just shaking the foundations of the arena. Incredible. Exactly. And so I got that vibe at the Taylor Swift concert, when she is super real, right? She'll kind of come off the mic, she'll get off the piano, and she'll be like, thank you all so much for coming in.

Michael Blau

The most humble, real voice ever, and the audience of 60,000 people will just completely erupt. And then she starts to, like, tear up. You could tell that she's, like, so happy and, like, it's just incredible. She's a force to be reckoned with. So I will say I didn't go in person to the Arrows tour.

Speaker C

I did watch it, the streaming service version of it. It was a stunning performance. Chris, are you a swiftie? I would say casual on the tiers of fandom. I'm probably, like, in the middle.

You do not have an arrows tour friendship bracelet. Is that right? I do not. Okay. You know what's so interesting, actually, about the Taylor Swift concert and digi fizzy is that when I win, at least.

Hold up, hold up. Digi fizzy. We're gonna have to dig into that. You keep going. You keep.

Michael Blau

The summary is that there's this funny debate in the community of what's the right word for digital physical interactions. Is it digital? Is it digi fizzy? Is it physically backed? Token?

Like, what is it? And I tend to prefer digi fizzy because I think it sounds funny. I don't think digital is a good option. But again, I think, Chris, you might disagree with me. Right.

Speaker C

Chris, where do you stand on this? No, we don't use physical. The phonetics are just terrible. We use digiphysical for, like, the broad category, and then for, like, items, we use chip goods. Okay.

Chipped goods. Yeah. Phigital. I don't know. That sounds like some kind of, like, body part or something, like a crucial medical term.

Michael Blau

Yeah, true Sci-Fi character. So what I was going to say was one of the craziest things about the Taylor Swift concert, I didn't even realize this until you asked me about it specifically, was when you walked in, they gave everybody this wristband, and the wristband, it didn't have an NFC chip in it, but it had, like, some, like, little computer in it, some chip. The control some sort of, like, led light on the wristband. And what would happen is someone backstage somewhere was controlling a computer, which basically, depending on where you sat in the audience, it knew your physical location based on the wristband. And when Taylor Swift would sing a song, any beat or tune that she would sing would sort of project across the audience through these lights.

A good way to visualize it is if everybody's light was shining, like, yellow, for example. And then when she would, like, do a big bass or something, there would be, like, this blue line that would appear to just completely move around the audience. And it would be because the computer backstage would be changing individual wristbands to blue and yellow based on where they were in the audience, like, into your location. And so it was this community owned light show, essentially. And then, of course, when you left, they took the wristband back because it's probably an expensive device, but it was this totally insane interactive moment of digital and physical in the real world.

And all I could think of at that moment was, oh, my God. If this was an NFC chip and I could tap it and get some sort of proof that I was here, a part of this moment, it would have, like, completed the whole picture, because I'm not the person to buy a t shirt, and this would have been so much better for me. So I just wanted to tell that story because I think it was, like, such a cool, cutting edge, live, bitchy, fizzy example. Yeah, that's so cool. Sounds like the Beijing Olympics.

Speaker C

You had all these people and all these lights going. That sounds incredible. Imagine if there was an NFC chip, right? You could tap id yourself as a fan, and maybe based on your tier, you were allowed to, like, co create a little bit where maybe you got to pick a few settings. Like, you got to play along with the people who are programming the experience.

Michael Blau

Exactly. Like, you could choose a color, like one of nine colors or whatever, and then that would create some image across the entire audience. And then at the end, when you tap the chip, that image was, like, memorialized as an NFT of some form. And, like, it was completely unique to this audience based off of this device. Oh, that'd been amazing.

Speaker C

That is wild. What was the last piece of merch that you guys bought at a concert? Michael, you said that you're not one to buy a t shirt at a concert. I think for me, the last piece of merch that I got at a, like, show, I'm a magician. So I bought some decks of cards when I went to see David Blaine in Vegas.

Michael Blau

So that was my form of merch, I guess. Nice. Nice. I haven't been to a concert in a while. I feel like it might be, like the watch the Throne tour with Kanye and Jay Z.

Speaker C

Nice. What year was that? I feel like that was five plus years ago. That's awesome. I guess that's the life of a startup founder.

You have to forego some of the fun activities. Yeah. Chris, tell us about your journey to Iyk. Where did this idea come from? Why pursue this idea?

Chris Lee

So I was a software engineer at Major League Baseball before this, and it was 2021, during COVID I was 19, bored, and I actually met my co founder online on Discord, and we were mostly building bots to game different drops. What you said, I met my co founder on Discord is the new. Like, I met my wife on, like, Tinder. Yeah, I love that. It was a very interesting time because a lot of people, there was, like, this self selection bias that happened where people who were just into nfts, where either on crypto, Twitter, or, like, meeting on Discord.

And I was definitely a part of that, where I was at a point in my life and career where I was looking maybe to do something different. And so by jumping into discord, it was an opportunity for me to kind of just learn about all the different things that were happening in web three. So during that time, all these PFP projects started dropping, and we were being maybe opportunistic, and we spent a lot of time building different bots, trying to game these different drops. One interesting thing that happened was we saw real brands show up, and the example that stood out to us was Dolce and Gabbana said they were dropping a pair of sneakers in collaboration with an NBA player, PJ Tucker. And they said it came with an NFT.

And so, first of all, we were like, this is a little bit of validation. Like, we thought we were in this weird corner of the Internet doing weird stuff. You were? But, yeah, yeah. Okay, so maybe we were, but we had, like, a very traditional fashion brand showing up, saying that this $800 pair of sneakers comes with an NFT, and we're like, whoa, this is crazy.

So we did a little research on how it works and all that, and ultimately, we were pretty dissatisfied with the implementation. And the way it worked was you would buy this sneaker, and on your receipt, you would get a code where you would take that to a separate form, put your Ethereum address, and they would airdrop you the token. And the reason why we thought this was suboptimal was that these two assets, even though they're issued together or given together, they're totally detached. Right. Like, you could instantly flip that NFT on Opensea, but keep the sneaker, or you could sell the sneaker on, like, stockx and keep the token.

Speaker C

Okay, so let me make sure I understood the workflow here, or the purchase flow of the Dolce Gabbana sneaker. They had the sneaker for sale. You can go on buy it. You get a receipt for it. So on the receipt, there was like a code.

QR code? No, just like alphanumeric characters. So you could take that, go to the website with your ETH address, and they would send you the NFT. Yep, exactly. Okay, and so your point was that these two things are totally separated.

There's no real linkage between them, because now you can go do with the NFT what you want. You can go sell it on whatever marketplace you want, and then the sneaker itself, you can do the same thing on stockx as you said. Yep, exactly. And so what we wanted to do was figure out a way to permanently link the NFT to the physical item. And that's kind of where the concept of having a pullable token, where anyone who taps the chip has the ability to pull that same token into their wallet, that's how that was born.

Chris Lee

And for us, we think a lot about these different models of linking tokens to items. And the Dolce example is something we called like a sidecar model, where you just issue this thing completely separately. So you call that the sidecar model. But you thought that there were ways that you could improve that, and so you came up with this other idea, the pullable model, you said. Yeah.

So the way the pullable model works is instead of the token kind of freely trading, as usual, the only way to transfer the token is by tapping the chip. And so you can think of it like normal nfTs. The owner has the right to do what they want. Right? Like, if you own a digital asset, it's your right.

If you want to sell it, or if you want to gift it to your friends or your family, it's yours. You can do what you want, right? In the pullable model, it's actually not yours. Even if the token is in your wallet, the token is actually controlled by the chip. And so you can think of it like the chip or the item actually controls the digital.

And we as humans, as we get possession of it, we're temporarily borrowing the token by tapping the chip. It's interesting, because now these physical objects, the way it seems to me it's almost like an rpg game where these things, they emanate this aura. People talk about art as having an aura, but now you're literally putting a chip that has this near field communication coming off of it. It's literally emanating an aura. Yeah, that's pretty wild, huh?

Speaker C

Okay, so who's actually using this technology? Like, what are the applications? So for us, part of the reason why we're so excited about the concept was we think it can power next generation loyalty concepts where if you're a brand, you now have more visibility into who has your items, right? So what you could do is say if you have this t shirt and this sneaker, you unlock some colorway of like a SkU, or maybe you unlock an exclusive SKU. Maybe if you have this hoodie, you gain access to this exclusive content.

Chris Lee

So we're definitely targeting a few categories as part of our go to market strategy. We think the music industry just chipping merch makes a lot of sense. Traditional apparel brands, I think in terms of who's using it today, it's definitely more crypto native brands. So we work with a lot of web three apparel companies that are fully embracing tokenizing physical items. But I think the end game for this is just for it to be more widespread, where it's just the thing that you do when you buy products like you tap to claim or register them.

Speaker C

You mentioned Dolce and Gabbana did this NFT sneaker sale. What other brands out there are experimenting in this sort of way or have experimented? There's the who's who's list of brands have been experimented. So companies like Prada, Dior, Balenciaga, these are traditional fashion powerhouses with years and years of heritage, and they're experimenting with this. I think there are degrees of how web three the approaches are, but at its core, the concept is around, like, creating new consumer experiences for their customers.

Michael Blau

Something also is that a lot of the brands, not all of them, but like a good portion of the brands that have done Digi fizzy products, they're actually not necessarily using the sidecar model or the pullable model. They're using this other model, which is like the voucher or redemption model, where in that world a consumer will buy an NFT of maybe a hoodie or something and then they will redeem that NFT for the physical. Again, every single model is different, but that could look something along the lines of like, you actually like, burn the NFT, delete it off the blockchain, get rid of it and then the brand will ship you the physical hoodie and the interaction is done. Or you get to keep the digital token. It just has this one time claim to get possession of the physical.

And of course after that point, then these things are now detached and it reverts to the sidecar model. But yeah, a lot of these brands, especially like Nike and Adidas, have done this redemption mechanism. So once you redeem it and you can do with that claimed token as you will, does that still have any meaning? Do people care about the NFT once you've received the benefit that it offers, you know, the merch in the physical world? I think so, because like in theory the brand could add multiple claim experiences to it.

Actually, I think if I'm remembering correctly, like Tiffany's, they have this model where you get this one NFT or maybe it's Louis Vuitton. One of them, I'm forgetting which one it was, but one of them is you got a digital token that's an NFT which is non transferable. And that token comes with multiple redemptions of physical products over a certain time horizon, like a few years or whatever. And so you actually can't sell or transfer or trade the NFT because it's non transferable. But embedded within it has these multiple redemption and claim components.

They're all a little bit different. Some of them are not. Some of them it's one time, some of them it's two times. Sometimes they're on transferable NFT, sometimes they are transferable. Everyone sort of mixed and matched, you know, all these different mechanics.

Chris Lee

But I see it kind of as a receipt too. So even though the token's been redeemed, it's kind of like your ticket stub where like, okay, it's already been used, you've gone through the turnstiles, but still some people collected their ticket stubs. I actually do that, yeah, usually after I go to a concert I keep the stub. So that makes sense to me given that there are all of these different mechanics out there, all these different experiments that people have been running. What has been most successful?

Speaker C

Like who's doing this right and who's doing it wrong? So well, like name names. But I think just as a strategy, one thing we've tried very hard to do and kind of pride ourselves on is creating more accessible user journeys for the end consumer. And so our strategy has been, let's say we embed an NFC chip in a piece of merch. When a fan first taps that item, they get immediate accessible value so one thing we do a lot is using content.

Chris Lee

We did this drop with Verite, who's an independent musician. She sold merch before her album came out, and the merch was promoted as a way to get early access to the songs. And so if you had this crewneck, you could tap it and listen to singles before they dropped publicly. And so now the bar of being able to enjoy the experience is really low. All you had to do is tap your phone, but there was still this token that was attached to it, right?

And so as you get more familiar with this new, like, digital experience off of a crewneck, you could claim the token, which to us is a way to extend all the benefits of having the crewneck forward, where maybe nine months from now there's token gated access to some content or tickets or whatever. And one of the requirements is that you need to have one of these crewnecks. The token is what makes that possible. But for us, it's like we weren't focused on just the token itself and believing that the token has value. We wanted to kind of gently onboard people, give them something exciting, and then allow them to claim it over time.

And I think that's definitely helped with adoption because the experience is just a lot friendlier. People came to know NFTs during the cryptomania of the last cycle. People would joke that NFTs are just monkey cartoons. I wonder, how are you seeing consumers react to this technology? Are people receptive to nfTs?

Speaker C

Are you calling them NFts or something else? How are people communicating what these things are to people? And what's the reception been like from people who might not really have any particular interest in web three, but rather have an interest in, you know, a fashion brand or a musical artist? I would say NFTs as a term is pretty much out at this point. Like, out.

Chris Lee

So last year, it's too tainted. Like, there's too many articles, too many bad things have been said about it. And for us, we try to use, like, more relatable terms. So for items, you're claiming your certificate of authenticity. So you just bought a really expensive piece, like you're either registering it or you're claiming the COA certificate of authenticity.

And to me, the token is kind of an implementation detail where if we're crafting a campaign for merch, the campaign is usually about like, you get this merch for a chance at a meet and greet, or to get early access to tickets, or get access to exclusive content. Like, the token is the mechanism that allows that to happen, but it's not actually the value proposition. And so all of our language, it doesn't matter, we actually talk about what the fans care about. So if NFTs as a term are down and out, as you said, it's become tainted. Why use the technology at all?

Speaker C

Couldn't you build something similar in a web two sort of way? Why have you decided to pursue NFts on the backend to make this all possible? So the truth is, everything we built at iyk today, we can build it in web two style, like using a database. And there are several reasons why we chose to build with tokens. One of the primary reasons is the fact that it's an open standard.

Chris Lee

And one of the benefits of open standards is you have a whole ecosystem of tools that people are building that may not be for your app, but because it speaks the same standard, it actually works with your app. And so for us, it meant that we didn't need to build the world just by attaching a token to an item. Things like OpenSea became essentially like a closet app where you could see what items you own, the ability to token gate commerce experiences. There were already shopify plugins that allowed you to token gate purchases. And so this concept of, oh, you must own this shirt in order to buy this hoodie, we didn't have to actually build that.

So there are a lot of like, composability benefits of adopting an open standard. And the other thing I would say is the verifiability that comes with being on the blockchain where anyone can verify independently. Like if you don't trust a certain token, you can actually go to the blockchain, you can see things like who deployed the contract. There's a lot of these types of benefits to being on that open infrastructure. When you say the second part of being able to verify things by looking at the blockchain, are you talking about like, okay, say some fashion brand does a release and they say they're going to sell 100 of these sneakers with nfts.

Speaker C

Are you talking about the ability to verify that they indeed only issued 100 tokens or goods linked in this way? Or, like, what would be the advantage of inspecting data on the blockchain? Yep, exactly. So one kind of cool thing I learned was that Moncler, it's this jacket company, has like a really bad counterfeiting problem. And there actually have been cases where their raw materials have been stolen.

Chris Lee

So there's literally counterfeit Moncler jackets with the exact same fabric. So it's almost like entirely the same, except for the fact of who made it. Exactly. So you have, let's say, two physical items. One is made by Moncler, like officially, and the other isn't, but it's like literally the same materials.

And so, okay, what's real and what's fake? Well, the benefit of having tokens on the blockchain is that Moncler, they have a wallet account, let's say it's Moncler ETH, and they created 100 certificates of authenticity, or tokens, and it's verifiably from them. So even though you have effectively a real Moncler physical product, if it's not linked to a token that was issued by them, by definition it's counterfeit. And in my opinion, what's one practical result of that? Well, you can't service that jacket at the store because it's not like recognized by the brand and stuff like that.

Speaker C

One thing that this calls to mind, to play like a little bit of devil's advocate here. I've read research about how knockoff fashion items actually are beneficial to the luxury brands because it opens up this lower tier that other people can access and they aspirationally want to get. You know, the brand did good, but having those knockoff products out there, it still gets the attention. People still sort of might think that it's the real thing, which creates more buzz and attention. And then ultimately those people, like, they want the real thing and when they have the ability to buy it, some fraction of them will.

Like. I've read that luxury brands originally, what, they were very stringent about cracking down on this stuff, but they've actually kind of moved back and allowed some of this to operate in the shadows because it kind of ultimately benefits them. I wonder if you've thought about this at all, or how connecting the digital and physical in this way, in a way that you can instantly verify, might provide clarity that eliminates that sort of shadow market and those weirdly possibly beneficial aspects of counterfeits. I think the way I look at it is we just make it easier to verify the authenticity. Whether the brands want to allow the shadow market to exist, that's a business decision.

Chris Lee

But from having the ability to, as a consumer or as a brand, be able to tap and within 30 seconds verify if it's real or not. Like that is a useful value prop. Yeah. So it's really on the merchant themselves, how they want to approach whether something's real or fake. You're just providing the technology that makes it more seamless for them to do.

So, yeah, if verifying the authenticity of an item is very difficult, I think that kind of like a tax on the system where it introduces a lot of overhead. So one example is marketplaces like the real rail, where their take rates are like 40% plus in some cases. And a take rate, by the way, is the percent of revenue or gross merchandise sales and volume that is claimed by the network operator, the owner, the network itself, rather than the participants in the network, the people who are actually using it to trade goods. Exactly. And so let's assume, like, the real real is not being greedy.

And the reason why they're taking 50% of your sale is that because you had to physically ship that handbag, there were humans that were, like, inspecting the bag. Maybe they worked at some of these luxury brands, so they have a lot of experience and they know what to look for. But that whole process just introduces a crazy amount of overhead where if you could just tap within 30 seconds and anyone with a smartphone could tell, like, that could reduce a lot of those costs significantly. Does that match your research, Michael, I know you've looked into some of these marketplaces. Yeah, I largely agree with what you were saying, with how these brands would want these other objects to be floating around that are counterfeits.

Michael Blau

But at the end of the day, like, if Montclair is doing a pop up shop, for example, and wants to only let in their actual owners of their products, then they're not going to let the counterfeits in, right? They're going to let the actual ones in. And so, yeah, I guess I agree with Chris. As a gating mechanism, you're saying, like, you need to have some ability to attest the fact that you've bought their products before, and now we'll let you get into this pop up shop that we're doing. You were telling me about Stockx, too, that you have to ship your goods to them, then they verify it and they ship it out to the buyer.

Speaker C

Is that right? Exactly. Yeah, I guess it is another form of digi fizzy in some sense, where, like, if you buy a pair of shoes on Stockx, you do have this quote unquote digital token of this pair of shoes. It's just not on the blockchain, it's in Stockx's server and centralized database. And so at any point in time, you can trade the shoe, you could sell it, you can buy it, and then when you're ready to get the physical shoes, you just redeem it for the actual one, and Stockx will ship it to you.

Michael Blau

But yes, they do this process of, before they do that, the shoes have to go through the Stockx center verified by them. They actually get tagged like this green circle tag that this is stockx verified, and then it's shipped to the user. And so when the buyer gets it, they could say, oh, it has a little tag on it. Stockx really verified it, and so it's legit and it's good quality. A tag seems easier to counterfeit than a chip that's embedded inside of a product.

Speaker C

But I don't know this is true. Although I have not used Stockx, so I can't say this is true or not. But if they put an NFC chip inside this tag, then there would be, like, cryptographic material in this chip, and Stockx could publish on their website. You can verify whether or not the tag is in our database of what we know to be all the tags that we verified. And so you could create that link, but I don't know if they use NFC chips or not.

Are we going to get into a world where people are going to come at this with exacto knives and be ripping these chips out of products and putting them in other things? What is the vulnerability here? What are the attack vectors for counterfeiters? I can see a world where people are incentivized to do that, and they do that. I think, practically speaking, doing that will result in some artifact that the thing was clearly tampered with.

Chris Lee

Where for us, there definitely are varying levels to how these chips are being embedded. In the simplest case, people are just using a patch, it gets sewn on, and it is very easy to, like, cut that one piece of thread and, like, peel the patch off. In other cases, people have used, like, heavy duty embroidery or, you know, if you think about these chips more seriously, including it earlier in the production process, where if you're making a shoe, like, it's actually inside, in between the material. Rather than an add on or an afterthought, like, make it really embedded in the core of the product itself. Yeah, exactly.

Instead of, like, retrofitting, it's part of the actual creation process. Like, I don't have a great answer here. I think some of that will happen, but I also think there's even other technologies outside of maybe NFC chips that we've done a little bit of research on, where I think security is never absolute. It's always on a spectrum. Yeah.

And so it's just something that if this does become ubiquitous, there will be. Adjustments, and also, it depends on the product. Right. So if I'm getting something from a luxury brand. The cost of extracting the chip and embedding it in a new thing may be low relative to what this attacker can get from doing that, versus if I'm embedding a chip in a toy, I don't want to derail the conversation, but, like, one of my favorite examples of digi fizzy, before Web three was even a thing, was Webkins.

Michael Blau

Right? And you buy this physical toy, you can link it to a digital version of the toy that you can play with and feed and play games and see your friends and stuff. If it's a toy, the potential reward for stealing a chip out of one toy and putting it in another is probably quite low, and it's not worth it. So it just depends on, I think, what the product is. Yeah.

Chris Lee

There is one interesting implication of having the chip linked to a token here. Have you guys watched the documentary sour grapes? I have not. Michael, have you? I have not, but I know the story.

Michael Blau

I think I know where you're going with this. Tell me, uh, what is sour grapes about? Okay. This guy, Rudy Kerniewan or something like that, he was basically counterfeiting very expensive wines. Oh, that's a good.

Speaker C

That's a good title. And the interesting part about it to me was he actually had really good taste as a connoisseur of wine, and he was creating blends that were fooling, like, the best restaurants in New York and LA. So using that example, he had a whole system at his house where he was creating the exact labels of bottles from many, many years ago, and then creating these blends, bottling it and selling it. And so let's say you do rip out a chip from, like, a Birkin bag, and you produce a fake birkin with the real chip in it. Well, one implication of this is that there's still only R1 Birkin in the sour grapes example.

Chris Lee

He was replicating the authentic product. He was cloning them, like, tens, hundreds of bottles. In the chip scenario, let's say, even if you ripped it out, there's still only one. Right? And so there are still improvements to the state of the world today by having this system and then being able to detect if it's been tampered with.

Like I said is that's, like, another level where who knows what techniques we come up with? It's a shame this guy was using his powers for evil when he could have been, like, I don't know. He should have been a vintner. He should have made a winery and made all these excellent products for people, for sure. I'm going to definitely watch that.

Speaker C

Your point about there being only one chip, it limits what counterfeiters can do because even if they were to take a chip out of a, like you said, a Birken bag or some similar luxury product, when the consumer goes to use the NFC reader to scan that chip, if it's not the right chip, it's not going to show up. So it's not like they can really produce tons of these counterfeit products because there really is going to be just this one chip that links to the actual good wherever it goes. Yep, exactly. And also another attack vector which isn't ripping a chip out of a physical product. So a lot of these chips, depending on the types that you use, they have cryptographic material in them that in theory should be tamper proof, and you shouldn't be able to extract these keys from the chip itself.

Michael Blau

Like any user should not be able to do that. But there are maybe ways where if you have the right material and the right equipment, you could like measure the electromagnetic emissions from the chip. And if the chip is not designed right, you could potentially get some sort of data leakage of the keys that are embedded on the chip or leakage of like how random numbers are generated on the chip and use that as a way to actually not rip the chip out, but be able to forge the cryptographic signature on the chip. And then once you can forge the cryptographic signature on the chip, you can essentially go to these tokens and present the signature as you owning a physical item when you really actually don't own it. Again, I'm not the technical expert on how these things work in practice, but like Chris said, as this becomes more standard and more people use it, hopefully these types of attack vectors are accounted for in some way.

Speaker C

So what you're describing is what they call a side channel attack in cybersecurity. Yes, and I believe there are ways where somebody can be typing their password into a computer laptop and people hear the clatter of the keys or just detect the electromagnetic whatever that's coming off the computer, and they're able to actually steal people's information. So that's interesting. How buttoned up are these chips? How impervious are they to attack or resistant are they to these types of angles?

Chris Lee

I would say very. Where, one interesting thing is that these NFC chips, theyre not new. Theyve been around for a long time, and theyre produced by large semiconductor companies. So the tamper resistant enclave where these keys reside are probably at the same caliber as tamper resistant enclaves in your iPhone. So maybe not as good, but from a scale perspective, these chips are battle tested.

Speaker C

Trey, ive got a question about that. You mentioned that theyre coming from big chip makers. And just to tie back to something you mentioned about starting the company, you said you started doing this in 2021. Now, there were tons of headlines at that time talking about the chip shortages. People couldnt get access to chips.

There were all these supply chain issues. The supply chain got jammed up. Did that impact you? You decided to start a chip business at a time when chips were just not flowing anymore through the global economy. So I think that's where maybe ignorance is bliss, where, like, we didn't really appreciate the chip shortages at first, but it very quickly became clear, like, as we were talking to different suppliers, placing, you know, larger orders results in cheaper unit prices.

Chris Lee

So as you inquire, it's like, actually, we don't have that. And if you want this amount, you should place that order right now because there might be like a nine month backlog. So we didn't know any better to start. But, yeah, we quickly learned about it, and it didn't matter as much in the beginning because we were so focused on proving the concept and making sure it was sound so, like we weren't in the, like, scaling out period. We were very much in the product R and D phase, so it didn't really affect us too much.

Speaker C

The thing I love about that is it is such a good time to be building during a winter or during a time when nobody else is focused on the same thing. Maybe they're deterred because of, you know, reading these headlines about a chip shortage, and yet you're like, well, we're going to go in and build something involving chips. I just think that's great. In the same way that we're building in web three. Right.

Chris Lee

Although it feels like the vibes are shifting. Definitely. It does feel like the vibes are shifting lately. Now, you said you chose NFTs because it's an open standard. A lot of other products are being built using it.

Speaker C

There are a lot of applications that you don't have to build that are just pre existing. Is there any other name in town, or was this tech the only option for you to have all of that? Yeah, I think it's the only thing in town that meets all of those requirements. The power of open standards. I don't think there is a standard for product information.

Chris Lee

Like, we piggybacked off the NFT standard and everything was able to speak that language. Yeah, I don't think there was an alternative. Something that I was telling Chris last night is that an NFT as a technology ERC seven to one is probably, in my opinion, the only, if not the best way to own a digital item on the Internet. To actually own a digital item and not just have it be some mapping and a centralized database that a big tech company owns. And so, yeah, sure, you could have a file on your computer that in theory you own, but that file is infinitely copyable.

Michael Blau

And so there's no element of, of scarcity, not from a value perspective, but oftentimes there is scarce goods and so if you want something scarce, you need to actually own it. You need to have a place to keep track of that scarcity. And that's what blockchains are really good for. And so when you're thinking about this whole thesis, at least of iyk, where the whole point is you are going to map physical items and physical experiences to the digital world, everyone is already familiar with what it means to physically own something. Like, I have my phone in my hand, this is mine.

Yeah. The software on my phone is owned by Apple. But like, no one can take my iPhone physical device away from me, the shoes on my feet, no one can take that away from me. It's in my possession. And that is a very strong form of possession.

And so if you're going to attach a digital component to it, the digital component needs to have the same level of strength of ownership as the physical part. Because if it doesn't, then, like, why are we all here? And so for that reason, if you're searching for, like, what's the best technology to create digital ownership, well, that's an NFT. That's like, at least one model that I think about it through. Obviously, the open standard itself, 100% agree with and composability and connecting to the existing ecosystem.

But also the digital component needs to be as strong of an ownership as the physical component. I will say I do find it very odd that when I sign up for all these different services online, I have to, like, start from scratch, create a new username, create a new profile, picture, all these things. I'm like, can't I just come as I am and just like, log in and boot up and get going? And as a result, I have like, different names across all these different places. It's highly fragmented and inconvenient.

Chris Lee

Yep, 100%. Chris Dixon talks about this in his book read, write, own. It is profoundly strange that this is the way the digital world operates, whereas in the physical world, if you went into a concert venue or an office or something and you had to like create a new name and identity and clothes for yourself, that would just be bizarre. But uh, people accept this as like the way things are in the digital world. Yep.

One of the biggest challenges for the web three space obviously has been getting people to create accounts like wallets. But that being the obstacle in the long run. That's one of the strengths of web three, is the fact that you can have a single account that you connect with into multiple apps. So I think it's just a matter of time and it feels like that inversion of control back to the user just makes a lot of sense. Say more about that from a user experience perspective.

Speaker C

Obviously there's the core kind of web three community that has wallets. But as you're rolling out products for people who have no experience with a digital wallet, who again are just sort of like fans of some creator or some artist, how do you make that experience seamless? How do you enable people to get access to some digital token, but maybe not with them coming prepared with a wallet of their own? Definitely through layers of abstraction. So for us, having maybe a traditional user account, but is backed by a web three wallet, that maybe we do spin up a default one for people, but the benefit of the data or the token still being on chain, it allows you to.

Chris Lee

If you've claimed this piece of merch, you might see it in Twitter or Instagram or ten other sites because it's not siloed to iyk. Like the tokens are still on chain. So for us we're also looking at like, there's a standard 4337 for account abstraction where its getting easier and easier to create wallets for people and abstracting away the need to have a seed phrase for people to start a seed. Phrase being like the phrase you need to recover your wallet and access your digitally owned goods. Exactly.

Speaker C

Yeah. Thats asking a lot of people if everybody had to memorize a twelve word phrase and keep it highly secure. I feel like that would deter a. Lot of users for sure. And for me, I see it as kind of this gradual progression where, you know, claiming a t shirt, it's not as valuable as like claiming the Mona Lisa, right?

Chris Lee

So iyk, we can help onboard people to web three. And when you see all the benefits and the value, then you'll have the incentive or the motivation to go and set up your own non custodial wallet and all of that, right? And then you can start migrating things over, but we don't need to lead with, oh, before you do anything, like, what's your seed phrase? No, we can actually just bring you in. You start to see some of the benefits and then over time, hopefully you're like, you know what, I should probably control more of this.

I'm going to go do this. I told this to you the other day, it's like the ultimate trojan horse to get people into crypto because everyone's so familiar with physical items that it's like, it's perfect. Yep. So it's an incredible onboarding tool because, you know, people are going to get these merge products and they don't even know that they're entering like the web three world and yet they are. Yep.

They think they're getting a shirt, but it's actually a token. So the shirt is the trojan horse, the greek soldiers and odysseus. That's the chip, and Troy is the world. Exactly. Cool.

Speaker C

So I want to ask about Michael. Maybe I'll just ask you this. Chris said that people are kind of down on nfTs. It reminds me, to be honest, of back in, I think it was 2016, 2017, there was this meme going around blockchain, not bitcoin. All of a sudden, bitcoin was down and out.

It had been one of the many bubbles and crashes and people were like, oh, well. But the technology behind it is good, bitcoins bad, but blockchain that stuffs good. Since then, bitcoin has obviously had a resurgence and I dont know, when I look at this, I feel like NFTs might be entering that digital good, not NFT period, like blockchain, not bitcoin. Yeah, well, I guess the thing with that meme, its like blockchain, not bitcoin. But then ethereum came along and it was the blockchain part, which is like, you have this computer that is incredibly powerful and people can build all these apps and weve seen that happen.

Michael Blau

And so in the same breath, I guess thats true here. But the way that NFTs started was very narrow. It was, here's digital art, right? And now it's a lot more than just digital art as we know, right. It's access, it's digital physical, it's tickets, it's avatars, it's all of these things.

And so it's just that the first application of it, it's just a narrow view of what these things can do because at the end of the day, they really are fully programmable digital objects that is what a ERC 721 is. And so the world is your oyster, right. You could put anything into that. You can do dynamic nfTs, you can do the physically linked nfTs. It's just more like the first version of it was pretty narrow and that's what sort of took over the world.

But I guess I could see how it is similar to that meme a little bit. But we've already seen so many interesting examples of things that are outside of the world of digital art with NFTs, including iYk. Right. This is not digital art per se. And so hopefully, I think we're already seeing that meme start to disappear.

Speaker C

Yeah, that's a really good point. I have used some of the iyk products, actually. I have an iyk t shirt that I scanned. I have a digital replica of the t shirt. It's very nice.

Chris Lee

That's awesome. I haven't worn that digital t shirt in Fortnite or anything. I don't know what to do with it just yet. Maybe you can tell me what I can do with it. This is kind of embarrassing, but I bought a champagne colored tracksuit for my Duolingo owl.

Oh, wow.

Speaker C

I have like a ridiculous duolingo streak that I've been working on for many years. Which language? Well, right now I'm using. They've got like a music reading thing that they just debuted this year. So I switched over to reading music, but I was doing Mandarin for a long time.

I actually exhausted all of the Mandarin lessons on Duolingo. That's amazing. But I'd love to bring that champagne color tracks to other digital experiences. Yeah, you need to be showing that thing off. That should be your instagram, your Twitter.

I know it's just confined to this one app. People need to see this. And then I've also, of course, I mentioned Chris Dixon's read, write, own book, and he has a bookmark that came out of it, and you guys both worked on that. Let's talk about that bookmark, the idea behind it, how it works. Tell me a little bit about that.

Chris Lee

I feel like, Michael, you should go. You brought the cool factor to it. Cool factors. So the summary is if you order the book from specific stores or a specific seller online, if you go to read writeown.com bookmark, you'll be able to be directed to the exact seller, but you'll get the bookmark. Every book from this seller comes with a bookmark, and this bookmark within it has an IYK NFC chip.

Michael Blau

There's two components to this. So maybe I'll talk about the NFT artwork component and then, Chris, you should talk about the experience component. So when you tap this chip, what happens is you get this option to either connect a wallet that you already own. So if you're already a crypto user, you already have a metamask wallet, coinbase wallet, uniswap wallet, whatever it might be connected in, and claim the NFT that's linked to this physical bookmark. Or if you're completely new to crypto, Iyk will spin up a wallet for you and it's connected to your email.

And so you don't have to worry about managing a seed phrase or a private key or any of that. So it's very easy to onboard. You don't have to know anything about crypto to get started, but when you tap this chip, you get an NFT or a digital object or digital item, a collectible, as we've been calling it in this chat. And what's so interesting about this NFT is when we made it, we wanted it to be as crypto native as possible, as web three native as possible, to really demonstrate the power of what you get when you put art on a blockchain. And so what's really interesting about this is this specific NFT, and the artwork of it could really only exist in the context of a blockchain.

It could not exist off chain. And so here's basically how it works. So a quick summary for any listener who doesn't know the NFT token that is on the blockchain, will point to some off chain location, whether that's a website or decentralized storage, like on ipfs or Arweave. And that location is where the actual image and metadata of the NFT is stored. And so the title of it, the creator of it, the actual, like image or media content behind that, whether that's a song or a JPEG or a PNG or a PDF or an HTML file or any type of media, it doesn't matter.

Speaker C

And that pointer is with a cryptographic hash, right? It depends on where you're storing that location. If you're storing it on a centralized server, the pointer will literally just be the URL of that server. But if you're storing it on ipfs or arweave, where any content uploaded to those networks does have a unique content hash or a unique content identifier. And so if that is where it's stored, then that unique content hash identifier is what's stored on the blockchain as the pointer.

Michael Blau

So it just depends. What we did though, is, while that's great, and that's how a lot of NFTs work, we wanted to make it so that every thing about this image and the metadata is 100% stored on the blockchain. So it does not have to call out or point to some off chain server or off chain network storage network. It's all on chain in the format of an SVG run, which is basically just a type of graphic image. And the way that this works is because this data is 100% stored on chain, you can essentially generate it from the blockchain itself.

So if I own this NFT, let's say I own NFT number one, because every NFT has a unique token id. And then I transferred this NFT to Chris, even though Chris would now have token id number one, the actual artist would be completely different, and it would be generated 100% based off of what Chris's wallet address is. And so it's this really cool dynamic artwork that will change based on the wallet that owns it. It's 100% on the blockchain. So we're not relying on any off chain server that could go down or any other decentralized storage network.

A lot of people in the crypto world, we just call it crypto native, are 100% fully on chain. So that's how it works from the art side. But as we've discussed, there's a lot more to these physically backed tokens than just the art itself. And that's where what we've done as a team at a 16 z, and then also with partnership with IYk, is add all these other cool experiences to the bookmark itself. So, like, of course, when you tap this bookmark, you'll get access to unique interviews from Chris and videos, and potentially, in the future, maybe access to events.

But one of the coolest things, in my opinion, this is like massive, is the ability that if you ever meet Chris in person, Chris Dixon with his phone, can tap your bookmark chip and autograph it. And that autograph is permanently on the blockchain as a combination of a. We'll call it physical signature, like you're normally used to, where people take a pen and they make some cursive that no one can read. Right, there's that. But also it's a digital signature in that this signature was issued from Chris Dixon's wallet.

And to me, that is so powerful because we're all used to going up to big celebrities that we love and asking them for an autograph in person. And what do they do? They just scribble something with a pen. And that's great. And we know that they really signed it because we were there.

But, like the rest of the world, like, it's amazing how we rely on physical signatures as a form of verification when it's so easily forged. But now you could actually have Chris Dixon digitally sign your physical item, and that is also on the blockchain. And so when you show off this nft to your friends, not only will it show you the cool artwork, but also it will show you Chris's digital signature on top of that artwork. And to me, that is like a huge unlock and just insane. Yeah, it's kind of like the Moncler example where it's so easy in this case to forge the actual scribble, but to have it be signed by his wallet, that's what gives it meaning.

Speaker C

You can't just copy and paste. Like, you know that this is the hand that touched the hand that touched the hand of Chris Dixon or whatever. Yep. And what's so interesting about it, too, is to go a level deeper on the tech side. The signature itself that Chris Dixon is giving you when he taps your burke mark is also an NFT.

Michael Blau

And who owns the signature NFT? It's not you. The owner of that signature NFt is the bookmark NFt. The original NFT from the bookmark. It's basically like you physically own this bookmark, which itself, that ship owns this digital twin NFt, which itself now owns the signature NFT.

And it's like nfts on. Nfts on. Nfts. Digital goods. On digital goods.

On digital goods. Turtles all the way down, right? And it's so cool. But what's the reason why this is an important distinction to make is because if I now give you, Robert, my digitally signed Chris Dixon read write owned bookmark, and you claim the NFT out of my wallet using the pullable model which we discussed earlier. Right.

So you tap it. Now the NFT moves from my wallet to your wallet. The digital signature that Christixon gave goes with it. So I would now have Chris Dixon's signature, even though I didn't get it signed. You did, but I got your NFt.

Just like if I had Taylor Swift sign a t shirt and then I sold it on eBay. And you buy that t shirt, you're getting the t shirt, but you're also getting the signature with the sharpie that's on it. Right? And so, same idea here. It's moving with it, which is super cool.

Speaker C

Can I ask. So you transfer this NFT to me. Now, let's say that you pull it back, I give you the bookmark back, you pull the NFT back. If you use the same way with the arc generate as it appeared before. Yeah.

Michael Blau

So the art is deterministic based on your wallet address. So as long as the same wallet address owns it, it will always look the same. But if you are listening to this and you are a smart contract engineer and you like to poke around in smart contracts, you will find an Easter egg. Is this a smart contract engineer or a smart contract engineer? Sorry, I gotta be pretty.

Speaker C

A smart, smart contract engineer. Smart, smart contract engineer can look and there's a little Easter egg. And the Easter egg basically allows you to kind of override some of the deterministic nature of the way that these images are generated and set your own, or at least have more control over what the gradient colors are in your, in your image. And so if you want to go find that, I encourage you to find that. And you can actually override this a little bit.

Michael Blau

But yes, for the most part, if it's the same wallet address that owns it, it's always going to be the same image. Chris, I don't know if you remember this, but we were at a founder summit event that a 16 Z had hosted, and you were demoing the bookmark for me and some other people and we saw for the first time what Chris Dixon's art, his generated art, was going to be. And for lack of a better term, it came out puke vomit sludge green. I remember that. Yeah.

Speaker C

Just like the most disgusting green that you could imagine. Did we call it like Shrek swamp or something like that? Shrek swamp green. Now, you didn't know that that was how it was going to come out, right? That was sort of a surprise.

It just happened to be the most hideous color you could imagine. We changed that wallet. So use the escape hatch, the Easter egg escape hatch to make that? No, no, we just like, use a different wallet for the one that Chris Dixon would own. That was funny.

Michael Blau

But I will say it took a lot of time to figure out how do we make this generative component so that no matter what, it could look somewhat good, obviously, like, you can't control what colors. Yeah, but, you know, we did spend a lot of time thinking about, like, should it be one color gradient, two color gradients, how does that work? And so that was a lot of tinkering, but I think where it's at, it's like pretty good, like 95% of the time. Oh, it's amazing. My NFT, by the way, it came out a very nice lime green, sort of a neon lime green, which I was pleased with.

But here's the thing. If you are an owner of this bookmark right now and you do not like how it looks, that's totally fine, because all you need to do is tap the bookmark again and pull it into a new wallet that maybe looks better. And you can do that forever until you find one that you like. A wallet that you like, but you also like the image. So it's not like it's, you know, stuck in its current state.

Even if you don't find the Easter egg, you can still just move it to another wallet and change the image. And one lucky recipient out there will find the shrek swamp green. Yeah. The elusive, the elusive color. I learned way too much about colors building this thing.

Chris Lee

I don't know of a project that did something like this before. Chris knows I like to do these dynamic on chain things because what's so cool about that to me is that, and I said, like, the art view of NFTs was the first example of how they came into the world. And it's a little bit of a narrow view. But if you really think about it, there's a lot of art that you can create that is crypto native, that could only exist in the context of a blockchain. And that is like what this piece is like.

Michael Blau

You could not make this a jpeg that you just put on your wall. It doesn't work that way. Right. You need a blockchain to make this piece of art exist. And so I like art that is really leaning into all of the cool things that NFT gives you.

Leveraging the blockchain for that. Yeah. And youve done tons of projects like these. Yeah. Yep.

Chris Lee

But going back one step to the concept of the autograph, I think another way of looking at it is where basically the item has its own history. If we talk about the pullable model, lets say you resell the item so the next person taps and claims possession, the whole provenance history of whos possessed that shirt will live on the blockchain and be associated with that item itself. And then in this case, its like, oh, you actually met Chris Dixon. That autograph lives with the bookmark itself. Maybe youre sure you check in at the Taylor Swift concert so that, you know, if that shirt is at some vintage store 20 years in the future when you tap it, oh, it's been to this show.

It's been held by these people. It's been signed by this person. Like, it's just giving this rich history that implicitly exists for all the items in the world, but making it more explicit. Yeah, it's really cool. You can know the previous owners of something, and sometimes the previous owners of an item can enhance the interest around it.

Yep. You know, something I want to add to this is the first question you asked us. Right. Which is, why even combine these worlds, like, what's the reason for it? Why can't we just leave physical, physical, digital, digital, digital and call it a day?

Michael Blau

Yeah. And something that I think, hopefully we all realize is that the whole world is actually not moving in that direction. Right. The whole world is actually moving in to tight integrations from physical to digital, whether it's the fact that you have an iPhone in your pocket or the oura ring or the Apple Watch on your wrist that's monitoring your health and giving you digital health data, or now these new AI wearable pins that you can talk to, or even in the vision Pro, where now I can have a whole Persona and a digital version of myself in virtual reality, that when I FaceTime with my friends, they don't see my physical version, but they see a digitally interpreted version of my physical version. So the whole world is moving to merge this.

And if that's the case, why not do it the right way? Why not do it in a way where the digital pieces are implemented in the strongest, most reliable, transparent, and open way possible so that when we do get to maybe like a fully digital world, when we're in the world of ready player one, everything is not just completely controlled by one company, and rather, everyone actually owns their digital goods. And so doing it right from the start, I think, is important. And being able to see the provenance of all this stuff on chain and verify it publicly is a huge component of that. Yeah.

Speaker C

In Chris's book read, write own, he talks about this idea of the metaverse, and that the problem with ready player one is that this universe could be owned by any one individual at all. You know, it should be something that is community owned by all the people who participate in it. It's funny that that book came out not that long ago, but this concept was not there for the taking at that time because the technology just wasn't. It was sort of inconceivable, you know, it's so funny. I rewatched ready player one the other day, and there was an amazing digi fizzy moment in the movie, which was that Parsifal is going shopping in the.

Michael Blau

I'm forgetting the name of the world, but in that metaverse, right? Oasis. The Oasis mall. Oasis, yeah. And he finds this suit that's like this intense haptic suit, and he clicks a button to buy it.

And you see, like, the coins visually move from his body, you know, into this shop. And then he gets a digital receipt of this suit. And then the next day, the suit shows up at his doorstep where he can actually wear it. And so he purchased it in the digital realm, and then it shows up at his doorstep, which is sort of like the redemption model that we've talked about before. Yeah, but the weirdest part is that later on in the movie, the fact that the world is owned by the centralized company, they were able to go in and figure out who the actual, like Wade, like the actual version of possible was in the real world because of the shipping address from the oasis to his home.

And therefore they were able to go to his home and attack him. Right. And so. But this was all enabled because the world was owned by a centralized company that has this, like, backdoor view into everything that's going on. Getting swatted by.

Speaker C

By web two tech. Exactly. Crazy. Yeah. This is a tangent, but it's interesting to think about how things like Uber are actually digi physical, right?

Chris Lee

You get on your phone, you click some buttons, and you physically summon a car, or, like, the Internet of Things. So my blinds or shades are actually remote controls. If it's too sunny in my room, I can hit some buttons and the shade comes down, and then now there's no sun. So it's like, very interesting how our lives are very much being not only lived online, but we have these digital touch points to actually control our environment. Like even the nest, you're configuring the temperature in your home digitally.

Michael Blau

Chris, talk about the card, the credit card you told me last night. That was great. Oh, yeah. Another great example of this is the credit card, or debit card, is a digi physical experience where you get issued a card by, let's say, visa, when you go to any merchant, and they add things to your order. And so then you tap your card, the reader is recognizing that chip, and they map it back to your digital id or your digital account.

Chris Lee

It's like, oh, Robert wants this orange juice. Let's charge it to his digital account. But that is digiphysical because the chip actually maps to your digital identity. So I think for us, being able to maybe for the first time, enhance your identity with the items you own, the different behaviors you've done in the real world. That seems like part of this natural progression.

Speaker C

Or hydrating your identity. Yes, hydrating. To your point, it's funny to think about the physical and digital worlds as separate. I mean, we conventionally do. We have mail, like the postal service, and then we have email and we have commerce shopping at the mall, and then we have e commerce.

We have all these sort of distinctions between the two. And yet in practice, in reality, the lines are really blurring and it is accelerating. All of our experiences are becoming this strange hybrid. 100%. Exactly.

So, Chris, I want to return to something you had mentioned way back when you were talking about how you had met up with your co founder. You mentioned that you guys were boughting NFT airdrops. So just to bring this whole conversation full circle, you were at one point creating bots to acquire nfts that presumably go on and sell elsewhere. And now you're developing these products that are going to hopefully help artists like Taylor Swift avoid bots claiming all of her tickets. Yeah, it just seems like an ironic outcome, or maybe it's intentional and deliberate that you've seen the holes in the system.

Chris Lee

Yeah, there's definitely some irony in there. I think for us, the botting, it was more like you could buy an asset and there are different things at the time where, because it was such a new thing, whoever could determine the rarities quickest, you had a little edge where you could, you knew what to buy and sell a little bit. So the botting in that case was more just indexing some data, running some rudimentary analytics on it, and then deciding what to purchase versus in the Taylor Swift example, it's more on the identity level of who should be allowed to purchase this. So I think it's definitely ironic, but maybe slightly different elements to botting here. Gotcha.

Speaker C

All right, well, thank you guys for coming on here and talking about all things vigital. Hey. Hey. Digi fizzy. What's wrong?

What's wrong with phygital fidgy fizzy. It's a beautiful word. Love it. No, but thank you, guys. This has been an awesome conversation.

I learned a lot. Yeah. Thanks for having us. Really appreciate it. Thanks, Robert.

Michael Blau

This is great.

Speaker C

Michael, I know you feel very strongly. I feel like you're playing coy with how you, your opinions on digiphysical, like you should let loose and say how you really feel. So the funny thing about it is I really wasn't serious about it. And then I think it got funnier as I became more serious about it. And so now I'm sort of, like, just completely championing this word.

Michael Blau

And it's funny, and it sounds like a cool drink that you would get in Willy Wonka's chocolate factory or something. Digifizzy sounds like a soda pop to me, which I kind of like. It sounds like something that maybe, like, kind of bad for me and sugary, but I want. I want it. Exactly.

Listen, if there's one thing that I get out of this podcast, it's that anyone who listens to it takes forth and says, digi fizzy nap. From here on out, as the official canonical word for this category, all listeners. Out there, please cast your vote. Digi fizzy digital or chipped goods. Thenceforth, that is how the industry shall be known.

Speaker C

Exactly.

Let's Get Digi-Physical: From 'Tap' Chips to Taylor Swift

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Episode Chapters

1: Introduction

2: The Role of NFC Technology

3: Consumer Experience Transformation

4: Addressing Counterfeiting

5: Future Prospects

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