Pepo & Decrypt – New Token Models for Media Engagement
In another of our bonus episodes recorded at EthCC in Paris, we caught up with Jason Goldberg, CEO and Founder of Pepo and Ost, and James Dyer, Co-founder and Head of Product at Decrypt. At the time of recording Decrypt were about to announce they were launching their own token that rewards audience engagement, built on Ost technology. We chatted to Jason and James about this relationship, the problems solved by these monetization models, the link between Pepo and Decrypt tokens, and DeFi, and what the future holds for media and tokens.
Topics discussed in the episode
- Background of Jason and James
- Decrypt’s affiiation with ConsenSys
- The issues and problems being solved with the respective monetization models
- The levers Pepo are using to ensure users trust the platform and promote growth in the ecosystem
- The reasons Decrypt chose Ost to build their platform on
- The different components of the Ost toolkit and how these are leveraged
- The technology involved with getting tokens to sponsor a ‘season’
- How Pepo and Decrypt market themselves
- The bridges between Pepo and Decrypt tokens, and DeFi
- How good UX standards of the wallet are reached, in particular the recovery wallet feature
- Overcoming the challenges of civil attacks and malicious acts
- The future of media and tokens and what the new models look like
(2:10) Jason Goldberg, and history of Pepo before OST
(6:47) James Dyer, Decrypt media bringing clarity to crypto
(14:34) OST enabling the internet of money, and user research for Pepo
(17:20) Rewarding users for their attention
(23:45) Growing a user-base
(28:40) Why Decrypt chose OST
(31:51) Seasonal releases of co-branded decrypt tokens
(36:59) Enabling regulatory compliance
(39:15) Getting in the Apple app store
(45:15) Brainstorming and enabling bridges
(51:10) Account recovery in the OST SDK
(55:38) Preventing Sybil attacks, and security challenges
(58:22) Thoughts on the future
Sebastien: I’m here with Jason Goldberg, who’s the CEO of OST and Pepo, and James Dyer, who’s the Co-founder at Decrypt, a media company. I’ll let you guys introduce yourselves in more detail, please introduce yourselves and let the audience know how you got involved in crypto.
Jason: I’m Jason Goldberg, and I’ve been a serial entrepreneur for over 20 years. The first product that I worked on was AOL chat rooms back in 1990s. So, I have been working in the community and internet for a long time. I fell down the crypto rabbit hole in 2016, working at an app that I launched called Pepo, which was, we had this novel idea back in 2016, to enable influencers to earn money directly from sponsors, advertisers, fans without going through platforms. Realized back in 2016, that would be a really hard thing to do. We have to build a ton of technology to do so. That led us to build OST (Open Simple Token).
Sebastien: So the idea for Pepo came, first?
Jason: It was first Pepo, literally the app was Pepo, way before Open Simple Token. OST stands for Open Simple Token. Yeah, we launched an app in 2016. Any influencer could create their own channel in the app. We had lots of foodies, travel bloggers, people could join their channels. The idea was to build up the Web 2 experience messaging to the influencers and then layer on the economic model later.
We had over 250,000 users, it was a real serious app. We shut the whole thing down because, I started getting obsessed with how are we going to create this economic model inside the app and how we enable peer to peer payments that were made with microtransactions, and all this stuff. That led me into Ethereum, along with my co-founder, Ben Bollen, we started brainstorming. We’d spend weekends brainstorming how to do this, diagramming how to create the user experience we wanted, on this whiteboard.
If you were to enable every Instagram user to be able to earn when they post, have every like earned money, what user experience would you have to enable? And the ‘aha’ then was okay, don’t just do this for Pepo build technology to do this for any app. That’s when I made this tough call to say, let’s turn off the app and focus the entire organization towards building the enabling technology. I just felt it was a much bigger opportunity.
Sebastien: Okay, yeah, that’s interesting. I have any idea I didn’t know this about the history of Pepo. Have any of those people from before? Do we see them on the app now?
Jason: I know, it’s really interesting. It wasn’t until a couple days ago that we even started to let people know from the old Pepo that we existed because we took a different approach this time. We built all this technology to enable you to integrate these microtransactions into the app. Then we went out and spoke to people to try and figure out what were the right features to build. We didn’t have 30 second videos before, the app was just chat rooms, it was almost a Whatsapp group with the influencer.
In the new version, the app that we launched a month ago. It’s entirely community driven, the community told us, short-form video, real authentic, and then every like transfers value. We decided also to launch into the crypto community to start, and we haven’t really marketed to anyone outside of the community, because we wanted to get it right within a tight knit community, and then expand out versus going really broad. It wasn’t until a couple days ago where we actually went out to about 50 of the top influencers, creators of the original Pepo and say, “Hey we launched this app, it’s mainly used by crypto people now, do you want to come on and check it out?”
We’ve had a couple of them join, a couple hundred. We had two foodies from India, one in Dubai. They are “Hey, I love this and I can earn money from it, cool!” When the time is right, we’ll start to push out to the original user base of people. It takes a lot of patience and will to not just say, “Hey, everyone join”. It’s not ready to have everyone, you don’t want to deliver a disappointing experience.
Sebastien: Yeah. Okay. We’ll come back to that. James, please. Tell us a bit about yourself.
James: It’s funny actually, because my journey coming into the space, there’s been a few different times Mr. Goldberg and I have crossed paths. In university I actually co-founded a video discovery product. It was called Swish, a lot of similarities. We were curating the best of the internet’s 30 second video clips.
Sebastien: Like Vine and these sorts of platforms.
James: It was that time when all of this stuff was going on. Initially, the premise was to really focus on quality of video and pull it in from other platforms, focused on the emotions that people really wanted to feel. Whether excitement or amazement or intrigue. We did that for about a year. We got to a decent amount of users. We were asking some of the monetization questions, there weren’t really answers there. At the same time, a lot of my friends from University, and the startup scene, were getting in really interested in all this blockchain and cryptocurrency stuff. About that time, I decided to stop doing this video app, which was called swish.
I set up an educational platform called LitePaper. The general problem for that was, everyone was super excited about the promise of this technology. Back then, at the tail end of 2017, start of 2018, no one apart from the super insiders could actually clearly articulate what this stuff was, and why was it exciting. So we built a platform to break down the fundamentals into building blocks, make it simple, the Duolingo for blockchain cryptocurrency. That went pretty well, six months in, we had an opportunity to join up with some other guys who are building a media policy called Decrypt. We chat with them for a little bit, and decided to join forces. That’s where I am today. I’m one of the co-founders of Decrypt. We are a media platform covering the space. We do news, we do education, and we do collections.
Sebastien: You guys are growing pretty fast.
James: Yeah, we’re doing pretty well. We’re young, been publishing for just over 18 months. We’ve 20X the size of our audience this year. That’s from 55,000 readers a year ago, to just over 1.1 million. We’re growing, but it’s important to say, that along the way, we’re trying to build a brand that is demystifying the space. Back to the conversation a while ago, be a truth bearer, and one where we’re telling compelling stories.
Sebastien: I’m curious, because we’re both in media, different types of media, I suppose. But what do you think is lacking, in this space, where you felt that Decrypt, could could could fulfill, or answer to a user demand or a community demand?
James: I can speak to my personal premise. It always comes back to this notion of making this world intelligible. Helping people to understand what matters where the promise is. By the same token, it would be naive if we didn’t call out, there’s a lot of scams that have taken place, a lot of bad actors, so calling those out. But also, it’s about highlighting the genuine successes. It’s about making the big ideas easy for the outsiders to understand. That’s an important role to play in broader awareness and adoption. Hopefully, this space continuing to grow and have an impact which we all want to see.
Sebastien: Can you talk about your affiliation with Consensys?
James: Yes. Happy to talk about that. We are a wholly owned subsidiary. We are editorially independent and technologically agnostic. Obviously, that’s a critical pillar for media company, we need to preserve our integrity. That’s something that we have really focused on in terms of the foundations and setting ourselves up as a media property that’s set up to succeed.
Sebastien: What have you implemented to ensure this journalistic integrity? and journalistic integrity is one thing but the other is, we can all we can very easily get into our own bubble. How do you ensure that Decrypt is really agnostic and covering a wide range of technologies from Bitcoin to super experimental stuff to everything in between?
James: Sure. I’m not gonna be able to answer in as much fidelity, as the people working on the editorial side who have taken a lot of steps to ensure that this is in place. I work more with the guys on the tech and product side. But I can speak a little bit in terms of ensuring our independence. If you look back historically at other media publications, what they used to do is draw a line between church and state, as it were. That’s the guys that are actually in the trenches writing the stories, and then the money making part of the business where this content is effectively being monetized. We’ll talk about some of these business models out there today, but it’s super important to keep those separate. Those incentives between the journalists, and how the media company looking to make money, that those wires aren’t crossed, as it were.
Sebastien: They’re there. They’re not crossed. Okay. Yeah. I don’t consider myself to be a journalist, although some people on Twitter sometimes put me in that category. But of course, as a media property that accepts sponsorship, over six years of doing Epicenter, we’ve had to make choices. And we’ve had to be quite diligent. I’m not going to say that there isn’t sometimes biases that can surface. It’s an interesting challenge. So today, the reason why I wanted to get you guys in here, was to talk a little bit more about the challenges, and also the opportunities that exist in terms of monetization of media platforms. Both of you run very different media platforms, one being a social media platform and the other being a proper journalistic media company. But this question is to the both of you, what issues and what problems are you solving with the different things that you’re doing? So with Pepo, and we’ll get to talk about this a little bit more in detail, but the monetization model that you’re implementing in Decrypt.
Jason: Yeah, from the Pepo side, first and first and foremost, we’re a technology company. We built OST technology, Open Simple Token technology to enable any application to inject the Internet of money into their application. That’s our reason for existence. We enabled smart contract wallets to be embedded, in any app, with SDK that we developed, and then everything that’s needed in order to be sure that those transactions can happen at almost zero cost on scalable layer two chains. We can go deeper, as to the protocol, how that works. Pepo as an app, halfway through 2019, we were at a place, we felt our technology platform was ready to be used by third parties. We decided not to wait for others to adopt it. You can try to get people to adopt frontier technology, that they don’t know that they need, yet it’s always complicated. It can take a long time.
We said, what we really need is to prove some use cases and show everyone what’s possible. So we set out to come up with a use case, that was worthy of being a showcase, demonstrating to the world what our technology is capable of. The process we went through was to start by interviewing lots of people, and we had a number of hypotheses early on, and as these things go, most of them were wrong. The way we found out was by talking to people. We started by just talking to people in general about their social media consumption. You know how they were using sites, let’s say Twitter, YouTube, we talked to podcasters. What their frustrations and challenges were, and how they were monetizing their podcasts.
We talk to people about their likes and dislikes with Patreon. We talked to people about things like LinkedIn, and Facebook and Instagram, we went all the way around. What we uncovered through all these conversations, a few things stood out. We heard that increasingly, everyone’s a content creator, every day we’re creating tons of content, and we’re uploading that content to these large dominant web platforms, who are monetizing our content and our data. Most people, unless you’re Kim Kardashian, are not making much money from it. We heard from a number of folks, podcasters in particular, that service like Patreon should work, but don’t work as well as they think should as they should.
Sebastien: If they don’t shut you down. Totally, yeah. We had a Cosmos newsletter and it just disappeared. No reason.
Jason: They’re not censorship resistant. Was that a MailChimp thing?
Sebastien: No, it was on Patreon. Don’t get me started.
Jason: Seriously, we uncovered a lot of things around, no matter where people are creating content, with an abundance of content, people feel they’re giving up the content for free and struggling to monetize. It’s hard for people to stand out and get noticed and recognized. The signal versus noise problems continue to increase. Then we found that the payment structure, in web 2.0, made a lot of these problems insurmountable. For instance pretty much every website app uses stripe as a payment processor. These days stripes fees are 30 cents on every transaction plus 2.8% of the transaction because Visa MasterCard charge them 25 cents and 2.5%. You can’t have a one-cent or five-cent transaction if you’re being charged 30 cents and 2.8% so it makes microtransactions impossible.
That’s where the internet money comes in. We said, we can solve this problem right? If we can do these transactions, person to person on a blockchain, you have no value loss, you don’t have anyone in between collecting rents on it, and you don’t have to pay the credit card processors as well. There’s an economic difference. Then use the fact that tokens are transferring value, to make the experiences richer. For instance, on Pepo, every token not just earns money, but it also impacts the relevance engine, the personalization, cutting down on the noise of it. It’s how do you use value in this internet of value to actually make experiences better?
Sebastien: Yeah, I was talking to Paul yesterday about this very thing, and that the challenge in podcasting, and particularly, in the Western world, because from what I’ve heard in my conversations with people in say China, for instance, is that the ecosystem is very different. But the particular challenge with Western podcasting is these platforms behind you podcast, Apple podcast, Spotify, and all of the others. None of them, or nearly none of them have monetization built-in, or frictionless payments. If you want to do any form of monetization, you’ve got to lock your users into this other platform like Patreon, or whatever you choose to go through. And that’s just not the way people consume. It’s not seamless. So there are platforms to allow you to monetize content. But it’s not frictionless. There’s not a one click in my podcast player Spotify, where I can tip.
Jason: Well, let me see. Patreon podcast is a great example. I spoke to, must have been dozens of podcasters. We didn’t even start in crypto, we started talking people we talked to people about religion, sports politics, and frankly we were just crawling Patreon and look for people, I call them grinders. People who were not yet the superstars, but you could tell that they were doing a lot of work to try to make money but not quite there yet. Let’s talk to them because they would have pain points.
Here’s what we heard. We found that since the tipping, let’s say the value transfer, is not contextual, that most people don’t do it. In fact, we found that only the podcaster’s super fans end up clicking over to Patreon and signing up for a subscription. The other thing is because of the stripe thing I was talking about, that 2.8% and 30 cents, they can’t allow you to just give 10 cents or 20 cents. You have to sign up for a subscription, which is usually two or three bucks a month with a recurring subscription, that’s hard to cancel.
The model doesn’t lend itself towards this “what Seb said at minute 30” and just click the button and say, okay great job, Seb. We also found, frankly, that people hate the word tipping. The whole idea of tipping is not something that people associate with online content, but people are very open to showing appreciation with value transfers. So that’s received tokens of appreciation and are more than just likes.
The point of all this is Pepo has been developed through a lot of direct user research. I’ve done personally with our team over 1000 interviews in the last year. We spent 30 minutes just talking to people. We try to find pain points, we try to explore and discover what are things that they’re trying to get done that can’t get done, what are the hacks they’re doing to try to get it done and figure out how do build a better product to make it possible for them, with Pepo. We decided and this was one of the hardest two big decisions we made. One was, in July of last year. We were exploring all these things. We had all these ideas of you create a button that you could tip people on Instagram with, or on Twitter. We’re No, we need a place to start.
We kept hearing from people, what we need is one authentic connection to the content creator. All right, how do we create these authentic connections? That led us to 30-second videos, because you have to be yourself in the 30-second video. Then the hardest decision we made to lead up to the launch was we decided to narrow the focus just to the crypto community to start. This was really controversial internally, we had so many arguments about this, because we’ve been talking to people, as I said, in politics and sports and religion, all these different topics. We’re gonna focus just on crypto. Why just crypto? It was same reason why Airbnb launched in San Francisco before it took over the world. Same reason why you got to pick one market and figure out the density of it, get it right, then expand.
The other one thing, we also found out early on that crypto itself is not an is not a narrow community. There’s so many different subcommunities inside of crypto.
Sebastien: Yeah. I think Pepo has found at least one subset of the crypto community, which is the DeFi community, there seems to be a lot of people, a lot of people that you see here, are there. Not so much, other communities.
Jason: A lot of DAO people, activists as well.
Sebastien: And you’re starting to see this new wave of people coming on, the whole food blogger, foodies, which is cool. It’s an interesting use case, for a video app. To be able to see people take pictures of their food, in restaurants and things like that. That lends well to the application. I want to talk a little bit about ecosystem growth. What are the levers that allow a relatively new ecosystem to grow? Because the importance, I think, with any platform, is to have network effects. Once again, I’m pointing to the platforms behind us like Apple Podcasts, Spotify, etc. You know, if these platforms are successful it’s because there’s a lot of people on there. As a podcaster, for instance, I’m glad that I’ve got a lot of people on Apple podcasts listening, to us or on Spotify or wherever. But if all of a sudden I have to move all my listeners to one platform, because that’s where I find the marketing features or monetization features, that’s an enormous amount of work. In the case of Pepo, what things are you experimenting with here, so that people actually start using the platform, and then content creators feel that this is a good platform where I can start creating content?
Jason: There’s a few things going on here. One is a whole lot of patience. Trying to stay, smart, not fast. Now, at the same time, we’re moving fast, but smart, not just fast. We’ve always said we need to get it right, for one community, and one set of people and then expand out from there, rather than trying to go conquer the whole world. I also Coach our team on patience, to the extent of look, I have no idea if Pepo will be the next Snapchat, or next Instagram. The chances are one in a billion of that happening, and having hundreds of millions or billions of users. What I do know, is that if we get a loyal user base that is using Pepo, it’s gonna attract lots of other companies who want to have that same internet of value technology embedded in their apps as well. You can get that snowball effect, but you start with people. Then you get to the next larger app, and the next larger app, the next thing you’ve got, whether it’s a Snapchat or Instagram or Tik Tok saying, Okay, how do we use that technology in our application?
For instance, in the podcasting world we wouldn’t be able to go out and sell our technology today to Spotify or Apple, but you find some upstarts in the podcasting space, make some inroads, and then the next level, the next level, next level. You can’t cut corners, you gotta let these flywheels build. Now, the key for us in terms of features in Pepo is to follow the users and make it useful for them. We’re constantly searching, and the way we search by having conversations, by talking to people and finding out what does it take to make the app essential. You don’t want to be something that people are stacking, it’s yet just another thing in their toolkit, you wan’t to be one of the first things they think about. What we hit on in the last few weeks is communities. One thing that we found is, as opposed to TikTok which is entertainment, bite sized content where people just want to have a random bit of delight that they sink into, with Pepo we’re using it for work-related purposes.
Sebastien: Really I like to call it like the crypto Twitter, TikToc’s, Steemit, but also a little bit of LinkedIn.
Jason: So what if it’s professional, what does that mean? Well, professional is more deliberate. You go searching for particular topic or particular community that you’re invested in. We went deep on launching these communities. Epicenter you guys have a community on Pepo, we launched them at Eth Denver, and then we’ve been rolling out, I think there’s about 50 Communities on Pepo now, and communities allow people to congregate, there are 30 second videos and conversations around topics, to get notifications and subscriptions and followers for those topics. A lot have been event based, but we’re learning as we as build the app, and we’re building it with the users. I think we’re onto something, we’re gonna show over the next year that Pepo is an app that, on its own, is very interesting and gains a huge following and shows that you can earn more than just likes. I also think we’re very rapidly proving the value of the technology through Pepo. I can tell you, we’ve had dozens of companies that come to us because they see what we do with Pepo, and they say, I want that in my app.
Sebastien: Cool. Yeah. When I use the app, it doesn’t necessarily come to mind that Pepo could be used in other applications, that you could find that Pepo button in a podcast app, a social network, or something like that. But yeah, it’s about growing an ecosystem. The social media app is just one of those ecosystems. We’ll talk now, a bit more, about what you guys are doing at Decrypt. But creating the bridges between those different communities where you might have a strong community over on Pepo, and then overlapping communities on Decrypt, and then those tokens can flow also between those platforms. I want to move now a little bit more on the OST model, and what you guys are building on top of OST. Obviously, Pepo is built on top of OST. So my question to you James is, what is it in the OST technology that you found interesting and made you want to build this community payments platform on top of crypto.
James: I could pick up where Jason left off. Why we’re one of the companies that are looking to leverage this technology. Back at Devcon last year. I was at that conference, and I saw Pepo in action. For me, it was one of the first times where I’ve actually looked at a Web 3 product, and it doesn’t feel or look a Web 3 product. It meets those same user standards that some of the best in class products, more broadly in the tech space, have been able to hit. Super high level, how you guys using this tech are able to deliver this user experience, with blockchain technology. That was the hook for me.
In terms of, the different component parts and does a why it’s been really fantastic for us to build on top of. It’s cheap, for us as a fairly small company. This technology that Jason, and the guys, have been building is a toolkit. You can configure that in different ways. Our use case at Decrypt is slightly different. We are looking at the intersection of us as the publisher, the people that are consuming our content, and then the brands that want to connect with that audience in a way that is completely non intrusive. We have a slightly different configuration. But having that toolkit we can. If we had to build all this stuff ourselves it would take a long time, incredibly resource intensive. The SDK they offer allows us to build quickly, they allow us to iterate and ultimately answer the problems that our users have.
Sebastien: So then let’s talk about the technology, and the SDK and how you guys are leveraging that. What are the different components that are part of the OST toolkit.
James: I’ll give you a high level, maybe if Jason wants to jump in as well, he can give us a deep dive. In our particular use case, at Decrypt, we’re doing initially a lot more company to user interactions instead of user to user interactions. Example on Pepo, people in the community are sending value to each other. What we’re looking to do is share value between companies and our users. We’re talking about this a little bit later on today, which I’m excited about. But Decrypt is launching what we’re calling Decrypt seasons.
Decrypt seasons are seasonal releases of our base token, which is brought to you by a brand. It could be an epicenter season, it could be a Samsung season, and then, in one of these givens seasons, there is a limited amount of tokens which users earn by reading the content, by engaging with this content by sharing it, and then once they build up a number of these, they can cash out for rewards that are available to them. Okay, now, what the brand’s getting from this side, as they are co sponsoring this token, they get to be really immersed into the experience and their brand is front and center, every time one of these interactions take place.
Sebastien: Can you give me an example? Let’s say you have an exchange that wants to sponsor one of these seasons? What, what are the kinds of interactions that would allow readers or users of the platform to get those tokens, and where would the sponsor connect?
James: Yes. One thing just to kick this off. I think Web 3 is teaching a lot of people that their attention actually has value. Users are becoming a lot more cognizant of that. It’s a bit of a hangover from all these huge web 2.0 monopolies that have been able to make millions, billions, of dollars from using user information and data. We’re trying to play a small part in making a system with a bit more parity, where users are rewarded for that.
Your question, we’re keeping it simple to begin with, let’s say our users are reading an article on the epicenter podcast, or they’re reading an article talking about what the guys at Pepo are doing. Once they read the article that get an option to be able to complete it. As soon as they complete that given piece, they have a reaction. They let the know user how they felt about that. That’s this piece was great. This piece is bullish. Then as soon as they’ve completed it as a reward for them completing, and investing their time and attention in this content, they will instantly using the OST tech, they’ll get sent one of these co branded tokens added to their wallet. Then you’ll see in the wallet that they have one of these co-branded tokens brought to you by the brand partner for that particular season.
Jason: And then all those tokens roll up to Decrypt tokens. I can talk a little bit the enabling technology that makes that possible. OST is a layer two smart contract solution. We enable brands like Decrypt to deploy tokens on layer two Ethereum chains. The value of those tokens are determined by locking value in contracts on layer one. You could take any ERC 20 token, could be Eth, it could be DAI, whatever it is and use that as the base for creating the token on layer two. Then you create a mapping of, let’s say, 1 to 1, and whatever you want the exchange rate to be, that gets fixed in the smart contract, so that whoever receives the layer two tokens, they know the value of that token is based on what’s on layer one. For instance, Pepo app you have a one to one mapping of Pepo to the OST token, and OST most recently trades in the range of let’s say, .9 cents to 1.5 cents and users see the fluctuation of that. The backing of the token on layer two could also be a stable coin, like DAI or USDC if you wanted to.
Sebastien: So the Decrypt token can be backed by DAI instead of USD so that you would have a stable value
Jason: Totally up to them, we’re working on that.
Sebastien: Okay. Then the platform would provide that liquidity in the smart contract.
Jason: Right, exactly. What this does is it creates a regulatory compliance solution that also allows the UX that we enable. Regulatory compliance is that the Decrypt token has no secondary market, it can’t be traded on exchanges. Its only value is derived by what’s being staked on layer one. Technically an owner of a Decrypt token, say backed by DAI, let’s say it was one to one, say, I know this token is worth $1, because there’s DAI in a contract that backs that. If they ever want to call on that they could, although the in-app experience redemption we’ve created is more compliant, which is how you cash out for gift cards, which is part of the SDK that we provide, same thing as in Pepo.
All that is part of delivering a solution that actually speaks to what users want and need, versus trying to do what is the best optimal solution, that you might have, a couple years from now, which would be user can just use their own keys and just cash out wherever they want. For now, gift cards work really well. The next part of enabling technology is that our SDK, which we’re talking about, enables brands like Decrypt to have a smart contract wallet that every one of their users can get. We deploy a number of smart contracts on behalf of every user on layer two chains, including what’s called a token holder address, which is where the users’ tokens live, and they can access that from multiple devices with a recovery contract, which allows them to recover using a six-digit pin, with a delayed recovery module, and all this the blockchain under the scenes being lower down than any user really needs to know about, that makes these almost zero cost token transfers possible.
Sebastien: Okay, interesting. I wasn’t aware that you could actually do this backing with DAI, and that ultimately, you could create a token that’s worth a penny for instance, and have it be backed by DAI. Now, at the moment, these tokens, you can use them in PEPO to buy gift cards. But that’s a regulatory workaround?
Jason: Yeah, essentially the issue at the moment. Our approach has been called land then expand, versus go for the optimal. “Land then expand” is rather than trying to spend the next several years, getting regulatory clearance to do the entire optimal solution, which would be, let’s say, user can move whatever money they want into an app like Pepo, and then cash out any way they want, whether it’s dollars, or crypto, or the bank, or whatever it is. We said, let’s get in the App Store with something that is regulatory compliant and approved by Apple.
Sebastien: Which is a big challenge in itself.
Jason: Yeah, exactly. It was the first crypto app approved by Apple. The conversation there was really funny. The solution that we implemented, we architect with our lawyers in over a year’s worth of work with them. We brought it to Apple and Apple said, interesting, but we’re not the law. We’re Apple. Want to talk to you about this and they dug into it. Then we got the clearance.
Sebastien: How do you talk to Apple? Is there a number that you call?
Jason: I was in Osaka at Devcon. We really wanted to move the app out of testflight, and our lawyers are like, we’re clear. We’re good. The clearance I’m talking about here, is we have meant the solution where you can buy more tokens using Apple Pay and Google pay so using their established means. Relying on them to be the payment processor, and then cashing out for anything that’s a store of value, a gift card, that it could be an Amazon or Airbnb gift card, it also could be an NFT, it could be purchasing something like a domain or whatever it might be. Anything that’s a store of value, you don’t need a money transmission license.
We got our lawyer signed up for it, and then alright, let’s get this thing to into the App Store. Let’s show during Devcon we actually can get this live in the App Store. We submitted this to Apple with a note saying we want to be first, we want to show that this is possible to have a crypto powered in-app event, I sent them all the legal opinions. I sent it back channels and posts into Apple and said, try to get it to someone that we can get attention on this. They respond immediately. It was amazing. We had a woman on the app review team. She was a lawyer. I don’t know for certain, but based on her questions, she was. She said, Let’s get on some calls. I was talking to her, three to four in the morning Osaka time, back in Cupertino where she was. We went through three rounds of review and some revisions and they approved the app.
Sebastien: Cool. That’s really interesting. I’d like to bring it back to you, James. When you were speaking with advertisers, sponsors on the platform, what’s that conversation look like? Where traditionally you’re telling them hey, buy this ad space, or maybe not even having that conversation as you’re going through some ad marketplace? How does that conversation change, now that you guys are doing this co-branded token?
James: Yeah. It’s important to flag that these business models tend to move a lot more slowly than the technology itself. You guys have already both experienced that, in platforms and the monetization methods that some of these advertisers are used to, or what’s been existing for a while. This is your ad exchanges, banner ads, sponsorships that you might put on a product like a podcast. The business models, which have been established for a little while, that these are buyers are familiar with. I do think and this relates to what Jason’s been saying. Looking for that beachhead market, the conversations that we’re trying to have are with companies that think, there’s a better way, that these business models are slightly out of date. They have a larger experimental ad budget, let us say, and that they’re willing to try things which are not totally unfamiliar with what we’ve seen before. But introduces a bit of novel technology, in our case, and happy to work with us and playing out those experiments.
Jason: I think similar how we’re starting Pepo, in the crypto community, and building out from there. I would see you get some pretty awesome crypto native companies to prove some use cases that you can then build out and take that to mainstream companies and they’ll see the results first, rather than just being sold on something that’s pie in the sky. Very similar. One think I want to note, nothing that I’ve mentioned at all in terms of monetization, whereas James has in terms of his model, is at all based on validator economics or ceiling transactions on a blockchain, or number go up.
It’s really important to emphasize that aspect of, it’s almost the easy out, in crypto, to appeal towards if enough people buy, it’ll create demand that will increase the price, and everyone will make money. Having these apps can’t be just all everyone’s going to make money through usage network fees, there needs to be more utility to them. It’s an important distinction, because I think, in terms of creating this internet of value, the first use case that we have today, mostly around DeFi is around up-ending the banking system. We’re maybe introducing that there could be an alternative form of banking where finance, the actual injection of, what does that mean for applications, and products, and monetization models? We’ve yet to see that yet, but I don’t want to just fall back on number go up.
Sebastien: Yeah. Now, this question is for the both of you, but do you foresee bridges between the Decrypt token, the Pepo token, and DeFi? You know, what are some of the interesting things that you’re brainstorming about?
Jason: I’ll speak from the Pepo side, and actually also from the OST Technology side. As part of the announcement we’re doing today, we’re also announcing the OST redemption store SDK. Today, we’re powering the store inside of Pepo where you can cash out for Amazon, Airbnb, Uber gift cards. We also added unstoppable domains, which is crypto domain site, today as well. We’re providing that as an SDK. The folks that Decrypt are able to basically, we power the cash out options for them, they don’t have to build that themselves either. Now, next steps, we want to enable crossover between the tokens. You could take your Pepo coins, and convert them to Decrypt coins, if you wanted to, or other partners we have. What we’re looking forward to, is more ways to create this interoperability and network effects across the system.
In terms of where we go with that over time, we want enable people to take more control over what’s in their wallets. Today, the wallet himself is completely self custody. We nor Decrypt, nor any of our other partners have any way of reaching into a user’s wallet and taking their tokens or expiring them. It’s you earn it, you own it. Now the next step is we want people who are maybe more crypto savvy to be able to say, okay, I’d to participate in DeFi through that, or maybe convert some of my tokens into crypto, or other things that might want to do with their tokens. We’re taking incremental step by step approach to that. The number one reason why people aren’t adopting Pepo faster is not that right now. It’s how do they get more value from the video format? or whatever it is. So we prioritize them based on user in user interest.
James: Yeah, I can add to that, it’s the holy grail of this space, that there’s just this seamless fluid transfer value, which can go everywhere and anywhere. We’re excited to see the interoperability options continue to evolve with OST, but also all these great technology companies in the space. I can second what Jason said, and that’s you’ve got to start somewhere. It’s almost Maslow’s user hierarchy of needs. It’s looking to provide utility here and now, and users completing the loop and getting value from these systems. You know, there’s things that we can do before looking at where these tokens can be sent, exchanged and used elsewhere.
Jason: If we just say to users and people lock up your tokens for a period of time and earn interest on them, so you can’t cash them out during the time.
Sebastien: Yeah, you could totally do that, I’m tipping out a lot of tokens, but a lot of them could be locked in DeFi
Jason: Users could do that, which we’d want to make sure that… look, we’re an app in the App Store. We have a higher God. Our name is Apple. we had to make sure we do such things in a compliant manner. Yet today, our wallet is self custody. We don’t want to move to us being the custodian. The user, we’d have to find a really slick UX for the user to understand what she’s doing, for her to decide, okay, I’m now DeFi’ing my tokens and getting interest on it. Then they’re “So how am I earning 8% interest from my keeping my tokens in Pepo.” That could be an interesting way to educate people on why people are willing to borrow DAI. But one step at a time.
Sebastien: That would be really cool. That’s a really interesting way to get people just regular people into DeFi and understanding the mechanics.
So with regards to the SDK, one of the things that has been on my mind. Recently, we recently did an episode with Itamar Lesuisse of Argent. They build a great wallet, and a lot of the technology that sits behind Argent, specifically with regards to the multi SIG wallet, etc. It’s probably quite similar to that of OST. Now for an app like theirs, they’re controlling the technology, but also have control over the entire User Interface. Now for something like OST, you guys are a technology provider. You’re providing technology at the base layer, but you’re not necessarily sitting in in design workshops with the client coaching them on, what are the user experience best practices around things.
Jason: Yeah actually we are.
Sebastien: or maybe you are. But if you want to scale this thing, for a company like Decrypt that’s building this user interfaces there’s a lot of really new and novel concepts in there, one of which is recovery. If you take something recovery, I don’t know if you have this at the moment. I presume you could have it where you would have maybe one of your Pepo friends can help you recover your wallet. How do we create good user experience? It goes beyond just the technology. There’s really we need to create UX standards around things like recovery, key storage, where your keys are stored how you recover them.
Jason: Clear a couple things to unpack here. This is really great question. The first is that we’re huge admirers, and fans, and close to the guys at Argent, a really great team. Argent took the path of being a standalone wallet, and our ethos at OST was to be ingredient technology. A lot of what’s makes OST technology possible has some commonalities with Argent. They wanted to be a wallet, we want to enable thousands of wallet products to be within their apps using our technology just a different approach to a similar problem solve. We said let’s go to folks who already have distribution, like Decrypt and others, rather than us trying to gain wallet downloads. Also the philosophy there is what we call wallet as a platform. That wallet is not an app wallet, it’s a number where tokens are held. That can be embedded into all sorts of different places. It’s a contract.
In terms of the SDK itself, and this is really important, we have created the OST wallet SDK in such a way that all of the core functionality of the wallet and the user experience around, adding multiple devices, initiating recovery, going through the recovery process, all of that is powered by the SDK in such a way where it’s available on iOS, and Android, and React Native, in such a way where the team at Decrypt, for that part of their application, they don’t need to adjust any of the UI at all. It’s several layers of the wallet functionality, they can just take this and just plop it right into their application. We’ve optimized that UX based on our user research and feedback, so that they don’t need to write any of that.
James: Yeah, I can add to that. Zooming out, when we started to see UX coming out of the dawn of the internet, there are all these weird elements that people haven’t seen before. this is a form and I need to enter my information into a form. Obviously, there’s been loads of research and best practices that have emerged out.
Anyway, so that all is to say that we’re seeing these new patterns, we’re seeing, a user’s being able to recover their keys. Over time, the more and more people work in this space, the more and more people use this technology, we see these best practices emerge. From our side, I think, implementing these patterns starts with, boring as it sounds, good documentation. That’s good examples of what to follow. Yeah, and in terms of these recovery patterns and the other patterns that are more novel to Web 3, being able to follow the practices that OST put out has been great.
Jason: Example. When we created the recovery module for the wallet SDK, we did this from two fronts. One, we started with user research, with what we call paper testing, we put different options in front of people. We saw where they succeeded and where they failed. These are mainstream users, we started with. Not with say, crypto savvy people. We found that a six digit PIN was the maximum that someone was able to remember, again and again and again. Obviously writing down 12 words would be more optimal, but most people don’t want to. You obviously can’t remember 12 words. But six digits was something that people remembered every single time. we then went to our security experts and said, okay, we need to find a way to enable a six digit wallet recovery from smart contract to be part of our wallet SDK. We started with the experience, then we reverse engineered back to the technology.
We figured out a way to make a six digit PIN recovery from smart contracts. We also tested, as you mentioned, social recovery and it failed miserably. It’s one of these concepts where a lot of us crypto nerds think would be great, you can ask 3 of your friends to help you recover from a smart contract. Your friends don’t want to help you do that. You don’t want it either. With most people, it’s not a viable solution. The fact that from a security standpoint, it would work, but doesn’t mean people are going to do it. We focus on things that people actually use.
Sebastien: Interesting. How do you overcome the challenges that are linked, specifically with regards to the Decrypt token? How do you overcome the challenges of sybil attacks? I don’t want to say it’s harder on Pepo, but you need to have a Twitter account, it’s on an app. It’s but with a web browser, it’s maybe easier to automate identity creations and getting people on?
James: To begin with, we’re launching on app. Security is obviously significantly easier on an app. It’s easy to exploit on the web, we’re looking to expand into the web later. But first and foremost, we’re releasing the Decrypt app where we’re introducing these tokens that are seasons. I think, when we’re looking from a token design point of view, when we’re looking at all these different actions and incentivizing these actions. You’ve got to flip the coin and be okay, what’s the malicious user going to actually do here to try and exploit this?
To start off with, confirming that users read an article. Are mechanic there to prevent someone building a clever bot that’s going to be reading thousands of articles a day and absolutely destroying our token. With that we put a sensible daily cap on the number of tokens that a reader can use. We also attach a sensible reading speed to our articles. Someone who’s a really quick reader, what does that look like in words per minute, and we have a timeout. That’s just an example of how we’re thinking about preventing abuse on that particular action. The same applies to sharing and being able to validate that. There’s simple things you can do to guard against these kinds of malicious actors.
Jason: Yeah, the best thing is putting stuff out there also, and just you’ll think that you come up with everything, and then just watch the users find the holes. That’s okay. These apps right now are not completely decentralized from the redemption standpoint. So, as I said, the user has a self custody wallet, it’s a smart contract wallet, they own their own keys we can’t take money from them, but we do play a role right now in the cash out. There’s always this safety net that well, if someone goes to cash out, and you saw that they were a malicious actor, we don’t have to honor the cash out, in that instance. Now, if they did something that was our mistake, that allowed them to accumulate lots of tokens, then we should let them keep it.
Sebastien: What’s the future? What’s the future of media, and tokens look like? This is a question that I’ve carried with me for over six years of doing a podcast. What do the new models look like, and where is the space gonna go? There’s been a lot of experimentation, even in the early days of Epicenter we were part of the LTB network and there were some early experimentations, there even before Ethereum, on Counterparty with the LTB token other platforms. What’s the future here, and where are we going to see the most innovation come from?
Jason: Yeah, look, my perspective on is that we’re at the very beginning days of injecting the Internet of money into apps and applications, websites and enabling all new sorts of business models that are going to be aided by the fact that anything that you can do, anywhere you can transfer a piece of data, or the API call, or any action the user can take online, whether it’s a five star review, a high five emoji, whatever it might be, it could have value attached to it, and that can have impact on consumer experiences, but also on business models. It can start to create new models of how individuals can monetize their data, their content, etc.
It’s gonna take longer at first, than people wish, to materialize. When it does, people are gonna be like “Whoa, Where’d that come from? It’s huge.” Where we’re at right now is we’re at least up to bat. Right? Six months ago was will this ever happen? At least now we’re in the game. And now that we’re in the game, we’re gonna start to see some things move pretty fast about DeFi. As an example, a year ago no one was talking about DeFi, and suddenly it’s everywhere. We’re at the beginnings of these kernels of Internet of value percolating across, and it’s gonna be one app in the next app, the next app and all of a sudden, someone will create the next Snapchat or Instagram or wherever it might be, that’ll be completely token powered. And whole new business models have been invented here.
James: It’s a very good question. I wish I knew the answer. I wish I knew the answer to that one Seb. Ultimately, all of these businesses, largely shaped by the business models that emerged with the internet, and media companies being completely upended. We’ve seen that with the rise of social media. I’m personally keeping my eye on this. I’m really excited to what Jason’s alluding to. If this elusive business model emerges from Web 3, people are aware that there’s certainly a different toolkit now, where we can start building a new business model. But what I come back to, is just the notion of these Web 3 tools being programmable trust, and that being able to design good incentives, between different groups and hopefully a system which is there’s more equanimity between the parties. I don’t know, but I’m excited to find out.
Sebastien: Well, I’m really looking forward to seeing where this where this goes. I’ll be following it very closely. It’s a topic that’s very near to me and where I’m really interested in seeing the progression and I mean with Epicenter, this could also be perhaps an area of experimentation.
Sebastien: Thanks, guys for being on the podcast.