This episode unpacks Zora's journey from pioneering NFTs to launching content-specific coins, revealing a vision where open crypto markets discover the fundamental value of all online media, shifting the paradigm for creators and attention economies.
Zora's Origins and Early Vision
- Jacob Horne, Founder and CEO of Zora, recounts the company's five-year journey, which began as a side project inspired by Uniswap's Unisocks experiment in 2019. Unisocks tokenized 500 pairs of physical socks, launching them into a Uniswap pool for trading, demonstrating the power of applying open financial markets to non-financial items. This sparked Jacob's realization that crypto protocols like Uniswap offered powerful, accessible tools for anyone to create markets, hinting at a future where cultural items could be valued and traded openly.
- Unisocks: An early DeFi experiment by the Uniswap team where physical socks were tokenized (as $SOCKS tokens) and made tradable via a liquidity pool, demonstrating the potential for tokenizing real-world items and creating markets around them.
- Jacob highlights the "light bulb moment" of realizing Uniswap provided "the entire superpowers of coinbase in like one function call," accessible to anyone.
From Physical Goods to Digital Content (St. Fame & The Pivot)
- Zora's initial iteration, stemming from a project called St. Fame, focused on tokenizing physical goods like streetwear, aiming to build community-owned brands using DAOs (Decentralized Autonomous Organizations – member-owned communities without centralized leadership). However, the team observed more interest in the tokenization aspect than the DAO governance and faced complexities linking on-chain tokens to off-chain physical items. This led Zora to pivot towards the burgeoning NFT space in 2020, focusing on helping creators tokenize digital content like art and media.
- DAO (Decentralized Autonomous Organization): An organization represented by rules encoded as a computer program that is transparent, controlled by the organization members, and not influenced by a central government.
- Jacob notes the initial focus was on the DAO side, but "everyone was really obsessed with the tokenizing goods piece," guiding their shift towards digital assets.
Iterating on NFT Market Models
- Over the past five years, Zora consistently explored the most effective ways to tokenize content, iterating through different market models and user experiences. They moved from traditional one-of-one NFT auctions, common on platforms like Super Rare, towards "Open Editions." This model allowed anyone to mint an NFT for a limited time (e.g., 24 hours) at a low price (e.g., $1), significantly expanding collector participation beyond high-net-worth individuals.
- Open Edition: An NFT minting format where an unlimited number of NFTs can be created within a specific time window, often at a fixed, accessible price, contrasting with limited-supply collections.
- This shift "100x the size of the number of people who were able to and wanted to collect," tapping into latent demand and fostering larger holder bases and network effects.
The Unbundling and Merging of NFT Ideas
- Michael, the host, prompts a discussion on the different facets bundled within the 2021-2022 NFT boom: tokenizing real-world assets, digital art/collectibles, and "altcoins with pictures" focused on trading. Jacob argues these weren't necessarily diverging but were different attempts at the same core idea: using crypto markets to discover the fundamental value of online media. He views the initial NFT phase as a "great bridge," using skeuomorphism (design cues from familiar objects) by resembling the traditional art market (one-of-one, auctions) to onboard users.
- The debate around royalties (enforced at the marketplace level, like OpenSea vs. Blur) highlighted the tension between creator compensation and market liquidity/efficiency sought by traders.
The Leap to Coins: Solving NFT Liquidity Issues
- Zora's latest evolution moves beyond NFTs to fungible "coins" representing content, launched about a month prior to the recording. Jacob explains this shift addresses the inherent inefficiency and low liquidity of secondary NFT markets, where trades require matching buyers and sellers and often involve negotiation. By representing content as coins traded in liquidity pools (like Uniswap), anyone can buy or sell any amount at any time, creating a more fluid, efficient market for price discovery.
- Jacob states the realization driving this was that for many collections, the individual NFTs were "fungible actually in practice," as buyers often just wanted any item from the collection (evidenced by floor offers).
- Strategic Insight: This shift from illiquid, unique NFTs to fungible tokens for content represents a major potential change in how digital media is valued and traded, impacting investment theses focused on NFT marketplaces versus tokenized content platforms.
A New Model for Creator Royalties via LP Fees
- The conversation revisits the contentious NFT royalty debate. Jacob explains that the previous model failed because royalties were enforced at the application (marketplace) layer, not the protocol layer, allowing platforms like Blur to bypass them to offer lower fees and attract traders. The new coin model inherently incorporates a form of value capture for creators through Liquidity Provider (LP) fees on platforms like Uniswap. When a creator launches a coin, they typically provide the initial liquidity (often single-sided), earning LP fees from the trading activity generated in that pool.
- LP (Liquidity Provider) Fee: A small fee paid by traders on decentralized exchanges (like Uniswap) that goes to users who provide the assets (liquidity) enabling those trades.
- Jacob notes this is more robust: "that basically exists by nature of the Uniswap protocol... the only way you would be able to kind of undercut that as a protocol is if you remove that LP fee but then there'd be no incentive to provide liquidity."
- Actionable Insight: This protocol-level value capture mechanism is more resilient than marketplace-enforced royalties. Investors should analyze how effectively this LP fee model sustains creators compared to older royalty systems, especially as liquidity deepens and LP shares get diluted.
Beyond Pictures: Tokenizing All Online Content & Attention Markets
- Jacob broadens the scope beyond just images, suggesting any online content (social posts, videos) has potential value discoverable through crypto markets. He frames the current memecoin phenomenon as "attention markets," where participants speculate on the future virality and reach of a piece of content or meme. This allows financial expression of opinions on attention, previously difficult outside of advertising markets.
- Attention Market: A market where the value of an asset (like a content coin) is primarily driven by speculation on the amount of future attention (views, shares, discussion) it will receive.
- "People are speculating on the current and future virality of a thing... they kind of like resemble attention markets in a way," Jacob observes.
Addressing Skepticism: Value Beyond Speculation
- Acknowledging the "degenerate gambling" critique, Jacob concedes current valuations might be inflated but argues there's underlying non-speculative demand from collectors driven by patronage, status, and genuine support for creators. He posits that while current valuations may be excessive, online content does have non-zero value (proven by social media ad revenues), and crypto markets are a new mechanism for discovering it. The key is finding the right market structures.
- Strategic Consideration: While speculative fervor dominates now, the long-term viability depends on cultivating genuine collector demand and sustainable value capture, moving beyond pure attention trading. Researchers can study the ratio of speculative vs. collector activity.
Creator Coins vs. Content Coins: Tokenizing Output First
- The discussion touches on different coin types: creator coins (tied to an individual like Trump), short-term meme coins (like Harambe), and Zora's focus: content coins (tied to specific outputs like a post or video). Jacob expresses skepticism about creator coins currently, arguing it's difficult to programmatically link a creator's diverse off-chain value (merch, events) back to their coin. He proposes a more foundational approach: "I actually think we need to effectively tokenize all of his videos first before we can then bundle and create a create a coin on top of those."
- Key Insight: Tokenizing discrete pieces of content first creates on-chain, legible value streams (trading fees, LP fees, coin ownership) that could later be bundled into more robust creator-level assets, solving the value attribution problem. This bottom-up approach contrasts with top-down creator token launches.
Zora's Value Proposition & Comparison to Ad Exchanges
- For creators, especially the "long tail" (10k-100k followers) struggling to monetize on traditional platforms, Zora offers a potentially simpler, more direct monetization path. Jacob claims creators can often earn more on Zora quickly than through years on platforms reliant on ads or subscriptions. He contrasts Zora's open market model with traditional ad exchanges (like Google's or Meta's), where attention is monetized via closed auctions selling ad space in user feeds. Crypto enables an open system where value accrues more directly around the content itself.
- Jacob quotes Stewart Brand: "Information wants to be free but it's also expensive," arguing crypto resolves this tension by allowing open access while enabling market-based value capture.
The Zora App Experience Today
- The Zora mobile app is designed to feel familiar, resembling Instagram but with crypto-native elements. Instead of likes, posts display market cap and trading volume. Users can easily see holders and trade the content coins. Critically, the onboarding is simplified: users can sign up with email and post content, tokenizing it automatically without needing prior crypto knowledge or funds for gas fees. The web version blends Instagram and YouTube aesthetics, prioritizing the content itself over hyper-financialized charts.
- Focus: Zora aims to onboard first-time creators easily, expanding the type and supply of tokenized content, believing this will ultimately attract more traders and collectors.
Market Structure: Challenges and Evolution (Uniswap & Beyond)
- Zora currently uses Uniswap V3 for its coin markets, leveraging its existing infrastructure, distribution, and liquidity. They chose Uniswap after experimenting with their own bonding curve protocol (Wowow), finding Uniswap offered better integration and composability out-of-the-box. Key features include single-sided liquidity provisioning (creators don't need upfront capital) and leveraging existing tooling like Dex Screener.
- Bonding Curve: An automated market maker mechanism where the price of a token increases algorithmically as more tokens are bought (minted) and decreases as they are sold (burned). Often used for initial token distributions.
- Challenge: A current limitation is the minimum starting market cap (around $1,800 on Zora's setup) needed to prevent immediate buyouts of the entire supply for negligible cost. Zora aims to lower this towards zero.
Future Market Mechanisms & The Role of AI/ML
- Lowering starting market caps requires new mechanism design. Jacob mentions collaborating with teams like Wetstone (creators of the Doppler protocol) on solutions potentially involving reverse Dutch auctions or multi-pool AMMs with granular curves for different price ranges. Uniswap V4's "hooks" (custom logic added to pools) could enable features like automated fee conversion into a single currency (e.g., USDC) for creators or Zora.
- Doppler: A protocol designed for efficient price discovery at the very low end of token market caps, potentially using novel auction or AMM mechanisms.
- Uniswap V4 Hooks: Allow developers to add custom logic that executes at different points in a liquidity pool's lifecycle (e.g., before/after swaps, adding/removing liquidity), enabling more complex features without needing a whole new AMM.
- AI/ML Relevance: Jacob envisions a future where market makers resemble today's ML engineers writing social media feed algorithms. These actors would analyze new content metadata, predict virality using models, and trade based on those predictions, effectively becoming algorithmic curators and price discoverers in this open content market. This suggests a future convergence of DeFi trading and AI-driven content analysis.
Conclusion: A New Era for Content Valuation
- Zora's evolution from NFTs to content coins signals a fundamental shift towards using open crypto markets to value all forms of digital media and attention. For investors and researchers, this necessitates tracking the development of new market structures (like Doppler, V4 hooks), creator monetization models (LP fees vs. royalties), and the potential rise of AI-driven trading strategies focused on predicting content virality.
