In this interview, Girri Palaniyapan speaks with L Baker, the founder of RARA - a social curation protocol ahead of its launch on July 23rd 2022.
This interview has been lightly edited for clarity and conciseness.
For those who are new to the Rara protocol, how would you describe it?
Baker: RARA protocol is what we call a social curation protocol. And one thing novel about the protocol is that’s powered by NFT-backed reactions. Reactions are ERC 1155 tokens; they're one-time use tokens. And the sole purpose of those tokens is to react to and burn on other NFTs. It's basically a web 3 emojis; you use these web 3 emoji's to like, comment, and react to other NFTs. And when you do that, may cost a little money because this is crypto, its web 3. But by spending that money, you're essentially investing in the likelihood that NFT becomes popular. As other people react to that same NFT and comment on that same NFT the value of your curation tokens, which you get in return for spending reactions go up. And so the idea of the protocol generally is broadly decentralized curation of all NFTs without permission.
How does RARA differ from other existing curation protocols?
Baker: I would actually describe the existing “decentralized” curation protocols as Auction House protocols. Rarible has a version as does Zora. These all describe themselves as decentralized curation protocols. And curation definitely occurs with those protocols, but it's very limited. Specifically, as the owner, you have to say, "Hey, protocol here's my NFT, put it up for sale". And then it allows for third parties to curate that NFT with other NFTs and basically create a gallery. And if you end up helping sell it, selling their NFT, you get a sales commission. So it takes the owner's permission. And if it takes permission it takes to NFT for the sale, and it's incentivized by sales commission and the sale price basically high price stuff. And so the question is how do we curate NFTs that aren’t for sale, or NFTs that aren't may be high priced in a permissionless way. That’s how RaRa differentiates itself. RaRa is an open, permission-less, curation protocol for all NFTs.
Something fascinating about your protocol design is that the reactions themselves are NFTs. You could have hard-coded thumbs up, and heart emojis as reactions. Why did you all decide to actually use an NFT itself as a reaction?
Baker: Memes. In short, emojis, are the web 2 versions created by corporations. ASCII is how you get an emoji created. But an emoji looks look different on iOS than on Android. And the same emoji looks different on Twitter than on Facebook.
And so two things happen there. First, these emojis don't go cross-platform. Second, they look like whatever the corporation makes them look like.
Personally, I think the more novel stuff on the internet is user-generated content. That's what NFT's are. And so why should we restrict reactions to what we created as well? Because we use NFTs as reactions, through RARA we get a media graph. These reactions and the NFTs that are backed by those reactions relate to this other group of NFTs which are thematically linked.
I guess the reactions themselves are then permissionless in the sense that anyone can put them up. It's just way more expressive. Could you share how the process of setting up a new reaction NFT works?
Baker: So the way reactions work is that NFT owners have to register the NFT with the protocol. Registration is simply proof of ownership. There's no custody or token wrap. We were under the belief, and I think it's correct, that NFT owners want their NFTs to be pure; you don’t want to wrap your token. Also, there's a security risk associated with wrapping, so why do that.
And so what it requires is for NFT owners to register with the protocol. And that's the step we just completed, we just completed what we call the Genesis reaction registry. For about a month and a half, we focused solely on people registering reactions.
And the community was also involved in the setting up the Gensis Reaction registry right?
Baker: Yes, the community was also involved in the process with Discord voting; they basically selected the reactions, they wanted to be for launch. And those are going to be the ones approved in our app. There's a whole bunch of stuff that's registered with the protocol and some other developers could use and do something with it. But the ones that are in our app, which RARA social company controls, were essentially approved by the community.
Tell us more about how creators of NFTs can benefit when their NFTs are used as a reaction.
Baker: What’s cool about when the owner registers an NFT protocol, is that if there's on-chain royalty set by the creator, we pay them their share. We are probably the only native media monetization in crypto. That's literally you're using the media to react to something you're getting paid for use, like pay per listen. And so owners and creators get paid when people use their NFT. And in a very similar way, when NFT receives a reaction, the other creator also gets paid a little bit of money.
Suppose I am a curator and I think a project is going to pop. Walk us through an example of what the curator needs to do and what they stand to gain?
Baker: All you need to do is start a curation or react to that NFT. Every reaction cost one USDC. All these reactions are recorded on the Polygon blockchain. So gas is cheap. And it's generally more accessible to the broader ecosystem. And the way it works is the first 5 cents of that dollar goes to pay the NFT owner and the creator of the reaction. The next 5 cents goes to the NFT owners and creators receiving the reactions. And so we got 90 cents left; this amount goes towards acquiring curation tokens for that specific NFT on a bonding curve.
As more people react to that same in the NFT, the price of those curation tokens increases. That bonding curve is locking up USDC. And whenever you want to take a profit, you sell and burn your curation token back to the money curve, withdrawn USDC.
I don't think a lot of people would understand the significance of a bonding curve and the fact that it has instant liquidity. Expand on why you chose this?
A bonding curve is just a contract. It is both the buyer and seller of tokens. You don't have to go buy it from a third party, you just buy it from the contract. And the reason you do that is that the contract, all the money used to buy curation tokens is locked. All the 90 cents leftover in this scenario is locked in the contracts waiting for the next buyer or seller. We chose a bonding curve because if it weren't a bonding curve, it would require matching sellers and buyers. And if you are curating an obscure NFT, liquidity is extremely low.
The bonding curve provides liquidity where you can always buy and you can always sell; there's always a market, you can't always sell your NFT. But you can always sell a curation token. And so the way the bonding curve work now, it'll take around 100,000 and USDC before flat lines.
Specifically, you have opted for a sigmoid curve in the bonding curve. Walk us through the logic of that?
Baker: The sigmoid bonding curve is the natural progression of the adoption of basically all technologies. It basically starts slow and doesn't really increase much. And then all of sudden there's an inflection point and that mass adoption. And then it slows again, once it's been adopted. Because we chose 100,000 USDC as the maximum amount what that means is that an NFT can go viral for about 100,000 likes before it starts to slow down. And the way a bonding curve works is the curve is a very simple smooth line. But human behavior is people take profits occasionally. And so in the price chart, a curation token looks like the price chart of any other token over time. The bonding curve just defines the price based on what people were doing at that time And as a result, NFT can go viral multiple times.
Could you give an example to better illustrate this?
Baker: I'll give you an example of the Hal Finney running Bitcoin tweet. I remember seeing this years ago maybe with a couple 100 likes, and he was definitely sub-1000 followers. I followed him and I liked it. I probably even re-tweeted that tweet. And that tweet, throughout the past few years, you know, get keeps getting brought back up. It's historically significant. And each time that tweet goes viral one more time. And so in a very similar way the protocol will definitely reward high-quality NFTs that are historically significant. With multiple rounds of virality, there will be multiple opportunities to react, comment, and engage with this NFT and make money for when it goes popular.
So essentially, this doesn't just incentivize curation, but it also gives people sort of exposure to the asset in a way
Baker: Yeah, it's a more accessible exposure. What's interesting about the RARA protocol is that it’s more accessible as it only costs one USDC to really invest in any NFT. And most NFTs are 1/1s and RARA makes it easy to get exposure to them without buying the asset. Also, the protocol also pays the creator, the owner for the exposure. The Creator definitely made money from the sale of the NFT and probably makes money when that NFT resells. RaRa just adds cash flow on top of it. The NFT is a capital asset, RaRa is cash flow for capital assets.
That's super neat, because now the creator doesn’t have to wait for a sale to happen. They are going to be able to get cashflow regardless. You mentioned 1/1 NFTs will likely be curated. What kinds of NFTs are going to be the best fit to be curated on RARA?
Baker: I don't know the answer to this question. My guess is 1/1s could perform a little bit better. That said NFTs are inherently social. And so for a variety of social reasons, they're really unquantifiable. I think there'll be other non 1/1 NFTs that perform very well as well.
Tell us more about the launch on July 23rd? How can those interested to start curating be a part of this?
Baker: So we're launching on Saturday, July 23, at 11:30, Eastern. We call it the summer of Ra. The summer of Ra, is a private beta. It gives beta users kind of early access to essentially curate the OG NFTs. And there's gonna to be a period in RARA protocol where it will be a race to curate the iconic NFTs of the world. Because curation can only be started once. The initial curation choices will matter for a long time. And so we wanted to reward users - anybody who helped us get here with those NFTs.
And so there are two types of NFTs that will give you access to the app. There is a fan NFT. The fan NFT is basically a membership pack pass that allows for you to react and comment to these NFT's on-chain, It was air-dropped to a lot of people. There are also a number of giveaways that are happening this week that will have to be happening for a while to get those away.
The curator NFT on another hand is essentially the highest permission NFT in the app. The curator NFT allows you to start a curation. On Saturday, we're launching this app. And, the idea of this, is we want the curation and the vibe of the app to really represent our community. And so the people who've been around for a while will be the ones that are essentially the taste leaders; they're going to set the standard for what RARA represents, what's the vibe, what gets curated.
Suppose, someone wants to react to an NFT, is it always one USDC? I imagine that it will be more expensive if I’m the 100th person reacting.
Baker: Reactions are always one USDC. It’s the value of the curation tokens that changes. Also, each NFT has its own curation token bonding curve.
One thing interesting about your project, it seems that you have sort of opened up the protocol for developers to integrate it from the onset. How can developers start using it? Is it completely permissionless?
Baker: You can check out the docs page; the protocol is open-source and was audited by QuantStamp. There are two ways developers are going to integrate with it. One way is to interact with the data that happens from curation. The other way is to have curation in their app right.
What was the spark for this idea? What was your journey?
So I went to law school to get into investment banking. It just sounded cool. And there were a lot of cool movies about investment banks. My dad had an investment bank. Did that four, five years, realized I was renting my time, and was very excited about this idea of tech and startups, and joined the founding team of SynapseFi.
SyanpseFi was the first banking API in the US. And our first customers in 2014 and 2015 were Bitcoin startups and crypto exchanges. And we'd like to joke that PayPal started in porn and synapse in crypto. And our first customers were on the edges of FinTech really. We were on the backend seeing the mess that happens at the banking level when people were trying to get into crypto. And the reality is, or what I realized is banking APIs are the future of banking, but we are living in the post-banking world
And that prompted you to move into crypto?
Baker: Yes, you can't put crypto back in the box. And so I left in early 2018 to go full-time on a crypto company called TokenSoft. We were building financial assets on blockchains while also helping with token sales and distributions on Tezos.
In early 2020, I was ready to do my own thing. And specifically, I thought we had spent, about 10 years getting ready for normal users. We started to get the tech ready and wallets ready and tooling ready. And it was time. And there just happened to be this kind of weird moment; COVID that threw everyone further onto the internet. You know, we were already living on our phones and living each on the internet. But there's no doubt that you know, remote work is here to stay.
And there was definitely a feeling that social media users were being extracted for everything and getting nothing out of it. And so what was happening in early 2020 was the rise of creator payment tooling, Substack, and all these different things.
Creator Monetization, right?
Baker: Yeah, Creator Monetization. And I immediately realized like, this is not how it was going to work. And so I started working on this idea of social money. Media on the front, money on the back.. Memes on the front, crypto on the back. Okay. Two and a half years later, I figured out how to turn it into a protocol. That's what RARA is. Reactions are media on the front, USDC money on the backend. And specifically, it pays people for engagement.