The Index Podcast
Aug. 11, 2023

Web3, Token Economics, and the Future of dApps with Fantom's Samuel Harcourt

Web3, Token Economics, and the Future of dApps with Fantom's Samuel Harcourt
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Host - Alex Kehaya

Producer - Shawn Nova

 

 

Transcript

Intro:

Welcome to the Index Podcast hosted by Alex Kahaya.

Alex Kehaya:

Plug in as we explore new frontiers with Web 3 and the decentralized future, hey everyone and welcome to the Index brought to you by the Graph, where we talk with the entrepreneurs building the next wave of the internet. I'm your host, Alex Kahaya. In today's episode, I'm excited to welcome Samuel Harcourt, director of Business Development at the Fantom Foundation. Phantom is a decentralized, permissionless, open source smart contract platform for decentralized applications. It is one of the leading blockchain networks created to offer an alternative to Ethereum, and I'm super interested to learn more about Phantom. Thanks so much for being here, sam. Let me know your background, like how you got into crypto, and then I would love to learn more about your role at Phantom.

Samuel Harcourt:

So I guess my experience is relatively boring to everything that's happening at Fantom. But just to keep it brief, coming from the Australian military, I went to work with one of Australia's first digital asset desks, called DCH. That was right in the middle of the bear market in 2018, so it was quite a ruthless time to join, but I really loved it. And then I worked down the road, essentially opening up my own digital asset desk where I hoped that crypto startups at that time raised some capital for Bitcoin mining companies, and then from there I joined Phantom.

Alex Kehaya:

You were in the Australian military first, though that's interesting. What were you doing there?

Samuel Harcourt:

I was a raffleman. It was an interesting time. I'm glad to be doing a different thing now. But yeah, it's a good experience and quite valuable to say.

Alex Kehaya:

So you were at this trading desk. What did you call it?

Samuel Harcourt:

Digital asset desks, just hoping that a lot of the crypto clients that were coming in. They were raising capital for pretty crazy things back then and I was just saying like this is legit or this doesn't seem legit. It was quite an interesting time.

Alex Kehaya:

It's interesting that you were doing that during that bear market. I got into this space in 2016, and I was, like, I would say, the first half of the upswing and I went all the way up with the bull market and then all the way down the other side. I was at every single conference in this space back then. I was traveling two, three days a week and the conferences were nuts. They were just packed with just so much ridiculousness. The CEO of the company I was working with, skyname7, who was one of the co-founders at the market. He asked me to audit the top 50 projects by Marketcap on CoinMarketCap. I had not really been in this space before, so I went through every single one of them and I went really deep, went through all their websites, went through all their founders' backgrounds, read all the white papers and everything and I came away from being like holy shit. Two of these are good. The rest of them are super sketchy. So many of them were sketchy, but it did teach me a lot. I can relate. It was kind of a similar exercise to what you were doing in 2018. I'm wondering what the deal flow looked like in 2018. There were some crazy things getting built Crazy for me back then was this is some random ICO that I have no idea how it has a billion dollar market cap, but what were you seeing in 2018? Anything interesting pop up that you looked at.

Samuel Harcourt:

Nothing that I would mention today because it all was a lot of crazy ideas. Just trying to get involved with the space One, I did join. I missed that fun part that you were talking about and I always just hear stories about that massive run up. I joined on the other side of that, so it was all depressing People just going home early because they're just sick of seeing double digit reds every day.

Alex Kehaya:

Yeah, dude, I remember.

Samuel Harcourt:

So a lot of ideas in that time were quite crazy and I think, being a fresh eyes into the space then I was able to say, no, this is quite a crazy idea. I don't think you guys should go down this path. There were some interesting ones but none of them kind of lasted up until today. I guess more into what I do at Phantom. It's a BD role. It's covered in three different verticals. The first one would be inbound, so dealing with applications who want to come to Fantom. They want to learn about deploying on the network. They want access, maybe some marketing together. They want access to a watchdog program. They want some sort of foundation guidance. Sometimes when deploying Not everyone does, but we are here for that supportive growth of the network. And then on. The second one would be outbound, so dealing with some pitches, governments, companies across the world, finding synergies where we can. I think the space is still early and there's a lot to build and to understand before we can find massive synergies, but nevertheless we do have great conversations with different verticals, I guess you'd say. And then the last one would be internal operations. So a good example of this would be Rainier hackathon that we've just launched with AWS and Covalent. That's still got about 10 days to go, so if anyone's keen, they want to join that. Check out our DevPost website. You can still get involved over 200K in prizes. There's lots of prizes to get around there. That's essentially what I'm up to, as well as some other little things that we'll talk about today. Which I really like to highlight is our own program, our vaults and a few other things that we're working on at the foundation.

Alex Kehaya:

How did you get from where you were working when you entered crypto to phantom? How did you meet the team? What was that like? What inspired you to want to join?

Samuel Harcourt:

There's a street called Pidstreet. The offices were on the same street and we actually had a mutual connection back in the day called Stephen Bollotti to Michael Kohn today. So just friends of friends, and they kind of needed to be a good D-Guy back there. I was willing to jump on board.

Alex Kehaya:

I don't know a ton about phantom and its founders. Can you just walk me through the Genesis story of the company and just from your knowledge, and just give us a little history lesson on why phantom exists and who's behind it?

Samuel Harcourt:

The Phantom's history really started just after I joined. I know that sounds a bit ego-tistical, but from when the mainnet launched in 2019, andre, michael Kwan those are the true guys who have formed what we're using today and built the technology that we have today. And then from there, it's been almost four years of operation, 99.9% uptime. And, yeah, there's actually a big scoop about the foundation I can provide. Everyone is very straightforward, everyone's very direct, which I really love, so everyone's just really focused on building out the network technology and, I guess, the mission of the foundation. I can give you something that's quite cliche, like oh, we want to onboard a billion people or we want to dominate the world with blockchain technology. I can give you something a little bit more specific. One side would be it's very tech-focused. So the work that the R&D side is doing with Phantom Virtual Machine, it's just brilliant. If you want to watch one of Michael Kong or Andre's speeches about that, they can tell you way more insights and give you a much better, I guess, analysis of what's been built. But a big takeaway there is about 200 to 300 million transactions will be able to be executed on chain per day. That's what the data's been telling us, that's what it's forecasted, and that's pretty incredible to me, because if you add up every L1, l2, sidechain subnet and put all those transactions together. It won't mean that threshold. So it's quite an amazing milestone to hit and I'm super excited to see that roll out later this year. And then, on the other side of everything, it's what I come to plan with a bit more it's on the demand side. So there's so much supply side to that block space. We need to fill that with demand. That's my mission. And really focusing on gas-paid-to-the-network transactions daily. Back in 2021, in the DeFi summer, I think TVL was such a big metric. Everyone just you know, probably said about TVL right, and we hit a peak TVL of about $14 billion. It doesn't increase the speed of the network, it doesn't increase security, it doesn't increase validated rewards. It's great for DeFi, but that's just one component of what can be built on the blockchain. So that's I guess the other side of what we're focused on is those transactions and gas-paid-to-the-network.

Alex Kehaya:

Interesting. Yeah, that makes a ton of sense to me. I mean, I spent a long time thinking about this. It's like how do you bootstrap a network and create this demand? It's a marketplace, right. You have validators who are running the chain and providing the security and they get paid for that service. Who's paying for it? Right? It's a very interesting decentralized business model to try to get off the ground, and it's still early days for pretty much everybody. Still like even Ethereum, which has tons of transaction volume, or Solana right, it's still really early.

Samuel Harcourt:

Just on transactions it is transactions with gas-paid, but it's not validators talking to each other. It's a user coming to the network paying to do some sort of transaction and then not going through and going to validators.

Alex Kehaya:

How do you think about driving that demand? And when you have a partner that you're trying to attract to build on the chain, what are you telling them to try to convince them to use your stack versus somebody else's?

Samuel Harcourt:

There's a lot of things we can talk about. That, I guess, set us apart from other O1s out there and there's a lot of O1s out there L2s. It's becoming quite a competitive space, which is good. We can talk about phantom speed. You can get a sub-second time to finality, and when I say finality I mean true finality. So we don't have any reorgs on chain or longest chain rule, which is cool. We've had a great uptime. We have, I guess, all these scalability side that's going to come with Fender Virtual Machine, with the 200 or 300 million transactions per day. But some unique factors that I think do draw in people to Fender that we've released recently, which was the vault. So the vault is quite a unique idea. It's essentially a never-ending grant program. It's not funded by the foundation, it's funded by 10% of all the gas paid to the network and that goes to a contract address and anybody can apply for those funds. That just have to make a governance proposal. Now we've had a little bit of trouble with voter app, I guess, and people making proposals and having to pitch it to all the validators is quite a hard thing to do. So we are looking to work with Gitcoin at the moment and just do a quarterly distribution round of the funds, and it's quite a significant amount. I mean, it's only been up for a few months and it's already over 500,000 fans, in which is 100,000 and something dollars. It's quite cool to see that idea. That's even if the foundation would go away today, but there's a grant program that's going to keep supporting development of the community through Gitcoin, which is a really cool idea. And then the other side of bringing demand would be our earn program. So before I get into the earn program, we can look back to the early days of the internet and Bill Gates. Although he's a bit of a controversial character now. He wrote a pretty good essay called Content is King, and in the essay he wrote for the internet to thrive, content creators need to get paid for their work, and that's the exact situation that I see today in blockchain is that for blockchain to survive, dabs need to get paid for their work, and a lot of them just don't have sustainable business models. It's either you raise from VCs, then hope you can build something. It's crazy fees that you have to charge your users. It's just really hard for them to find a balance there. And then we looked at what applications are doing and applications are bringing the demand to the block space. For us it's about splitting that demand that they bring with them. So we've done something called the OEM program, also known as gas monetization, where depths can get 15% back of all the gas that's been spent on their contracts. And you're probably like Sam you've just been talking about phantom, virtual machine, and transactions on phantom are quite low cost. You know it's about a cent per transaction. So what's 15% of that is a fair point. But we had some really positive results so far in our beta program with Stargate. So Stargate in their first two weeks and about 6000 phantom annualized, that's 150,000 phantom and that's from one contract. So we've been able to give them a whole. You know they still haven't claimed, but it just shows you the power of earn because they didn't have that revenue before and now they do by us just creating this own program and we're hoping that that, along with the I think about 1670 and other participants, and at the moment we're kind of incentivizing to really think about how the network should grow and align both the validators and the depths together to focus on the one thing that really matters, which is transactions on chain.

Alex Kehaya:

So I really think that that's a fantastic idea and I've heard people talk about something similar, but I haven't actually heard of someone actually like I didn't know that you guys were doing that actually testing it out. I mean, look, there are not like very many applications in our space like Web three that have product market fit. Yet creating decentralized business models around that is hard, it's unknown, it's totally new. I think charging for the execution of the smart contracts is pretty smart, especially when it's aligned with the fee structure on chain. The balance you have to strike is fast and cheap, like scalable infrastructure. If application developers are having to charge on top of the fees that the chain charges, then now you're kind of degrading that value prop, which for, I think, for us to see mainstream scalable applications, you got to keep that alignment, otherwise you just you kind of break some of the value propositions. The product market fit issue is something I think we're all striving towards solving and I think part of it comes from just making sure that the network has all the tooling it needs to enable these developers to build applications quickly not just the smart contracts, but like everything above that that then creates the user experiences that consumers are in. Enterprises are like expecting a need. I've spent a lot of time trying to solve that problem, the last like I don't know two years. I think we've come up with some interesting solutions there, but yeah, it's a tough nut to crack.

Samuel Harcourt:

Yeah, there's a lot of ideas that are being placed now and I think we're going to see in like three to four years which one's really pale. So I believe in the IRM program. I think it's a great idea because, like you mentioned, users are getting hit with multiple layers of fees. They're getting fees when they're doing the transaction. They're getting some sort of fee when interacting with the application generally. So it is just better to have it one fee at the transaction layer. In my opinion, if you devote that too much and applications get to the point where you know there's barely any gas being spent, then the validators all going to have nothing to run on maybe some sort of inflationary token idea, but you need something to sustain validators and the hardware costs I mean for fans. Another cool component of the FEM I can highlight a little bit would be that essentially, they've managed to reduce the storage requirements by about 95%, and I run a validator and the storage is about 50% of my costs. So being able to bring that down like by 50% is a massive, important part of making blockchain accessible and making sure it's a sustainable network. And then the other side is obviously, you know, the cost of the incentive to run a validator, and that's what gas is all about. Right, it's incentivizing the security of the network.

Alex Kehaya:

What kind of hardware do you need to run a validator on Fantom?

Samuel Harcourt:

I use AWS. I use a 2x large. I'm not exactly sure right now.

Alex Kehaya:

Double check We'll look it up and we'll put some notes in the show notes if anybody's curious for how to run a validator. On Phantom, I mentioned before the show I'm becoming a hard-bird nerd. I'm just very interested in the different infrastructure requirements for different chains and how you think about decentralization and how many nodes you have on the network. How are they getting hardware? How expensive is it? These high throughput chains? That's a big challenge. The more scalable you become, typically the more hardware you require to run a node, which means the operations get more expensive. For people listening, if it sounds like we're talking about a validator as a small business, that's exactly right. They are small businesses. They're usually one or two people running a bunch of nodes in different networks that they need to make money on. It's just like any other investment. They put money into it. They want to get some kind of profit back out In a volatile market, in a new emerging market, that can be tough. There's all these token economic incentives and different ideas that people are experimenting with to make that work.

Samuel Harcourt:

Yeah, we have about 60 something validators at the moment. We've just reduced the self-staking requirement from 500,000 to 50,000 Fantom, obviously making that a lot more accessible to everyone. It's interesting to see different networks on how they're exploring that. Fantom is becoming, I'd say, more decentralized every day. Every time I'm trying to get some sort of governance proposal passed, I'm running around two validators all across the world trying to say, hey, please vote for this or encourage them to vote, just to push things past. That's a cool aspect. I'm seeing in real time of how decentralized we're getting. It's quite cool to see that in first person.

Alex Kehaya:

You see on Twitter all this heated debate about how decentralized one thing is, one chain is versus another, and the merits and how they calculate it. The way I look at it is dude. We're all trying to figure it out, everybody's trying to figure it out and striving for that path. I always like to just hear what people's ideas are, even if they're not like. I work in the Solana ecosystem. I think there's a lot people can learn from how we built the network and how decentralized it is today. I think we can learn from other people too. I think there's always this fear that people are just going to nitpick, they're going to arm share quarterback about how decentralized you are or whatever, and the things you're choosing to do. Typically, those people are the loud voices out there are not the ones that are actually boots on the ground in the trenches trying to solve these problems. I find that a lot. They really have not actually tried to solve the problem in a meaningful way. It's more than just technology. There's business development involved, there's hustle, there's people. Really, the social consensus is the thing that drives a lot of these networks. It's the human beings that are actually running the validators. Humans are tough. They're tough to work with Aaron Ross.

Samuel Harcourt:

I love people like myself. They sell the validator. They haven't seen it for a while. You just get updates saying everything's running fine. You're not looking at governance proposals. You're not looking at things to interact with the network. A lot of the time, I can put myself in a lot of people's shoes. They have their jobs. They run a validator on the side and not really focused on the work related to the use that come up to vote. Like you said, everyone's a person running a validator. That's a good point. I'd also say it's not just the amount of validators on a network. That doesn't just mean decentralization on proof of stake. It's to make on how much is staked at where. I mean how distributed is that stake. There's lots of angles to tackle that.

Alex Kehaya:

Chris, yeah, it's stake. It's also depending on the hardware requirements. If you're able to validate a chain on a laptop, then that can get really decentralized really fast because it's super inexpensive. Inexpensive and a lot of people have laptops. Buddy of mine, al Morissi, runs Koi Network. I don't know if you've heard of Koi, but really cool decentralized compute network. Actually really interesting token. You should take a look at the token economics. They're really interesting how they're doing it. You can just run a Koi node on your laptop. That's super easy If you have high-spec hardware for a high-throughput chain like an L1, you need to think about data centers and bandwidth. Most of these people are not running these nodes in their house because the requirements are too high. Then you've got to think about how many data centers are there. Are all these nodes sitting in one data center somewhere? If there's an outage in that data center, then the chain goes down. I think a data center in a year or two ago that just burned to the ground. If you had all your nodes there, you're pretty screwed. It's data center location. Then you have ASNs. Asns are for people who don't know it's the actual pipe that connects you to the Internet. You get three data centers in Houston that are all in the same ASN. If somebody can fat-finger a configuration file and shut down the entire connection to that pipe, then all the nodes in that place go down. It's complex. All those factors play into how stable and secure the network is, how censorship resistant it is. Then you have the economics on top of that. I don't know. I find it fascinating. I find it really fascinating.

Samuel Harcourt:

That doesn't even include the political sphere. The country is becoming anti-appropriate of this. There's layers upon layers there. That's why it's so important to get it right and to be decentralized enough that one or two of these I guess attack vectors don't take you out or wipe you out or take the network offline.

Alex Kehaya:

I feel like we went down this like rabbit hole on decentralization. But I want to come back to the use cases that you're interested in seeing. You know, because you want to try demand and it's like right now I feel like it's still kind of the Wild West, like anybody's game. What's going to get product market fit? What use cases are you interested in building on top of Phantom in any L1? Really, frankly, that you think could actually achieve the goals that you want to be like high usage, you know application that gets product market fit. What's your prediction there?

Samuel Harcourt:

It's hard to make a singular prediction. I mean, I think all verticals will serve some sort of you know, mass transaction, important demand on the blockchain space. But you know, I don't think we can pick what's going to be the winner, what's going to be the exact model that's going to work, especially from the high level position we're at right now. You know, it's similar to what YouTube was in 10 years ago. They didn't try to say, okay, this type of content channel on YouTube is going to be the one that we're going to try to push the most. You know, they kind of put the incentives in the right place, which is splitting the ad revenue with creators, and then it all flourished, it all came above. So it wasn't them picking the winner, it was them creating an environment for creators to move everything in a positive direction. You could imagine if they didn't do something like that. You know, all the creators would have day jobs that they're trying to support themselves with and they just won't be able to focus on content and they won't be able to focus on what they have today. I'd say if they didn't do that, there'll be less than 1% of what's on YouTube today. But because there's that business model. That content's just built and so that's what you know. Coming back to that end program a little bit is that's what that's all about. It's giving more tools to developers on FANTOM to make sure they can get paid. You know, really interesting stat. Some of the guys at the foundation don't like me using this. It's quite incredible if you look at it, especially just from from, with fresh eyes, and you and you look at token terminal trending contracts and you see applications, the highest gas guzzling contracts on Ethereum, right, and you'll see Uniswap takes out like number one, number two, I think, number three or four, and in total it's it's over $300 million has been spent on gas accessing you. You tell you know, using Uniswap, if you just take a little step back for that and you say, okay, an application has managed to convince its users to spend over $300 million to interact and use this platform. And and how much did they get for that? And you probably go. Well, I guess maybe like at least a some percent or there, and it's 0%, I mean they get nothing at all. Goes to Ethereum validators and Ethereum.

Alex Kehaya:

Doesn't Uniswap get something from like the liquidity pools or something Like how does the protocol accrue value?

Samuel Harcourt:

It's fees. It's a fee model. They don't get any gas reimbursements. Maybe they do behind the scenes.

Alex Kehaya:

They're charging like a 1% or 2% fee for the transaction.

Samuel Harcourt:

Oh yeah, it'd be some sort of fee model, but specifically these contracts that users have paid to interact with the application. It's paying gas to Ethereum validators. Oh yeah, ethereum nodes.

Alex Kehaya:

I think aligning the incentives is a fantastic model, and I'm really curious to see. What I really like about the analogy is just comparing software to content creation, because that is what it is. I mean, it's free speech, it's expression of ideas in code. Aligning those incentives If you do it right, it then encourages like things like open source software and it encourages composability. If I'm a developer, I want as many people using my contracts as possible, so I'm going to make them as composable as I can so that other people can connect to them and run transactions through them.

Samuel Harcourt:

Everyone is very focused on the UI, your work standpoint. You know let's bring on the mainstream adoption of crypto. But the mainstream adoptions here I mean we've seen BlackRock file for an ETF, we've seen Snoop Dogg, m&m utilize NFTs. We see mainstream companies every day now getting involved or dipping their toes in blockchain in one way or another. So I think we're in the mainstream adoption phase and I think improving UI and UX is great. But if people aren't getting paid and the incentives aren't right for creators on blockchain, then everyone has to devote their attention somewhere else and cool things can't get built. And if cool things can't get built and content's not produced, then it won't bring on, you know, waves of the globe to interact with your chain or your applications.

Alex Kehaya:

And Fantom's already EVM compatible, right? So you know I'm an application developer and I've got EVM support on Polygon and Ethereum. Like, how hard is it for me to add phantom support for my contracts?

Samuel Harcourt:

Oh, you just replace the API generally. It's quite straightforward.

Alex Kehaya:

Very cool. So we're getting to the top of the show here and I always kind of end on the same question and what have I not asked you that I should have asked? Like what's something you wanted to talk about, or did I leave a question out that I should have asked? Like? Sometimes you'll be surprised at the answers I get to this question. You know, sometimes it's really spicy and other times it's like you already asked me everything and we just end.

Samuel Harcourt:

But you know, Is there anything that would stand out to you about phantom from your experience before this call? Just out of curiosity.

Alex Kehaya:

To be honest, like I didn't know too much about Fantom, but that's primarily because, like I have three kids and the last like five years have been pretty nuts between that and my work. You know, I mentioned in the early days when I first got into crypto, my daughter was only six months old, and I still had some time to like to do research and be like paying attention to what's going on day-to-day of my . And then, as we added more children and more work, I like my I have not been able to consume the same amount of volume of information Like there's outside of, really outside of, like Solana and the work I've been doing in the NFT space at Olplex. Like I have not been able to keep I followed a track of many ecosystems. bit of the Cosmos ecosystem, but that's because I have some investments in that space. I'm an investor in a cash and an advisor and investor in a region network. Those are both like Cosmos projects. I never actually like was a part of any team or in any way connected to phantom before this call. So I had no idea about the earn program and I thought like that was perhaps one of the more interesting things that I learned on this call about phantom. I think that that's I again, like I hadn't really seen another chain do that, and I think it's a pretty great idea. It's almost like an affiliate marketing thing too, because you know, it's like giving people commissions for driving volume, and that's the way it should be.

Samuel Harcourt:

I mean you could even think about some sort of affiliate fee from the transaction fees. Well, from recommendations, we've been quite experimental. You know with the vault that they're never any grand program with the own program, but it's good to try these ideas, especially where we are now, and see what's working. You know, as fast as we can and then really drive it forward. We did cover, I think, most of everything today. It was great talking with you.

Alex Kehaya:

For everybody listening. Go check out Sam and Fantom. You can go to phantomfoundation, tell them more about phantom, check out their documentation, check out their different solutions, different wallets and all that stuff to get like familiarized with the ecosystem. And this is definitely the first time I've heard anybody doing their own type model the way that they are. So it's worth taking a look at and really appreciate having you on the show and hopefully we'll have you again soon, sometime.

Samuel Harcourt:

Yeah, hopefully again in maybe a year's time and we can kind of look back on the past year and see what's worked and what hasn't, see how many transactions.

Alex Kehaya:

You had, dude, you got to go crash. You got to go get some transactions. Yeah, yeah, let's see.

Samuel Harcourt:

I mean I think quarter four is for Fantom virtual machine. That's a planned for release by then, depending on how long all the validators take to upgrade. It's going to be very interesting to see how this incentive model plays out and, at the end of the day, more transactions and guest paid. The network is a good thing because it feeds back into itself and creates a sustainable network which is pretty cool, pretty cool to be a part of.

Alex Kehaya:

Awesome. All right, we'll check back in. Thanks for being on the show.

Samuel Harcourt:

Thanks, Alex.

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