Zora and the Rise of Cryptomedia
Building the Infrastructure for the Digital Economy
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Hey Everyone 👋 ,
I’ve decided to do a three-part series on web3 companies. Over the next month or two, I’ll spotlight three web3 startups that pique my interest and that are pushing forward the broader ecosystem. Today’s piece focuses on Zora, a company building in the NFT space that I’ve written about a few times in the past. My hope is that this series highlights compelling companies and entrepreneurs, while offering a window into crypto’s mainstream potential.
If there are interesting web3 companies you’d recommend meeting or writing about (or if you’re building one yourself), let me know—I’d love to learn more.
With that, on to Zora and the rise of cryptomedia…
Zora and the Rise of Cryptomedia
Last week’s piece was about the death of mainstream culture—the splintering of culture into a billion tiny digital fragments. Internet culture is now culture writ large. And last month, I wrote about innovation in media—the new companies building within the major media categories: film, television, books, music, and gaming.
But what if there’s a new form of media—a new vehicle for cultural transmission—that will reinvent how we interact with digital content? Enter cryptomedia.
In his essay What is Cryptomedia?, Jacob Horne offers a definition:
Hypermedia is a non-linear medium of information that includes graphics, audio, video, plain text and hyperlinks.
Cryptomedia is a medium for anyone on the internet to create universally-accessible and individually-ownable hypermedia.
Cryptomedia is an ownership medium for hypermedia.
Cryptomedia allows for unique and provable ownership of information, including: graphics, audio, video, plain text and any arbitrary file or data.
Cryptomedia can be thought of as hypermedia with built-in property rights.
Zora, the company Jacob Horne co-founded, is building the infrastructure to power cryptomedia.
I’ll dive into Zora in three sections:
You can think of the the first as laying the groundwork for how we got here (“why now?”), the second as unpacking what Zora has built so far, and the third as looking ahead at the market and its potential.
1) The Tailwinds
Let’s set the stage.
To understand Zora, it helps to go back to the company’s manifesto. It reads:
They thought they could own us. The platforms that hold our audiences and content hostage. The labels that lock down our rights. The galleries that hold our art ransom. The big brands that think exposure is cash. They have a monopoly on ownership, a monopoly on creativity and they have been robbing us of the value we create for as long as there’s been a creative industry.
Zora’s guiding mission is to remove gatekeepers. Removing gatekeepers is a frequent topic in Digital Native (see: Down with the Gatekeepers) and the concept is foundational to web3. The power structures of the old world just don’t make sense.
Zora’s manifesto continues:
We bring meaning, we bring value. We’re what people believe in. What’s Louis Vuitton without Virgil? UMG without Taylor Swift? NBA without LeBron? Adidas without Yeezy? What’s Instagram without you?
Power is moving to the people. This shift is one of the defining shifts of our generation:
And Zora is built with the goal to deliver value to people, not to platforms.
It’s not just the stars who will capture value. All of us create more value online than we realize. To build on the last sentence above—“What’s Instagram without you?”—I think of how Bobby Hundreds frames it:
Your social media posts do make money. It’s just that you don’t see any of it. Your gorgeous photographs, compelling essays, and motion graphics draw attention to platforms like Facebook and Google, which churn advertising dollars off of all those eyeballs. You do all the hard work. They make the money from it. And now that you see it that way, isn’t it incredibly unfair?
Zora is being built at a time when cultural tailwinds are aligned (the power-to-the-people, down-with-the-gatekeepers, grab-your-pitchforks attitude of an emergent generation), and at a time when technology (blockchain) can enable new forms of ownership and economic value transfer.
2) The Product
Jacob gives cryptomedia seven distinct characteristics:
Token-based: an Ethereum-based Non-Fungible Token (NFT)
Permissionless: universally usable and censorship resistant
Universally accessible: open and available to the internet
Valuable: accrue value which is accessible to the owner and creator
Internet-native: created within and exists only on the internet
Platformless: belonging to no single platform other than itself
Composable: can be integrated into other contexts and systems
At its simplest, Zora is the infrastructure built to underpin cryptomedia.
Put slightly less simply, Zora is an NFT marketplace protocol that offers a set of tools that creators can use to transact NFTs on multiple levels of the stack. Basically, if you think of OpenSea as the consumer marketplace for NFTs (Ebay for NFTs), you can think of Zora as Stripe for NFTs: the underlying infrastructure powering the NFT economy. (This analogy breaks down in about a thousand different ways under scrutiny, but you get the point.)
At the base level of the stack, Zora is the protocol powering the things you need to do—for example, list this NFT for $100. You can build on Zora: for instance, companies like Mirror (a publishing platform for web3) and Catalog (a music NFT marketplace) are built on Zora protocol. One level above in the stack is Zora’s indexer for indexing data from the blockchain. Zora exposes blockchain data in a way that’s useful as an API. And at the highest end of the stack is the marketplace itself. Zora has its own user-facing marketplace at Zora.co.
Zora began as an extension of ERC-721 (the standard for non-fungible tokens on Ethereum) that embeds royalties and a perpetual auction into the smart contract. In this way, Zora was embedding the market into the digital asset—baking an order book directly into the token. This is really cool stuff. For instance, a creator could use Zora protocol to say “I want 5% of every secondary sale of this NFT.” The protocol would embed this into the digital asset and no matter where the NFT sells, the creator would earn 5% on all future resales. Zora’s protocol can be used to create digital assets that are independent of the platforms they are issued on and listed on. This is a far cry from OpenSea’s 2.5% take-rate.
I often think back to the famous scene from Zoolander, when Ben Stiller and Owen Wilson are searching for secret files. They learn that the files are in the computer—and they proceed to smash the computer to look for them.
When it comes to Zora, where’s the market for the NFT? It’s so simple; the market is in the asset.
Zora’s marketplace features live entirely on-chain, a contrast to NFT marketplaces like OpenSea that facilitate most activities off-chain. When OpenSea goes down, projects relying solely on OpenSea’s API lose access to that data. Zora avoids this problem, and Zora will exist as long as Ethereum does.
In January, Zora announced Zora v3, which adds a variety of fascinating NFT marketplace features. Among them:
NFT auctions: Anyone can use Zora to easily spin up an auction for their NFTs, without needing to know Solidity. A user signs in with their wallet, which autopopulates with NFTs they own. The user can then select a reserve price (lowest price they will accept at auction) as well as a sell-on share (the percent of secondary sales to capture).
Sell-on share: The creator/owner of a digital asset can pick the next buyer (vs. the asset going to the highest bidder), along with a proposed sell-on share—the percentage of the next sale which the creator/owner will participate in. This lives on-chain in the digital asset.
Instant on-chain royalties: A creator can set a royalty fee, which moves across marketplaces. The royalty is embedded into the NFT itself and every time you transfer it, the creator is paid.
Finder’s fee: The finder’s fee incentivizes the market to find an eventual buyer for a digital good. A creator/owner can list an NFT and specify his or her wallet. When that NFT is sold, that person receives a percentage of the sale. The idea is that you benefit from building an NFT marketplace, from embedding an NFT on your blog, from sharing a link on Twitter. Curation = monetary gain. The finder’s fee is a market-making mechanism that acts like an on-chain referral link.
3) The Opportunity
In 2016, Joel Monegro wrote the “Fat Protocol Thesis.” Essentially, Monegro argued that a key difference between the internet and the blockchain is where value accumulates. On the internet, shared protocols (TCP/IP, HTTP, SMTP, etc.) produced incredible amounts of value, but that value was captured at the applications layer (Google, Facebook, etc.). On the blockchain, the relationship between protocols and applications is reversed: value concentrates at the shared protocol layer and only a fraction of value is distributed at the application layer. In other words, protocols are “fat” and applications are “thin.”
The Fat Protocol thesis isn’t perfect; Chia Jeng Yang had a good recent piece exposing cracks in its foundation. But protocols have the potential to be enormously valuable.
Zora wants to serve every NFT vertical—art, music, gaming. Rather than being the marketplace that sells all of these NFTs across categories, Zora wants to enable other people to build experiences, platforms, and marketplaces in these categories.
A somewhat philosophical explanation from Jacob on how he sees value accruing to Zora over time comes in his essay Hyperstructures:
The nature of the medium of token ownership and unstoppability means we no longer need to extract profits to realize value creation. We can create ‘for-public’, with a new underlying value system that means the value created in Hyperstructures far exceeds any amount of profits that can be extracted in the immediate term, and can be recognized for the value they provide to society at large.
The two foundational traits of cryptomedia are 1) universally-accessible, and 2) individually-ownable. The two aren’t mutually exclusive, but rather coexist. As a company (and now as a DAO), Zora embodies that.
In some ways, Zora is akin to Uniswap for NFTs. Uniswap showed in DeFi that cryptonative assets demand cryptonative, on-chain markets. Zora aims to provide this for the NFT ecosystem. And in some ways, Coinbase is to Uniswap as OpenSea is to Zora. OpenSea has provided a familiar UI for consumers to interact with, while Zora acts a protocol powering new ways of creating and selling tokenized assets. Both Coinbase and OpenSea are massive businesses—and bring users many benefits—but there exists an opportunity for a more cryptonative, decentralized, on-chain answer.
Zora is still in its first inning, and it will take years to realize the full vision. But that’s okay—the NFT market is nascent and volatile. Volume is down sharply from last fall:
The NFT market will continue to rise and fall in cycles, while steadily growing across years. Zora aims to power this market.
Last summer, I wrote about cultural liquidity:
The things that move culture—film, music, books, art, writing—have historically been fairly illiquid. Cultural impact hasn’t mapped to economic value created or captured. Liquidity is a measure of market efficiency, and the “market” of culture is inefficient.
We’re all participants in culture, yet we don’t have an economic stake and we lack agency. Zora aims to fix that. Zora’s mission is to make the market of culture more efficient. Zora aspires to make culture liquid.
In the coming weeks, I’ll do two more deep-dives into web3 companies that are at the vanguard of the ecosystem and that embody broader trends.