{PotatoEng 19} Talking to SANsound— Soulbound NFT creating future music community via ZKP &Listen-to-earn Governance Model
Writer, Editor: Coin (M), Jiahui (F)
Second episode of our English channel {PotatoEng}! We will mainly focus on emerging projects that are building the foundation (technically and ecosystem-wise) for Web3 and Metaverse.
Welcome back to the new episode of {PotatoEng}! Yes, the two Potatoes enjoyed recording English episodes and the next few episodes will all be English. In {PotatoEng}, we’ll continue to deliver fun and technical projects we’ve seen recently, and invite core team members to share their stories with Potatoes. We will also invite our guests to join our Potato Farm Discord channel with the “Potato Guest” ID tag. Potato Fans are welcome to join us and claim their “Potato Enthusiast” badge as well!
Due to a limited time schedule, this relatively short episode is PART 1 of our conversation with Devin from SAN soulbound NFT, and if you’re interested in San, in Soulbound NFT, or in the future form of the music community, please subscribe, like and comment below this episode. We’ll have more questions and invite them back for conversation PART 2. We’re also planning on a live Q&A session on our Twitter @PotatoesMeta, with Devin @MartyDevin. Welcome to join us and say hi!
We met Devin at a Harmony event two months ago. He is a writer (Wrote a book on decentralized orgs, Amazon Bestseller: The Decision-Making Employee: How to Succeed in a Decentralized Organization, 2019) and an avid music lover who worked at the Harmony chain, and formerly WiseToken, once the largest liquidity pair on Uniswap. He joined this episode with us remotely from a mountain cabin somewhere in Colorado.
🌟 Project of this Episode: SAN
SAN is a music-centric ecosystem dedicated to transforming access and experiences for independent musicians and their fans through Soulbound NFT (subscription-based) and ZKP (privacy-focused). More details in SAN’s Whitepaper.
Note: All content does not constitute investment advice. Some of the content is a paraphrase and does not represent the position of Meta Potatoes
🥔 Potato Guests
Devin Marty | Head of Strategy, SAN
CoHost | F. Ex-theatermaker; Building Web3 infra
CoHost | M. Experience designer, Strategist in Web3 & immersive tech
💿 KEYS
Soulbound NFT: NFTs that are non-transferrable, and locked in a spec wallet.
Zero-knowledge Proof: a cryptographic method by which one party (the prover) can prove to another party (the verifier) that a given statement is true while the prover avoids conveying any additional information apart from the fact that the statement is indeed true. — From Wiki
TL;DR
Devin came to crypto from the research on decentralized organizations. He wrote a book called The Decision-Making Employee: How to Succeed in a Decentralized Organization, a 2019 Amazon Bestseller.
Decentralized tech, from the Gutenberg printing press, liberates knowledge dissemination, to the Internet, then to the blockchain. The masses gradually have the power to really make decisions.
During the team formation process, the idea of SAN has changed from “customizing headphones for independent musicians that can be connected to the blockchain” to “leveraging team members’ understanding of privacy computing and decentralized governance, through the combination of music hardware and blockchain technology, to build an ecosystem that promotes independent musicians.”
Here’s the problem that SAN is trying to solve: the Web2 part, indie/new musicians can’t profit from music streaming platforms and don’t know how to build a personal brand. And fans can’t meaningfully interact with musicians — they want to accompany the musician to success but they don’t profit from it, and there’s no data privacy throughout the process; the Web3 part, the solution generally adopted by music NFT platforms is to fix music in the NFT form and sell it, which is impractical (on the one hand, there will be many legal issues regarding direct confrontation with established music streaming platforms, and on the other hand, music royalties are inherently difficult to enforce) and is underutilization of NFT technology.
Therefore, the solution adopted by SAN is to enable the novel use of NFTs in the music industry through three core techs — soulbound NFT, zero-knowledge proof, and the listen-to-earn governance token model.
1) Soulbound NFTs to realize the binding of person-wallet-subscription2) Utilize zero-knowledge proof to help musicians obtain fan information (under privacy protection) and analyze it for building brands3) Based on the listen-to-earn governance token model,
- a. Fans discover good music;
- b. They support musicians through voting tokens;
- c. Musicians gain exposure (receive tokens to exchange for other cryptocurrencies/fiat currencies, or to purchase SAN’s brand packages) + Fans get rewards (receive tokens, and/or tickets to musicians’ concerts and other benefits).
To sum up, SAN wants to create a platform for decentralized discovery and support for independent musicians. And this model is easier to expand to the existing Web2 user base than other Web3 music NFT platforms that are against traditional record labels/music publishing companies/music streaming giants.
Users can log in to the SAN platform by registering multiple accounts/ paying for multiple subscriptions (if they want to). SAN avoids multi-account registration and bots rampancy by fixing the daily supply of tokens, adjusting the total gain per account, and requiring users to interact from time to time during the listen-to-earn process.
SAN means the number three in Japanese and Mandarin. SAN does not sell music NFTs, but sells soulbound NFTs as subscriptions. SAN encourages users to discover good music and support good musicians by listening to music they haven’t heard before. Later, SAN will integrate music streaming platforms such as Spotify. SAN’s thesis is that people are not buying music, and “owning music” envisioned by many music NFT platforms does not make sense for ordinary users as of now.
SAN monetarizes through soulbound NFT-based subscriptions (major revenue stream), selling and licensing hardware, throwing IRL events, staking and token appreciation, etc.
ALL CONTENT
[ 1 ] Devin’s personal experience & How they teamed up.
Q: Quick intro of SAN, the start of the idea, and the team formation.
Jumped into crypto 3 yrs ago. Wrote a book on decentralized orgs, Amazon Bestseller (The Decision-Making Employee: How to Succeed in a Decentralized Organization, 2019). The process of writing was learning, taking my thesis, and weaving it through other people’s stories.
The idea of decentralization is why I ended up writing as much as I did. There’s a lot of power in this different org form that isn’t traditional hierarchy, isn’t what we’ve been used to for ten thousand yrs.
There have been sprinkles of it in history, people often refer to Gutenberg Machine (the Printing Press) as the first majorly decentralized tech, people could have, for the first time, knowledge at their fingertips. As long as they could read and were literate, they would have more knowledge than powers at that time (governments/religions) would allow them to have.
This is an early example, then we have the Internet (WWW by Tim Berners-Lee) that disseminated knowledge to everyone. Now, for the first time in ten thousand yrs, people had the ability to make decisions for themselves in a real way — if someone is acting despotic or evil, people can call them out, and justice can be had.
It was taken to the next level with blockchain, and blockchain is not the only thing that’s really taking this decentralization into what we know today as normal life — you’ll have a lot of these organizations that have decentralized processes within that are more empowering from the employee side, offering them more autonomy, more mastering, and more purpose.
Social-side this is fascinating, but I know there’s this whole blockchain world out there and I didn’t even touch it. I wanted to dive into it. Before COVID I had done a little bit of research, during COVID I know now is the time so I dove into it pretty heavily and then found a few other ppl starting a Web3 startup called Wise Token — it was Ethereum-backed, not-for-profit, and was essentially trying to do something with decentralization that has not been done before: fully contract-run, no humans-touching at all, truly decentralized — that is freaking amazing. The team was awesome, mathematicians, particle physicists, amazing developers, etc. I came in to help build the ecosystem/community. That went very well — we raised $40M in presale, built a half-billion-dollar ecosystem, and it was the largest liquidity pair on Uniswap — some pretty major accomplishments there.
At that time, I was approached by a layer-one blockchain called Harmony, and they asked me to come over and do ecosystem growth with them, specifically for their DAO division, but also for events and some other things behind the scenes. So I jumped into it and learned a lot about DAOs. Unfortunately, there were some bureaucracies of larger decentralized companies, but that’s fine.
In August, I decided to leave Harmony and started SAN with a few other founders who are just incredible people.
One would be Jon Kaku, a world-famous DJ based in Taiwan. He headlined Heineken events, Ultra events, etc. His idea was to have a Web3 hardware company where you had headphones that could interconnect/interface with blockchains, and you could sell those through NFTs where there was unlockable content.
And his friend Brian, who is the artist behind the ON1 Force project, which (I believe) is the first blue-chip anime-style project to come out more than a year ago, with a big following. He’s worked with Samsung, Coinbase, Chicago Bulls, etc. and he’s done stuff that’s extremely impressive.
So the two got together, Brian designed the hardware, and Kaku went to his friend DL who was the director of product at Monster Beats and was in charge of designing a bunch of individual products that Beats put out. Kaku was sponsored by Beats and a couple of other headphone brands, so he knew DL pretty well and they started to do this. That was two years ago.
He also met Garrick in New York, and Garrick brought in me and others. Now the team has grown to 17 members. The idea has also expanded from “individual headphones that we can customize” (This idea came from DL as he was responsible for creating a brand that for the first time put customized audio hardware behind the artist e.g. Gaga Beats. So we applied it to other independent artists) to “building an ecosystem that is solely focused on promoting independent musicians through music hardware and combining that with things that we know really well in blockchain (privacy, governance, etc.)”. That leads to what SAN is right now.
[ 2 ] What is SAN trying to solve & The three core techs behind SAN
Q: Unlike many others building on existing Internet software and incorporating blockchain tech into their projects, You started SAN from a hardware perspective. How did SAN transition from a hardware-oriented project to a music NFT platform?
It’s really about the purpose of serving independent musicians. A majority of our team has immense music experience. There’s something we all deeply care about and we figure out how we can solve some other issues with blockchain.
These Web2 issues are:
New musicians don’t profit from existing digital service providers, and they have very little experience in building brands. It would also be almost inexcusable to ask them to jump right into Web3 and just go because building a brand in Web3 is hard (it could be a full-time job). And generally, independent musicians experience very poor fan analytics.
On the fan side, fans can’t meaningfully support the musicians they appreciate. They don’t benefit from the artist’s success and they don’t have any data privacy. Fans want to play a more important role in the artist’s journey (e.g. from small towns to the big stage). And most people don’t really understand that they need data privacy but it should just be inherent (not opt-in).
And Web3 issues are:
Our thesis is that music NFTs right now are flawed — they’re swimming upstream against legacy media instead of built in a way that would involve legacy. I understand that you want to take down the labels, but there’re so many legal issues and they could bog you down until they figure out how to do it. Moreover, inherently music NFTs are all about royalties. There’re many marketplaces like SudoSwap, X2Y2, etc. that allow people to trade without royalties. Also, royalties are just a handshake agreement — e.g. If I have a song that’s worth $10,000 and the artist is going to get 50% of it. I’m going to find a way to find the buyer and get the money over the counter (OTC) and sell it to them and the artist will get nothing. So the idea of royalties of music NFTs is hard to enforce.
Let’s just say that people are doing it wrong right now (from our perspective) and there’s an underutilization of NFT tech. The principle technology behind NFTs is mature, but it’s just sitting there and no one’s jumping on it yet. For instance, access to events. People don’t use it even in our space — at least I’ve never been to an event where NFT’s been a ticket yet. That’s even going deeper to decentralized login, decentralized reputation, Soulbound tech, etc.
1) Soulbound NFT
There’re three core technologies that we brought into the fold that are going to use NFTs in a new way. We’re weaving a narrative/storytelling through this core tech — we want you to get the NFT and soulbound it. Soulbounding is something that Vitalik’s been talking about a lot recently and is just to say that it’s locked in your wallet. It essentially becomes a unique cryptographic identifier — it’s one of a kind, in this wallet, can’t change — now we can say that wallet is this person. So we’re building a good foundation for decentralized login now.
2) Zero-knowledge Proof
The other thing we want to bring in there is the data privacy part. This is our understanding of Zero-knowledge (ZK) and how we can use ZK in a way that makes sense to people (now ZK is mostly math). You can use ZK to build the foundation of decentralized identity (DID) where musicians can get the information they need from their fans (e.g. If 80% of the listeners are female, then adding more women’s merch in the merch store is a logical thing to do) in a way that doesn’t compromise the identity of the person who’s listening nor the identity of the wallet that’s providing that information.
For IRL events as well — we plan to do shows with musicians who’re doing well on our platform. Say at a physical event, I don’t want my wallet tied to my physical location, because people can see how much money is in my wallet — it’s blockchain, it’s transparent — and that’s not a safe thing. So having ZK — this double-blind mathematically-provable truth mechanism — that obfuscates the identity of a wallet is really powerful and almost essential.
3) Listen-to-earn Governance Model
These two techs build the core of DID that can then be used in our fair governance model. We’ve spent a lot of time with governance over the years, myself mostly, with decentralized orgs like DAOs. We’ve done it through our listen-to-earn mechanism. We want to build a platform where talent speaks over money. And the listen-to-earn mechanism allows for that because all the musicians have to do is upload their music (and other ppl take the rest).
Also, fans, by listening to the music/interacting with the platform, earn governance tokens/voting points. They can take these voting points to vote for the musicians they like or take a bet on whom they think is going to be the top musician on the platform. Moreover, that bet might pay off, cause the more votes behind the musician, the higher they climb on Billboard, and the higher they are up on Billboard, the more daily token rewards go to — — 50% to them; 50% to the people who vote for them (Say you’re number one, you’re getting a lot more daily token rewards than number five, so the people who helped you get there would think “I made the right bet.”).
For musicians, all they’ve done is upload their music and they get pushed to the top, and now they have all these tokens to exchange for other currencies or buy brand packages from us that are going to help them grow their brands/fanbases — that’s the whole point, but then we want to do it in a bigger way: get merch and customized hardware into their hands. That’s a huge conversation piece for their fans — e.g. let’s get them on openings of Kaku shows, in front of 50,000 people, the adrenaline, the feeling, the photo opportunities, etc. That’s a huge step in growing a brand.
What we’ve essentially created here is a decentralized A&R (Abbreviation for Artists and Repertoire, the division of a record label or music publishing company that is responsible for talent scouting and overseeing the artistic development of recording artists and songwriters) funnel where everyone is a talent manager who finds the artists, gets them on the platform, and once on the platform, finds which artists on that platform are the best. They are incentivized to tell us who are the best and the best artists on the platform get rewarded in a way that they want. We get to offer them packages but they get to choose which ones they want.
We’re not like a label, even though we operate in a similar way as a label would but for a segment of people that labels don’t touch, which is new and independent artists. What we could do with labels is, develop a relationship with them and we have these great artists who (if they choose) we can pass them off to them. Also, if the artists want to continue their independent artist careers, they can continue to do that, and we can help them do that.
So that’s the whole goal of the platform and it really brings us back to the hardware’s end goal — let’s give these independent musicians things that are not possible in Web2/the real world. But as of now, it’s not possible, so that’s what we WANT to do. And the hardware kind of sparked off on “how do we do it” and ended up with “we improved a lot of other areas in Web3 that we think need improving” and this is a model that scales very easily to Web2 where a lot of other Web3 music streaming companies (due to how they’re structured) find it difficult to scale to a Web2 audience.
[ 3 ] Details of soulbound NFTs & SAN’s tokenomic design
Q: One quick question - regarding the soulbound tech, e.g. If I sign up with my wallet, can I use another wallet to sign up again — can I have multiple accounts?
When you’re soulbounding, there’s a fee, like a subscription. If you want to sign up and listen on multiple accounts that’s fine because what you’re doing is infusing more capital into what we’re building, which is going to help the artists anyway. Now there’s a limited supply of them, but going forward in the future, it will be referral-based (like Clubhouse). If you want to refer yourself over and over again and keep paying the subscription, there’s no harm, but you’re going to run multiple devices.
Also, there’re things we’ve thought about as we don’t want Bots going rampant. When you’re listening to earn, there’ll be small interactive things (that are not predictable and make the process more experiential e.g. like a song) required to be done.
Q: What if someone registers for (like) 100 accounts in SAN’s tokenization ecosystem, then he/she/they could become a monopoly (in this ecosystem)…
Mathematically it’s not built like that. We have an equation that determines the daily output of tokens. The numerator is the set value of tokens to be distributed each day, and the important factor/variable in the denominator is the number of people on the platform. Immediately, you can figure out all the other numbers and variables.
For example, 10 tokens are being distributed and X is the number of people on the platform. If there’s 1 person on the platform listening, they’re going to get all ten tokens. (There’s a time quotient of what they’ve listened to but we’re ignoring that). If 2 people are on the platform, one person listens to the maximum time quotient and the other person doesn’t, immediately that one person can only get half of that 10 (5, maximum). The other person just didn’t get up to 10, maybe they got 3. Now 2 of those tokens (10–5–3=2) just never existed because they were never deployed.
So you get to the system where it does matter to have more, but the more there are, it also diminishes the return per individual. It’ll be a fixed amount, and everyone is competing against each other, and there’s not going to be a way to listen to earn millions of tokens in a day. It is fixed and safe to a degree that you’ll say “what’s going on, they just keep diluting me”, but at least it’s a mechanic that’s not going to allow bots to take over.
[ 4 ] The origin of SAN & SAN’s relationship with major music streaming platforms
Q: BTW, how did the team come up with the name, SAN?
The idea came from Kaku at the beginning, SAN means three in Japanese and Mandarin. We want everything to be triangular, spiritually, and geometrically. It’s a fancy word for the in-ear monitors we’re developing and they’re triangular-shaped. It’s just a consistent motif through everything, even the art, all of SAN’s characters are based on this triangle in the middle.
Q: From my POV, SAN is designed for independent musicians to gain their revenues as well as manage their fan community. For ordinary users, based on my prev observations, if they want to engage with the musicians they like, they can directly go to major platforms like Spotify to listen to their music. If they’re not super fans of that musician, they wouldn’t be incentivized to buy the NFT form of the music. How do you convince them to do so?
We’re not trying to compete with legacy media and digital service providers like Spotify. We want to work with them (not from a partnership angle). We understand there’s a massive distribution network that these musicians should be on.
In our system, there is no music NFTs or NFTs that represent music. The only NFTs in our ecosystem are soulbound NFTs, which are essentially subscription identifiers. The user experience of SAN is just the same as any other streaming platform (or think more like the radio). You jump on, pick the channel you like (by artist/genre/etc.), and start listening. If you like the song, vote for it. If you don’t like it, on to the next song.
If you really like a song, let’s go to the artist, click on them and you’ll see their Spotify there. Great. The platform has done its job because it’s all about the discoverability of new and independent artists. We don’t want you to come to our platform and stream your daily playlist. We want you to come to our platform, stream the playlist you haven’t heard before (just like radio), and be rewarded for listening with things that allow you to take bets on those artists that are new to the platform.
So we’ll link legacy media like Spotify, Apple Music, and even SoundCloud, to artists on our platform. But there’s no buying of music NFTs. We understand that if you sell 25 of your music NFTs at 0.1 ETH each you’ll make more money than streaming a million times on Spotify. The music NFT purchasing goes against the trend — people don’t buy music anymore. Maybe they buy records but that’s novel. They may think “I need to buy this song to support the artist” but “I can just stream it before I buy”. Even though I could own this song, we’re not at a point where buying music NFTs makes sense — e.g. Snoop Dogg’s collection of music NFTs didn’t do well, he’s big in this space and he should have done well. So I won’t even say we’re not there yet, with those I just don’t think that’s the right idea. I think music NFTs will change music — in terms of how it’s created and how it’s consumed — in different ways. We’re one of those solutions.
Q: So it’s not the music itself being made to NFTs, but the talent-finding process that’s being incorporated in the NFT form?
Correct.
[ 5 ] SAN’s business model
Q: Cool. Another question about SAN, you mentioned 50% of the tokens go to the creator and another 50% go to the fans. So how does SAN monetarize?
It’s all really based on the soulbound NFT part. As you subscribe, that’s def one place where we earn revenue.
Everything in the ecosystem is done with the SAN token. There’s the governance part of it that’s locked (cannot be bought), and there’s the unlock part, which you can buy/sell/trade/etc. There’s a mechanism (I’m not going to get into cuz it’s way too DeFi) similar to staking, where small amounts of that go back to us. We will have a token treasury that, if we do well it will be worth more. That’s not our main revenue model but when you talk about tokens, the appreciation of treasury is def a part.
We are also experienced in throwing IRL events. Events can be very profitable (there’s obviously a whole industry for events).
We profit from hardware sales and licensing the hardware to other projects as well. Let’s say Cool Apes (pseudonym) want to use our hardware as a canvas for their project and they want to provide this audio hardware to their users — come over and use it. There’s a flat fee for manufacturing and there’s a licensing fee.
So there’s a mixture of a hardware company that has products that we do sell, as well as this subscription-based platform with some other small things in there. Then you get into the Web3 token appreciation strategy which is not really revenue but seems to be a way to make money in this space.
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