Kraken CEO dissects the future of the metaverse, NFTs

In an interview with Decrypt Executive Editor Jeff Roberts, Kraken CEO Jesse Powell discusses the future of the metaverse and what it could mean for NFTs, crypto exchanges, gaming & more

Video Transcript

JEFF ROBERTS: And I'm Jeff Roberts, Executive Editor at Decrypt. I'm delighted to welcome Jesse Powell, co-founder and CEO of Kraken and general crypto OG. Welcome Jesse.

JESSE POWELL: Hi, thanks for having me.

JEFF ROBERTS: Anyways, thanks for joining us. We're here to talk about the future crackdown on the metaverse but actually I want to go begin with the past and revisit a conversation we had in Wyoming a couple of years ago where you told me that, it's about basically "Magic, The Gathering" a popular board game. And I was surprise to find out how many crypto people played it, including Vitalik and so on. And you were one of those players, right?

JESSE POWELL: That's right. Yeah, Jed Mccaleb, Roger Ver, the list goes on.

JEFF ROBERTS: Yeah. And I mean, I think some of our OGs out there too. We'll know the infamous Mt. Gox, the bankrupt exchange stood for "Magic, The Gathering" online exchange. The reason I'm bringing all this up, of course, is sort of occurred to me, "Magic," the game, is kind of a metaverse, sort of like a pre-digital metaverse, if that makes any sense.

I'm just wondering, sort of interesting, all these crypto people played that game, and now we're going into the real digital metaverse where crypto is everywhere. I'm just kind of curious, maybe I'm trying to draw a line that's not there but do you see any parallels? What is it about gaming and those sort of worlds that attracts crypto people and why is crypto going to be such a big part of it?

JESSE POWELL: I think a lot of us in crypto grew up as nerds into fantasy and sci-fi. And I think we spent a lot of time in books and on computers and in a world that was not the physical world, in our own imaginations, or on the computer in a virtual chat room.

So, I think this all feels very comfortable to people, "Magic The Gathering" is in its own little bubble, you have these sort of proto metaverses in the chat rooms of AOL back in the day, you've got Second Life, "World of Warcraft," "RunEscape."

People grew up playing these games and I think that this new stage of the metaverse where you have these goods, these virtual tokens or these clothing or whatever it is, you can take between these different platforms, I think is what people really excited about now.

JEFF ROBERTS: And when did you first see this or suspect that NFTs would become what they are and the metaverse would emerge as it did? I remember cryptokitties in 2016, did you see it then or even before then, when you were first dabbling with Bitcoin? Or just tell me about your own personal sort of how did you anticipate it would play out versus how it has played out.

JESSE POWELL: Yea. The idea for NFTs goes way back to the earliest days of Bitcoin, there was an idea called colored coins on Bitcoin, which are basically Bitcoins that are uniquely identified to represent something else, proof of ownership of something else. And going back to the earliest days of Bitcoin, we thought the blockchain could be used for tracking proof of ownership of things, provenance, tokenizing other things like stocks and that kind of stuff.

So, I think we saw this coming, we weren't really expecting it to explode the way that it did in the last year or so. And I think a lot of that has to do with just some mainstream projects, NBA top shots being one example, CryptoPunks really taking off, the board API club.

I think that somehow this has captured the mainstream consciousness, and I think that it's really relatable to people because the kids that have grown up over the last 20 years, really are familiar with this idea of a digital store of value, digital representation of value, virtual clothes, virtual gear for your virtual avatar.

So, I think like that's all very familiar to people. I think what's new is this concept of maybe we can have these different metaverse, which are maybe some decentralized, maybe some not but they all sort of respect this common layer of like these assets on the blockchain that you can take between different platforms.

JEFF ROBERTS: Yeah. No, I'd agree with that but I do have a question for you. In the first generation of crypto, so much of the company or corporate side of it was the exchanges, obviously Mt. Gox for better and mostly worse, but also crack and Coinbase Gemini.

They were sort of, crypto was the exchanges. If you had a associate a company with crypto, it was always an exchange. But in the emerging NFT era, we're seeing sort of new platforms, OpenSea obviously but Nifty Gateway and stuff. So, what is the role of exchanges, including Kraken, in defining the NFT era?

JESSE POWELL: Yeah. So, I think exchanges can continue to play a similar role that they have over the last decade, which is to be that super easy on ramp for new people coming into the space. You don't come in already having Bitcoin or already having Ether or Solana, you've got to get that from somewhere. And I think exchanges are a really good bridge for those people.

They're regulated, they work with governments, they're connected to the existing on ramps and the legacy system, which is largely like bank accounts and credit cards which you can't just plug your DeFi, smart contract into directly.

So, I think exchanges are a really good on ramp for those people. They're the shepherds, they have customer service teams, they can help people get through that first stage before maybe they want to go on to do more advanced things in DeFi.

JEFF ROBERTS: Yeah. I want to come back to in a sec but in terms of Kraken, I mean, Coinbases announced or, I think is in the process of launching, an NFT platform. Gemini is closely tied or I think they own Nifty Gateway, Binance is doing stuff too. Is Kraken, what's your plan for Kraken on the NFT world?

JESSE POWELL: We do have something in the oven for NFTs. I used to run an e-commerce platform for virtual goods, World Warcraft, moonscape, Diablo, you know we did like 20 different games. I also used to run an art gallery so I've got some experience in the space. We're cooking up something that we think is going to be pretty awesome, and it'll be out hopefully toward the end of this year, early next year.

JEFF ROBERTS: Will it be a challenge just given that crack can I think is used by crypto veterans and professional traders in terms of reaching sort of consumers who might not be too familiar with crypto. Do you think that's going to be an Kraken's wheelhouse?

JESSE POWELL: Yeah. I think the consumer, part of our business is much newer. As you said, we kind started out with crypto OGs and a real professional trading platform, and it sort of moved into the consumer space more recently. But I think we're all going to be competing for the same kind of demographic, these people who are interested in NFTs and are coming into the space for the first time.

So, I do still think it's anybody's game, I think Kraken has a very strong reputation and brand in this space and is known for really understanding the crypto audience and the crypto Ethos. Hopefully that comes across and hopefully we manage to capture what people are looking for with our product.

JEFF ROBERTS: And sticking with this theme just a moment longer, what about usability? Because I've been telling my coworkers, I finally got my hands dirty with the Axie Infinity last week and, my God, I'm sorry, it was a horrible experience. I had to transfer Eith from a metamask wallet to their wallet and $200 got vaporized, and then I had to buy three of these creatures. And it just was not a friendly experience.

Who's taking the lead in smoothing out that EUX and making this, we always talk about in tech, the Netscape moment and a browser where suddenly it all comes together for the normies. I'm not seeing this yet in the crypto world.

So, who's going to make the NFT world and the metaverse approachable? Because frankly, Facebook I think can do it, I think most of us hope they don't do it. It'd be better if I think people like you did it but I'm not seeing anyone take the obvious lead in making the stuff accessible. So, can you comment on that?

JESSE POWELL: Yeah. Some of that comes down to the chain. The fees on Ethereum are relatively high compared to the fees on Solana or some other chains. So, I think you'll see this transition of new projects move to change with lower fees. So, I think that's part of it but this is like a constant ongoing cycle where something becomes successful, it gets more expensive and then people move on to another chain.

They're obviously scaling solutions coming to Ethereum as well, so, that hopefully will solve some of the fee problems. But as far as who's going to win the metaverse game or who builds the best experience, I really think it's going to be fragmented and sort of federated in a way across the chain where you have these common assets that exist on the chain and you can move between quote unquote, "Metaverses."

I don't think there'll be any single metaverse. You could think of "World of Warcraft" as one metaverse and "Diablo two" as a different metaverse and "Runescape" is a metaverse or Acci or Facebook. And some of these will be games and they won't have items that are compatible across the games but maybe there'll be some skins that are compatible across the games.

And I think it's the same for Facebook another kind of proprietary platforms where I think they'll support these blockchain assets and some representation them in their world, and they'll all have different rules. And I don't think anyone's going to have a monopoly on this.

JEFF ROBERTS: Yeah. And again with the same theme was what you said also apply to blockchains? Because I think it's hard not to think in historical analogies, even though they might not always be accurate. But I old enough to remember the early days of Silicon Valley and search and there was once upon a time, there was like eight search engines and you didn't know who it was going to be. Was it going to be AltaVista or this or this?

And then it became Google. To what degree is this, are going to be one change to rule them all or is there room for a sort of a thriving ecosystem where there's five or 10 or 20 chains that your average consumer is going to be interacting with, say two or five years from now.

JESSE POWELL: I think there is room for a lot of different chains that serve a lot of different purposes. And if you have a specific use case in mind, you can design a chain that does that thing very well or it may have an advantage over a generalized system.

I think Bitcoin is still the best at storing value, I think it's still the best it's security, so I don't see Bitcoin being disrupted in the near term. I think the game for smart contracts is totally up for grabs, I think Ethereum is a dominant player now but you see Polkadot and Solana and some other chains coming up that maybe could steal a lot of that thunder from Ethereum, with regard to smart contracts.

So, I think we'll continue to see an evolution of these chains, I think it's anybody's game right now and I think we ultimately end up in a world where there are lots of successful chains that are operating simultaneously.

JEFF ROBERTS: I mean, and just going out to the kind of blue skies, a broader picture stuff. I mean, you've obviously saw a lot of how crypto unfold earlier so, I'd like you to take us into the future a little bit in terms of like what's going to happen next. Are we going to an era of dhows? Is a metaverse underhyped or overhyped? Take us into the future, what's going to happen next?

JESSE POWELL: I think that metaverse is probably a little bit overhyped right now. But I'm just thinking back on my own experience, we've seen various versions of metaverse over time, I mean, you could even look at Fortnite as a metaverse, Roadblocks, Minecraft, Second Life as sort of one of the very first iterations of this.

And these are all successful to different degrees and for different purposes and different niche audiences, so I think people are making it out to be something more than it is.

We've had this and so I think the next phase is really these interoperable assets and maybe that's game changing. But I also don't think anyone really has-- it's not going to be a winner take all space there. I'm sorry, could you repeat the second part of your question?

JEFF ROBERTS: No, I think I'm just sort of asking you to predict the future, which you know isn't easy. But a related question is, in the history of tech, you know, I've covered it for about 15 years, and typically it's video games are the first application where new tech catches on. Well frankly, porn is usually the first one followed by games, followed by other applications.

But what I find so neat about NFTs is I'm seeing it thriving in non kind of techie intense areas like sports, even like art, and art galleries. And I'm kind of curious as sort of the metaverse, or whatever you want to call it, emerges, is it going to follow the traditional pattern of porn and gaming followed by this, followed by that, and trickling down or is there going to be several of these worlds going to emerge at once, all with kind of distinct cultures and people within them?

JESSE POWELL: Yeah. I think, like if you look back at Second Life as an example, there is some of that, there are sort of like pornographic areas of the game and there are gambling areas of the game, and they are like very kid friendly versions areas of the game. So I think there will be these niche areas that break out.

I don't know that porn or gambling benefits especially from the metaverse or from some sort of like immersive 3D environment. I think if anything these things just-- you probably don't want your pornographic like engagements managed on the blockchain because it's just like very traceable and it's probably like the last thing you want carved into stone like for all time. So, I think that stuff is probably more likely to stay like where it is with traditional Finance.

JEFF ROBERTS: OK. Well, on that note, always fascinating to talk to you Jesse, you're always a good interview and I like where it's going. That was Jesse Powell, the CEO and founder of Kraken.