Pinata | Getting Creative at Scale

Hi, everyone. Today we are joined by Kyle Tutt, CEO of Pinata, which is the home for NFT Media. I'll let Kyle explain what that is in the conversation. We have been working with Pinata since the Seed and then the Series A. We've absolutely loved working with this team and are excited to get into some of the background of Pinata, broader thoughts around kind of the NFT market and decentralized storage in general. So, Kyle, thanks for joining.

Yeah, absolutely. Happy to be here.

So maybe a good place to start, Kyle, would be giving folks an overview of your background and what initially led you down the NFT rabbit hole.

Yeah, absolutely. So, like many in the crypto space, I got into this because I had bought some bitcoin back in the day and then ultimately ended up getting interested in ethereum. So in 2015, I had bought bitcoin, but I'm not really like a crypto finance trader guy. I've always wanted to build my own company, and so I was playing around with it, but I was really just in it to kind of figure out what the technology is. And so Ethereum was really, really interesting to me with Smart contracts in 2016. At the time, I was working at my first job out of college, which was at a motorsports startup where we were working with professional race teams around audio communication. So completely outside the realm of blockchain and crypto. But, you know, I was spending my nights and weekends learning about crypto and what it could do, and that led me to gaining enough confidence in April of 2017 to quit my job and jump into blockchain and crypto full time. At the time, you know, I didn't have, like, a specific place I was going. I just knew I wanted to eventually build a company using this technology, and I was just going to go on a journey and figure out what that was going to be. And eventually that ended up being Pinata.

Awesome. All right, so let's get into Pinata. Like, it started at Eth Berlin Hackathon. Tell us kind of the backstory there and kind of what was the spark that actually led you down this path with Pinata?

Yeah, absolutely. So, as mentioned, you know, I quit my job and I'm actually based out of Omaha, Nebraska. And so, as you can imagine, there's not, like a bunch of resources here for me to learn blockchain and crypto. So the first thing I ended up doing was jumping on a plane and flying to New York to compete at the consensus hackathon in 2017. And the reason I did that is I knew as a non technical founder I needed to understand the technology at a much deeper level and to have a really strong foundation with the technology. So went to this hackathon started, you know, meeting blockchain engineers and you know, obviously sitting in rooms with them building. And I kept doing that all summer, just flying to different blockchain hackathons and kind of building out a network. But I was still living in Omaha so I wanted to find friends that I could hang out with here. And so I ended up starting the blockchain meetup group in town that actually grew to like 500 people. And the first person to reach out to me was actually my co founder and CTO Matt. And he was a software engineer at a consulting company. And I was like, hey, you should come with me to these hackathons. Like this crypto thing is real, there's a lot of excitement around it. And the first hackathon we went to together was actually E. ETH Waterloo and ETH Waterloo is where the CryptoKitties NFT application ended up launching. So you know, Matt and I have always had NFTs kind of in our story and they've always been a big part of our journey. But up to that point, you know, we were just going to hackathons and we had started a consulting company where we were building blockchain applications for various people, but hadn't started pinata yet. But through that experience is how we were figuring out that storing data on chain was exponentially exp. So I think at the time in 2018 to store 1 gigabyte of data on Ethereum, it cost something like $4.5 million. And so what everybody was doing was using a protocol called IPFS or the interplanetary file system to actually store and manage their data off chain. The problem back then was it wasn't very fast and it wasn't very stable. And so Matt and I had the simple idea of let's just make IPFS as fast and stable as possible. And so we came up with that idea, ended up launching the idea and pinata ultimately at the ETH Berlin hackathon in the fall of 2018. We ended up winning that hackathon and then we thought, you know, we were going to take over the world, raise a bunch of money and everybody was going to use us. Unfortunately, there was kind of like two factors going on where that wasn't true and we really ended up struggling for close to two years. Was number one, NFTs weren't like a big thing yet. The NFT community back in 2018 was all of like six people at the time. And the other thing was it was a crypto winter so we were struggling with people were kind of moving out of the space. There wasn't a lot of hype and so we just weren't able to get a bunch of users and we effectively had to just keep going, keep calling people, keep keep trying to find use cases for us until in 2020 we started to see the NFT market start to take off. And then you success followed Nate and.

Offline Ventures and I kind of found you in was it March of 2021 when February 28th. I remember the early credit to Nate on that one. But we were starting to see these kind of NFT projects and marketplaces kind of start to pop and scoured through docs to look at what infrastructure was being used and Pinata kept coming up and so it felt like there was almost some ubiquity on NFT projects at the time of Pinata, within NFT projects at the time, you know, but you had braved, as you mentioned, you'd brave through basically a few years of there being really not a whole lot of usage. Like I'm curious in your mind, in the broader team, what gave you that conviction over that time? Because it feels like a pretty challenging space to kind of keep building within with adoption kind of so limited.

Our conviction was around the idea that we knew storing data on chain at scale was just never going to be something that was going to work. Blockchains are not good at storing data at scale and so we just really needed some use case in the blockchain space to happen where they needed to store more data off chain. And that was obviously ended up being NFTs but you know, 2018, 2019, it was mostly kind of like DeFi applications, ERC20 tokens that aren't storing a bunch of data off chain. And so we really just needed the market to come to us. I always talk about it as, you know, we were right, but when you're right and you're early, it's the same thing as being wrong. And we were wrong for close to two years. But if we weren't there early, if we weren't going to those hackathons. So 2018, 2019, 2020, we kept going to hackathons, we kept building our brand in the dev community by going to those hackathons. And then I spent every day just calling as many projects as I possibly could talking to them about why would they use Pinata, why would they use IPFS or not and what projects were they working on. And then ultimately through all of that, we were also blogging in our technical bl, was teaching people like how to build in this space how to build NFTs. And that's ultimately where we started to see traction. So, you know, we were very committed to IPFs. I think a lot of people questioned that back then, but it's turned out well for us. And it was kind of like in the early days we would see one person using us every day and then, you know, a week later it would turn into two, and then, you know, four and it would go on from there. And that kept us active and kept chasing what we were going after.

Yeah. Before moving on to kind of some of your perspectives on the future of NFTs and also kind of building through crypto winters, I want to spend a moment on ipfs and it's a concept I'm not sure how many listeners will be deeply familiar with. I think Those building in Web3 understand it. But talk a little bit more about why you made the choice to actually align yourself so closely with IPFs.

Yeah, absolutely. So we kind of have a unique view on ipfs, I think compared to why most people, if they're familiar with it. I think most people think of IPFS as this peer to peer protocol and it's a distributed, decentralized protocol. What we're most interested with IPFS is that it's a content addressable system. So what that means is when you upload content to ipfs, it generates what's called a CID or a content identifier. And those identifiers are unique to the file itself. And so if you have a file and it changes just a little bit, that CID ends up changing. And when you combine that with an NFT or a blockchain, you get this really nice, you know, append only or immutable record of that file and what's happened over time. So for us, what that ultimately means is from an accounting perspective, this is kind of boring, but from an accounting perspective, this is actually really, really powerful at scale. And it's really, really powerful when you're transacting between parties on a open pseudo anonymous blockchain like Ethereum, or pick any of them, and it makes you be able to trust the data itself instead of who's holding it. So you don't have to trust that the person that you just grabbed that file from was doing something malicious or they changed the data in some way. You can just trust that that CID is what it's supposed to be. And that's kind of the core thing that we get excited about now as it's related to things like decentralization. IPFs at the end of the day can be as decentralized or centralized as you want to make it, which we think is actually an advantage. And the other kind of component where in this conversation that people bring up is around permanence and keeping data around for a long time. And IPFS itself doesn't necessarily keep data forever. You have to make sure that you pin it to an IPFS node to keep keep it up. And that's ultimately, you know, what people use us for, is they pin the content on our IPFS nodes and we ensure that they they stay up and can be served and distributed appropriately. But as it relates to, you know, permanence around data and some of the other decentralized storage protocols, we ran into this question a lot. Every time we were talking with teams. Is there like, hey, we need this stuff to be permanent associated with NFTs? And we always thought that was kind of a weird perspective. We actually think it's interesting to have NFTs that last for a second or milliseconds. And we never actually approached NFTs in the same way that a lot of the market did, which was thinking of them as art that needs to last forever or as collectibles. We just thought NFTs were a tool and you need to be able to make sure that the data is there and then when the NFTs go away, the data is no longer there. So permanence has never been a big feature factor in how we approach Data and ultimately NFTs.

Yeah, you got into one of the topics I was hoping to address, which is around just, you know, permanence is a topic that's coming up more right now. And to some extent, like Pinata is a layer on top of whether BIPFs or are we even. Eventually you could be agnostic to this, but like, maybe the double click on this just a little bit further, like for projects that are considering kind of decentralized storage solutions, like where will and won't permanence matter? And if there are certain applications where you actually think permanent is the right solution, I'd be curious for some examples of what you think those could be.

Yeah, absolutely. So this gets a little bit deeper into whether or not NFTs are actually assets or not. And so I love this topic. And internally at Pinata, we developed this framework where we put NFTs on a spectrum from consumables to assets. And consumables ultimately go to zero, and their value ends up going to zero. And there's a. A finite amount of usage that you can get out of a consumable. And the way I like to describe it is kind of thinking of this spectrum as a coffee shop. So with a coffee shop, you know, there's the building it's sitting in, that's an asset. There is the LLC that the coffee shop, you know is run by, that's an asset. But then there's like the cup of coffee itself, and that's a consumable. And you can buy that cup of coffee and you own it, you know, once you pay five bucks for it, but once you drink that coffee, ultimately the value goes to zero. And so when you start framing it that way that not all NFTs are assets, and then not all NFTs have to go up in price, ultimately that means that not all NFTs have to last forever. And I would actually make the argument that the majority of NFTs are consumables and have a finite life. The other thing I think that you really have to kind of peel back is in the early days of NFTs, there was a narrative going around that if an NFT lasts forever, it's more valuable. And we again, kind of always thought that was silly in the sense that just because a rock lasts forever doesn't mean it's necessarily more valuable. Right. And so there's just kind of some threads, maybe driven by Twitter rhetoric, that have driven this idea that NFTs need to last forever. The other interesting thing that we started to see is people started burning NFTs, so they would just start basically deleting them or sending them to a burn account, and then they would disappear. And we started seeing that very early on, outside of the art and collectible NFT market, but more of the permissioning market is kind of what I would call it. And so we've always kind of approached this as, at the end of the day, NFTs are just tools, and they're really good at exchanging data, moving data, being used as permissions, but doesn't ultimately mean that they have to last forever. And we think that ultimately there's a lot of good use cases where they won't. And then I ended up writing a blog back in 2020 called who is Responsible for NFT Data? And I posed the question, is DaVinci responsible for the Mona Lisa Today? And obviously the answer to that is no. DaVinci is no longer with us. And the Louvre Museum is ultimately the one taking care of the nft. And the point of that is that if something's important enough to keep around for a long time, people are going to ensure that stays around. And with IPFS and that CID component I was talking about, it's actually very, very easy to transfer responsibility of an NFT to the next person. So when you buy an NFT from somebody else with IPFs and CIDs, ultimately you can ensure that it stays live and is around for as long as you need it to be.

Right. So I think a lot of people rightfully look at Pinata as a pinning solution on top of IPFs or broadly related to storage. You know, if you look at Pinata's vision or early on versus kind of where the product's going right now, like, what are some examples that kind of illustrate kind of where you think the opportunity is and maybe what that bodes for NFTs more broadly going forward?

Yeah, absolutely. So when we first started, we were just, as you mentioned, just an IPFS pinning service, which is really no different than just being data storage at the end of the day. But we were doing it on top of IPFs. Where NFTs took us and the needs of the market essentially is we started to realize that we had to get much more sophisticated around media, ensuring that we could distribute content at scale. So effectively. What we started to see is that these NFT projects were their own little media hubs, or media brands, if you will, and they needed web2 speed and web2 scale associated with whether it's images or videos or whatever the content is ultimately that these NFTs were, they need to be able to distribute that to millions of people. And so we had to start building functionality and scale so that these NFT projects, typically they start as a team of one or maybe three people, have the ability to go from nothing to millions of people viewing their content overnight. And it kind of brings up this interesting question of if you can't sell a YouTube link as an NFT, then where are you ultimately going to distribute your content at? Or if you can't use Dropbox to distribute your content, where are you going to do it? And that answer ultimately ends up being Pinata for all of these projects. So that's kind of on the media side. And the scale side where, where we then started to see the market going is that ultimately private content and IP control became extremely important. So, you know, in the early days, it was like all of this data was public, associated with NFTs. But what we've seen is it's now shifted to a significant portion of the market is using NFTs for this concept called token gating. And token gating is a simple idea of where you only serve or distribute the content based on whether or not you own the nft. And so what happens is you basically give somebody content, it checks whether or not they own the token or the NFT in their wallet. If they do, they get access to the content. If they don't, then they're not able to view the content. And so we started to build out a feature called Submarine that allows NFT projects and marketplaces to easily token gate their content and serve content based on NFTs. Where that eventually kind of iterated to is this product called Submarine Me, where we make it really, really easy for non technical people to actually come token gate whatever type of content they want. They can token gate it across multiple chains and lock it down to whether it's at the, you know, kind of the NFT. If it's 10,000 NFTs, they can do it for all 10,000 or they can actually lock it down to the individual NFT itself. And we think ultimately what that's doing in the kind of grand scheme of things is it allows creators in these NFT projects to build their own business models based on how they're locking down this content with NFTs. And it's really using these NFTs almost as a permissioning mechanism. So we're just, we're really excited to see what kind of business models can come out of that.

What are some of your favorite examples so far of projects that are using maybe some of this more advanced functionality, if you will.

The one other thing we saw is that people started actually uploading full applications to us. And so they were using NFTs, token gated NFTs to serve full applications like you'd have on your phone or even on your desktop. And so we were actually seeing people use this functionality to token gate games is a big one. But we're also seeing people tokengate music where they're actually serving, you know, not just the file itself, but they're actually token gating a full basically experience around the song. Right? So it's, you know, it has a video and it kind of has a brand wrapped around this, this music player that's a full application that is ultimately being served through being attached to an nft.

Maybe if you think about kind of the broader NFT market in a three to five year time horizon, what do you think looks most different about it than today?

When Matt and I went to ETH Waterloo and saw CryptoKitties launch, the first thing I did is I came back to Omaha and I was like, all right, how do I apply this to something that I could describe to somebody in Omaha? And so the first thing I did is I wrote a blog in December of 2017 where I applied NFTs to farming. So I think it was like a use case for ERC 721 tokens, crypto farming or something to that effect. And what I did is I created an NFT that represented an acre of land and you were just using combine data. So the big tractors going through corn fields, they have a bunch of data flowing off them. And I was taking the data from those combines and attaching them to the NFT themselves. And so I initially thought that the use case for NFTs was going to be for transacting data between parties and not media or gaming or anything like that. I was trying to apply it to IoT use cases, Enterprise use cases, those types of things. At Pinata, the way we've always been thinking about it is what we just went through in the mania of NFTs is obviously a use case, but we think ultimately that NFTs and IPFs can be be used for all data and can be used to transact data. It can be used to permission data. And we think ultimately that all data is going to be attached to NFTs and ultimately uploaded to IPFS. And so, you know, where we think it's going in the future is I kind of already talked about this, but full applications uploaded to attached to NFTs. As I mentioned, I do think IoT data is going to be transacted by being attached to NFTs. I think, you know, algorithms and anything you can think of, essentially that is a file or a folder can ultimately be attached to an NFT and it can be transacted. And that's where we get really excited. And as it's related to kind of the, you know, the NFT market itself and the way that we approached it, the unique thing about Pinata is, you know, we've never actually minted NFTs. We've been kind of hands off in that regard. And we did that on purpose. And the reason for that is ultimately we didn't have a good grasp on, number one, which blockchain or blockchains was going to win. So we wanted to be kind of horizontally indexed across the whole market. And then we Also wanted to ensure that NFT innovation at the token level could happen without us influencing it. And so we are seeing NFT projects with a bunch of great innovations around the token itself, and we think there's still a bunch of room for that and we can just plug into that and not kind of interfere with that. So we ultimately think NFTs have a long lifespan and are going to touch everything. But there was a little bit of a silliness in the market over the last year.

Yeah, I guess. What advice might you have for other founders who are actually building through this winter, who maybe have not before? I know you're kind of a bit of a grizzled veteran here, kind of like, all considered, so how would you kind of address them?

So in these downturns, I actually think from a building perspective, it's easier because there's much less noise. Right. And so the thing that I always talked about with my product team during the mania was like, don't follow behaviors that are happening because NFTs are really expensive or they're being traded or there's a lot of speculation around them. And so when you're in the hype bubble, in the mania, you can accidentally build the product in the wrong direction because you're following a behavior that is not going to last over time. And so that's what I talk about with my team is like, let's make sure that when we're building a new product or feature, especially during that hype cycle, was to ensure that we felt that that behavior was going to last, regardless of whether or not that NFT was worth $1 or a million dollars. As you turn into the downturn, a lot of that noise goes away. And it's actually much clearer, I think, to be able to build and you can have conversations, your voice carries farther. You know, you can actually pick up the phone and talk with people. It's not. I think right now is actually the greatest time to be entering this space. And it's where, you know, ultimately Pinata built itself back in 2018 and 2019 was in those downturn. And ultimately what that looked like is, you know, we were calling people, we were going to hackathons, and we were blogging about our experience, and that's where we were able to, you know, build our brand, become trusted. Right now is a time where people will trust you more because you're in it not for the hype, you're in it for, you know, better reasons. And so, yeah, I think. I think it's a great time to enter.

Yeah, I mean, this brings up a related topic. Actually. Listeners might not know, but Kyle's based out of Omaha and you've been building the team kind of in I guess what one might call a non core market, which I think can be perhaps focusing but also comes with its own kind of challenges. What have you learned in that journey and building a startup out of Omaha and kind of advice you might have to founders building outside of what one might call core markets?

I have a person in Omaha who, who everybody obviously knows as Warren Buffett. He has a really good insight that I found out myself and then I read in a book that he actually found out about it in 1956. And the insight is this. Warren Buffett used to actually be in Wall street and he was creating his career in Wall Street. And ultimately what he ended up moving back to Omaha for was this concept that in Wall street he was just listening to all the rumors and he needed an ability to go somewhere where he could think clearly without social validation or without kind of external kind of hype influencing his decision making. And so he ultimately, in 1956, ended up moving back to Omaha because it gave him that space and kind of isolated him from the medias and from the hype. And so I've leveraged that a lot being in Omaha because you are isolated. Obviously. You know, we have the Internet and we have Twitter and I can read everything everybody else is reading on Twitter as well. But I'm able to just kind of focus kind of on the core idea. And I have the space and room to really think about these ideas at a deep level now. That part is great. The part that's tough and I figured out how to solve for was we don't have the best information. There is amazing information. When you fly into San Francisco or Silicon Valley and kind of. I always talk about it as updating my cache on like what is the hottest topic, what are the new trends, who's building what and why are they building it. Those things are really, really important. And I always try to make it back so that I can update my cache and then I'll fly back to Omaha. Think it through, think about is that behavior going to happen for a long time or is it kind of a short term behavior that is happening? So I think it can be a huge advantage if you use it right. You also have to build towards the strength of whatever city you're in. You know, not all cities are going to be the same. With Omah and Nebraska in general, it's a very Supportive community. They might not necessarily know what I'm doing. I couldn't quite describe it, but they do completely support me and I use that to my advantage 100%. Whereas if I was in a bigger city or something like that, maybe I wouldn't have had all the opportunities that I've had here.

Yeah, I mean it's phenomenal insights. Just to comment, I think Kenyatta from the outside, it seems has done an exceptional job of having a mix of talent from different backgrounds and also kind of obsessing over this core problem. Like you mentioned, kind of submarine coming out of just kind of a internal geek out session and you have the connectivity with a bunch of creators to be able to kind of test that concept out and see it through. So it feels like there is a mix there in terms of background and just kind of perspectives. What advice might you give to kind of founders starting in Web3 right now who may or may not be from the background as they think about composition of teams?

My co founder and I are in Omaha. Matt is here as well. But we are a fully distributed team and we leaned completely into that. Part of that is because like a lot of our success happened during COVID but the other reason I did that is because it's a very strong way to build diversity of thought in your team. And so we have people across, I think 20, we're a team of 45 today. We're in 20 different states, in eight or nine different countries is where our talent base is coming from. And ultimately what that gives you is a bunch of kind of data collection people who have a different perspective on the world and are thinking in a different way and are able to approach problems in unique ways that other people aren't. And we try to lean into that as much as possible. And I think when I think of Web3 and decentralization, I think that's kind of like a core tenet of it is like how do you develop different thought processes and lean into that. And I think if I was going to say anything, it's like, you know, lean into the uniqueness of Web three, it is a different way of thinking compared to Web two and use that to your advantage. That ultimately is where all the fun is. I always kind of talk about it like with web3 you can't Google the answers. You have to come up with them yourself. And that's the most fun part. The other thing, you know, at Pinata we talk about a lot is we're not going to be beat Google at their own game or pick a Web2 company. We're not going to beat them at their own game. We have to play our own game. And so we talk about this concept of counterculture and how do we build a game that we know how to play that other people have to play with us versus playing theirs. And that's ultimately where things like margin come from. And that's where innovation is going to be. Yeah.

Well, Kyle, this has been an awesome conversation. Before we wrap, are there any shout outs you want to give to anyone who's curious about Pinata or any folks out there who might be interested in the space more broadly?

You can find Pinata at Pinata Cloud and then I'm on Twitter @kyletatut.k y l E T U T. And in the space, I think ultimately you just have to be curious right now and make sure that you go out and learn as much as you can. A great way to do that would be to check out our technical blog on Medium and, you know, start building.

Thanks, Cal. It's been a great chat and honor to work with you. Chat with you as always. Thanks for coming on.

Absolutely. Thanks, Mike.

That concludes this episode of Gray Matter. If you like what you hear, please subscribe wherever you get your podcasts and please be sure to leave a five star review and any feedback you may have. You can also find all content on our website greylock.com and you can follow us on Twitter reylockvc. I'm Heather Mack. Thanks for listening.