Building the crypto native messaging protocol with Shane Mac (XMTP) – WAGMI Ventures Podcast

I just believe so much in the ability for individuals to have more ownership over their digital lives and the ability to own your identity with, you know, the DIDs was a start and that's been around for, you know, 5, 6, 7 years. It's been around for a while, but now you have a utility and an application to use that with.

Hey everybody, Tanner here with Wagme Ventures. On today's episode, we have Shane Mac, founder and CEO of XMTP. For anyone who's new, this is the Wagny Ventures podcast where we do snapshots with interesting founders from across Web3. Check out wagnyventures.io to learn more about the syndicate behind the podcast. But for now, let's get into it with Shane from XMTP. All right. Hey everybody, I'm here today with Shane Mac, co-founder and CEO at XMTP. Shane, how's it going today?

Hey, what's up? It's great to be here.

Yeah, it's awesome to have you on the show, and I know we've got a lot to talk about, so I'm, I'm pumped to chat. So, uh, I'd love to start us off just by maybe helping the listeners learn a little bit more about your entrepreneurial journey. You've, you've had the chance to do some pretty remarkable stuff over the years, so could you just introduce yourself and tell us more about the journey leading up to your work building XMTP?

Yeah, of course. You know, if I go back to being in college, it was the 2004-2005 era when social networks was just starting to happen. And I'd always been fascinated by the internet and chat rooms back in the '90s and marketplaces and just ways to interact and transact with people online. And so if I go all the way back to when I was 13 years old, I was actually a baseball player and I used to play in the intramural travel league. And when you turn 11, 12, and 13, you go from Mustang to Bronco to Pony League, and you get 3 different bats over 3 different years. And every year you get a new weight limit. So you want to like flex up and have the bigger bat. And these bats cost $200 a piece. And at the time I actually realized that no one wanted the old bat, but it was still worth like $150. And I found eBay and I was 13 years old. I made a fake eBay account in my dad's name. I made a fake PayPal account. So that I could accept payments. And I started asking all my friends, hey, do you want your old bat from the last league we were in? That is a, you know, kind of a little kid's weight limit. And they're like, nah, I don't want the bat. I'm like, all right, I'll give you like $10 for it. And I started selling bats on eBay and I literally had the UPS driver coming to my house every Tuesday and Thursday, dropping off those triangle boxes that would fit a bat perfectly. And I ended up running an entire bat business and ended up with the Power Seller Gold Star Award when I was like 14 years old, selling all these people's bats because every time they'd go to the next league, they didn't want their old bat. And that just like showed me the power of marketplaces and building trust and identity online. And that led to, you know, later on in my life, just getting into social networks early, being a part of the early days of Twitter. And I got really lucky back then to meet this guy named T.A. McCann because I was trying to get a Facebook photo and a Twitter photo back in 2006, '07, '08 to show up on top of my email so I could see your face when I was emailing you. And back then, most people didn't like the idea of their identity online or their LinkedIn next to their Facebook. It was very much like personal life, professional life. Interesting. And so that was this era that was kind of the early days of social, just doing interesting things with data. And we were trying to aggregate it all together to build what we called a smart address book. And what ultimately went on to become this thing called gist.com. And I met this guy and he took me under his wing. I didn't really know it at the time. I was just like, what is a startup? I don't even know what a startup is, but I kind of am curious and I knew how to build things on the internet. I got to work and build a startup with TA and he got me to move to Seattle and long story short, you know, I ended up meeting this guy who was working for Paul Allen, the founder of Microsoft. Paul had given him $1 million as the first seed money. That was the first seed money in the company. Grew that from 0 to 100 million people under 2 years. And then BlackBerry bought it a couple years later for about $45 million. And so my first like foray into technology and startups was meeting someone from literally a tweet back in 2008 that was because of what I was building and sharing and doing online. That actually led to the relationship and my first startup ever. And I kind of got to learn everything from then on. And then once you landed at BlackBerry, that was messaging. That really got me to think about messaging. And then I was the CEO of a company called Assist for about 7 years and then 2 years after we got acquired, which was a business messaging platform on top of SMS, Facebook Messenger, WhatsApp, Apple Business Chat, et cetera, doing a lot of chats, automation, and support on top of the messaging platforms. Which then led to XMTP.

Very cool. Okay, so, you know, messaging seems to be a pretty clear through line kind of from at least the past, I don't know, 8, 10 years. And so let's turn to talk about some of the cool work happening there where, you know, what is XMTP? What are you guys trying to accomplish?

Yeah, XMTP is Web3's secure messaging network. If you look at why it started, it was a couple years ago, and my co-founder Matt had been in crypto for a long time. And our first angel investor, his name was Robert Leschner, and he's the founder of the Compound Protocol. And he was talking to Matt one time and he's like, hey, I have $11 billion in a smart contract and I know every single person's wallet address, but I can't send a message to 95% of the people because I don't have a way to message them. He's like, that's a real problem. How do we solve this problem? So at the same time, you have the NFTs starting to happen, which for us was really just using on-chain data to build communities. How do you bring people together? How do you know who can be in the community? And how do you start to have digital ownership bring people together to do meaningful things, whether that's vote on things, vote on DAOs, memberships, collect things, et cetera. And then you started to see the future of ticketing and membership clubs and art and music and everything will kind of move towards this on-chain direction. But if that's how my community forms, how do I communicate to the people who own a piece of this community? Or if you're a creator, they own a relationship to me. How do I communicate to that wallet address? So those two things were coming together and made us really think about, well, SMTP was the core of email and it allowed an interoperable way for all these applications to communicate together. Could there be a new secure messaging protocol for what SMTP did for email, XMTP could do for the future of, you know, blockchain addresses and wallet addresses.

Yeah, that's amazing. I mean, I think anyone who comes across the work you guys are doing, some of the value is pretty readily apparent as something that's missing where, you know, a lot of these communities obviously are organized around Discord. You know, Telegram is kind of a more, I guess, less cohesive, but it's still an active part of kind of the crypto world. But having an easy way on kind of traditional, whether it's connecting wallets or whatever, that makes a ton of sense. I totally get the opportunity there. So I think we could really get in the weeds, and I know you could definitely get in the weeds, but I'm curious at a high level, what are you hoping is made possible or enabled if XMTP continues to gain adoption? And especially, I like the email corollary, I, I guess I'm curious, is there anything interesting in Web3 that could go beyond that analogy potentially? Like, are there any unique unlocks for messaging in Web3 that might surprise people?

Yeah, let's break both of those down. So where do I hope this goes? I really hope that there's an interoperable and secure layer that any application can plug into in the future that allows individuals to securely own their communications. So that their identity and their communication, if they ever want to leave and take it with them, they can choose which application they want to use. And if the rules within that application or the ownership of who owns that app changes and you don't like it, or you like something else better, you don't have to lose all of your networking communications and identity to move to the next app. I love Telegram. I actually like WhatsApp. I think Signal's great. The security is incredible, what they've done with Signal protocol. But if you have to use a single app to access your communication, it just means you don't own your communication. So that username you're using on Telegram, the network you're using to talk to people, the storage you're using to actually get free communication, all of that stuff, if you ever wanted to leave Telegram and go to a new network, is lost. And I think in the future, you'll be able to use any identity across thousands of different applications and move from application to application if we can have a standard protocol that powers them all, that adds value to the applications and to the individuals.

Love it. Yeah, super interesting. So, you know, one thing I've wanted to start asking folks more on this show is, you know, how do you think about value accrual kind of at the protocol level, especially when it comes to building XMTP? You know, so in other words, like I was reading Fred Wilson's post this morning about just flat out, like, what is a protocol? He goes into kind of monetization of protocols via tokens. And I feel like it's underdiscussed sometimes at the protocol layer, like how that value accrual works. And so I'm curious for XNTP, like, what does that translation process look like from developer adoption into some kind of value accrual look like?

We try to keep it really simple. I think the best economic models are really simple. To understand. So if you have two areas, the infrastructure side and the attention side, if you just go to the infrastructure side, we need to have a very decentralized and sustainable model for applications within the network to pay node operators for routing, storing, encrypting, and delivering those messages. And that's pretty simple. Apps today pay for a lot of servers, and when they do it themselves in their own app, you could imagine based on the value of the reach of the network and all of the security and work that the protocol and people working on it have done, you would pay into the network, the node operators to ensure that everyone has reliability on the security and the deliverability of the network. So that's one side, and that has, has to be a sustainable economy where the economics work. So the node operators make enough money, the applications are getting enough value to pay for that money. And then the protocol itself is, we're doing all the work on it to make sure that all of the security, the encryption, and the vision of where this goes is permissionless and works for everyone within the ecosystem. On the attention side is more around innovating around consent. So as we move from a world with phone numbers and emails and identities that were created by social networks to a world where your identity is a public blockchain address. We need to move from this privacy world to a consent world, and consent mechanisms need to allow new ways in which people's attention can be protected so individuals can have more control over their inbox. The applications they use can help decide what are the pre-existing on-chain interactions, identities, or even tokens that people own to ensure that reaching their inbox is almost like a preexisting consent mechanism or preexisting relationship. And so with all this on-chain data happening, you can imagine in the future that the ability for sending 100,000 messages to a bunch of wallet addresses, every single address could have a dynamic way in which the consent mechanism is set to reach that person's attention that they have control over. And in the future, economics could play into that. Much like WhatsApp today, businesses can send a message and there's some rules around it where they can reach a person outbound, but there's clear rules that are kind of governing how that works. You could imagine in the future that consent starts with, do I have the same token as someone else? Do we have a similar identity? Have we had an interaction on chain? and that could be a really powerful way to have more control over your inbox and your attention. But consent could also go in the future to more of an economic type model where people are getting more value or applications are getting value for actually their attention, and then the people have to pay to reach that attention. And you could imagine where that could go in the future as well.

Sure. Yeah, that's fascinating. So I'm curious, back in like kind of the earliest days of building XMTP, what were some of those early challenges and how did you and your team think about solving those?

You know, there's a ton of challenges to building a decentralized and secure messaging network. You know, if I have to think of the, the core fundamentals, I think number one is the UX of Web3, especially because messaging is pretty mobile but Web3 is pretty web-centric. There's a big challenge around creating better user experiences using wallets, using wallet login, and using that mobile kind of UX to be solved to create a much better user experience. So we can't just like do this and be like, well, the messaging experience is gonna be worse than it was before, but now it's decentralized. I don't think the end consumers really care. It has to be, this allows you to reach someone you couldn't otherwise reach, and we've done the work to make the experience great, as good as, or different than it was before. And I think we have a lot of work to do there, and I think we've been working hard on it. And there's a lot of great applications. The Lens ecosystem has a lot of great applications built within it now that can do really unique things. I just saw a big update today. Someone built payments inside of chat, which makes tons of sense because now that you have on-chain payments inside of a conversation that's with the same key, the idea of WhatsApp and like a Western Union coming together where you can communicate and send payments globally in the same conversation is a really, really powerful idea. As well as this app called Converse is the WhatsApp for XMTP, and it's an amazing application where you can use any identity that's decentralized, like an ENS or a Lens name, and then you can access all of your communication across the entire XMTP network, and it all shows up in that app the minute you log in. Those are really like cool experiences that are pushing the limits on like UX and building better experiences. But that's been a big, a lot of work, a lot of, it's a big challenge to create a great mobile messaging experience across the way that logins work and the Apple App Store, kind of the rules around it. It's, it's, it's a challenge.

Yeah, I can, I can totally see that that would be multiple hurdles kind of in one, uh, in one hurdle. So kind of similar question then, like along the journey, what have been one or two maybe key surprises and how have you and your team sort of adapted to those surprises? Good, bad, or otherwise, you know?

Hmm, it's a good question. I think the first surprise is how fast everyone started thinking about why doesn't Web3 have messaging? 2 years ago, we were like, I wonder if a wallet address can communicate with each other, and that needs to really happen. Why does this not exist? And within 18 months, people now are like, we need messaging, we need a way to communicate. How do we reengage users? How do we send a message and build relationships with people? How do I ask a question to someone that just bought something that I want, but I don't know how to reach them except for their wallet address? How do I get everyone to vote on this DAO? How do I figure out the governance kind of protocols or updates from DeFi protocols? How do I make sure that everyone has all the information and I can securely guarantee that the message I sent is actually from the wallet that I say it's from, now the message is signed with the same key that is the wallet, so you know that the message you're reading actually is sent from the person who owns what they say they own. All these things 2 years ago wasn't even on people's minds, and the speed at which people are like, how do we add messaging? How do we do it in an interoperable way? This idea of a portable inbox where you can use your wallet and your private key to access your communication on any different site that you go to and take your communication with you. We weren't sure if that was gonna resonate with people, but this idea that XMTP allows you to take your messages with you and your keys, your crypto is now your messages, is a really, really powerful idea that we weren't sure what people would think about that. And I think we've been really surprised by how excited people are about that.

Yeah, I love that. So speaking of excitement, what have been some of the most exciting developments during this creation process where, you know, for example, I noticed your most recent raise included some really impressive investors on top of like a massive roster of really amazing angels. I mean, the mood must have been pretty excited after that, right?

I'm—

I guess what else jumps out as especially exciting along the journey?

Yeah, I like to just focus on partners. Our investors are amazing. We really love all the feedback we get from them and how much support they've given us and the opportunity to even build something as global and big, as impactful as we think this can be. But what we really like to focus on are the partners. Everything we do is about the relationship with developers, the ability to build a protocol that is permissionless and decentralized. So in this world, we get to actually 100% guarantee that no one's gonna get rugged in the future, right? We have all been spending 15 years building on Web2 platforms on top of APIs, and API just meant I was gonna get cut off in the future sometime, or the rules are gonna get changed. And the idea to build a long-term relationship with developers in this community is the thing that gets all of us excited. And the amount of applications and things getting built on the protocol that we never even expected is insane. This company Relay is building an intercom-like widget for any website that instantly can plug in ChatGPT onto your website as well as your whole inbox inside of the widget because it uses XMTP. So all of your messages can show up with you. You can have conversations with the website you're talking to and they can use a subdomain on ENS. It could say goodmorning.xmtp.org or.eth and it can be a full ENS name and that can be a way to communicate to the site. But also they've integrated ChatGPT where they've mined all the documents of the developer portals of all Web3 and I can go talk to the Uniswap bot on their site and actually ask questions about Uniswap and use it to get answers. To anything in Web3. And that was just a really cool example of people doing a lot of innovative things. And then we started to see people building payments inside of it, the ability to do on-chain voting. So you can imagine sending a message and there's an accept, decline, no button for voting on-chain for DAO governance, stuff like that. There's just so much cool stuff happening. And for us, it's just championing that developer community, championing the partners, building better relationships, and making sure that we're all driving towards this future where because of decentralization and building permissionless protocol, no one has to trust each other and it builds this trustless relationship where everyone knows they can build on this for the long term and allows us to actually have better relationships now knowing that future exists for all of us.

Yeah, I love it. I think I'm getting a picture of what this vision, kind of the expansive vision could look like as, you know, you kind of focus on the developers and really elevating the cool work they're doing. It is really cool work. I'm getting the sense of the possibilities here. So, you know, with that, I'd love to maybe zoom out a little bit and talk about sort of the crypto and blockchain space more broadly here for a second, where I'm curious, like, what's got your attention these days as you think about kind of State of the Union here? Like, is there anything important that people should be paying attention to, and maybe it's underdiscussed?

Hmm, it's a really good question. Maybe this is biased, but I'm really, really excited for non-financial use cases. I just believe so much in the ability for individuals to have more ownership over their digital lives and the ability to own your identity with, you know, the DIDs was a start and that's been around for, you know, 5, 6, 7 years, it's been around for a while. But now you have a utility and an application to use that with. And this idea of when someone's losing a Twitter handle or losing your Instagram handle, or getting kicked off a platform and you don't even own those names or you can't even resell them or anything. The idea of owning your own identity, using that across an application, and then things like messaging come along where it actually has utility and your identity having utility, whether it's decentralized social and you're able to take your network with you, you know, what Farcaster and Lens and, you know, even the Blueskies and the Nosters, I think they're all starting to show this future of, decentralized social world and we're just scratching the surface of it. It's still too hard, it's still too complicated. The general consumer doesn't understand it yet. We have a lot of work to do. But then at the messaging layer, you know, if we learned anything from the past, it's messaging follows social and the social networks kind of blew up, but messaging was the huge piece of that and they were unique and different for what they needed to be more secure. It's a different type of network. You know, the WhatsApps were created, The telegrams were created, the signals were created. I just feel like the ability to have an identity meet utility with digital ownership that isn't just assets, price go up, tokens, things like that. I'm so excited for more of those use cases to impact people's lives, to start to show people that Web3 isn't just, you know, a profiteering token go up market. Where they all feel speculative, it actually is increasingly adding value to people's lives because over the last 15 years, all of our lives moved online digitally. We didn't own any of it, so therefore the value didn't accrue to any of us.

Love it. Yeah, I share your excitement actually about that direction, and I think some of the work you guys are doing is really important to that end. So maybe two last questions here. First question would be, what would your advice be for founders building in the Web3 space in 2023? Say you're giving advice to yourself, you know, at the beginning, what would you, what would you say to yourself?

I think it's what I would always say to myself being a founder is pick an area that is authentic to yourself and that you're personally so passionate about. I've been working on messaging for almost 15 years. I'm so excited that I'm just still working on messaging. And in that, that focus to just do that really, really well, I think is the formula to have a chance to be successful. And for us, it's what we don't do that we're most excited about. Other projects are, you know, doing so many pieces of communication and communication can mean communications between blockchains and communication between notifications and dApps. And it's a messaging kind of, you know, WhatsApp-like experience or an email-like experience, but it also means a bunch of other things. We're just focused on a secure messaging network much like a DM network, right? Can I send a message? Can you have one-to-many messages? Can you have this secure messaging network that is much like you think about email, Signal, WhatsApp, et cetera? And can you bring that to the Web3 world? And that's all we're focused on. And I think a lot of people are focused on a lot more things and kudos to them for doing it. And I think we're just trying to stay radically focused on this is what we believe in, this is what we see missing in the space, and this is what we want to enable. Globally to happen. And if anything, like the past, that much focus around the right thing, messaging ended up being much bigger than anyone thought in the past. And I hope that that happens again.

Love it. So Shane, what is your team working on right now? And what's the best way for people to follow along on the journey?

Totally. I'll start with where to follow along because we do everything in the open. Everything's public. It's xmtp.org. So if you go there, You can see all of our pull requests. You can contribute on GitHub. You can join our Discord. You can talk to the team. We're sharing our roadmaps, getting feedback. We just published all of our Q2 kind of plans. We also have our 2023 kind of high-level goals out there. And so everything we do in the public. So the most important thing is to just come join us. Come jump into the Discord. Come have conversations with us. Come join the GitHub, you know, you can submit a PR, you can literally join in and build with us, which is the coolest thing about this space. And then for what we're working on right now, our biggest thing for the year is to be Web3's most secure messaging network. And the keyword there is secure. And we're really working on bringing signal level parity to Web3 via the XMTP network this year. And I think that for us is so important because in 2023, messaging, and owning our communication needs to mean that we have the most secure communication. So we're working really hard on that front. And then we have a lot of announcements coming up of major partners joining that will really take the XMTP network to the next level.

Love it. Shane, thank you so much. I'm really excited actually about what you guys are building and I appreciate the chance to hear kind of this expansive vision and how you guys are thinking about it. So thank you for coming on the show and have a great day. Rest of your week here.

Hey, thank you, Tanner.

All right, take care.