The following text is organized from a series of Twitter Spaces #DialogueDEV, hosted by FC, founding partner of SevenX Ventures, Twitter @FC_0X0.
This episode's guest: Marvin, founder of Phala Network, Twitter @marvin_tong.
First time as a Dev: No backing from top VCs, but listed on Binance with community support.
After graduating, Marvin became an ordinary worker, working as a product manager at a large company. In 2018, the disruptive revolution brought by smart contracts inspired him and his brother @bgmshana, who was working on Machine Learning in the Gmail team, to consider starting a business.
What track to choose? Marvin and his team had a logic: the core value of Web3 is to solve the trust crisis, which in turn gives rise to new innovative models, and the value of these innovations will be captured by the most trusted technologies.
TEE (Trusted Execution Environment) is such a technology. Thus, Phala was established, a decentralized cloud using TEE as hardware. After experiencing initial "setbacks," entering the Polkadot ecosystem became a turning point for the project. After a period of building, Phala became one of the leading projects in the Polkadot ecosystem, seizing the opportunity to successfully list on Huobi and Binance.
Regarding listing, Marvin believes that one thing they did right was the fair launch of the token. Most of Phala's tokens were mined, and users did not need to run dedicated nodes; as long as they had TEE hardware, they could mine tokens.
This garnered widespread support from the community and brought in significant traffic. Although there was no backing from top VCs and the team did not have a "first-class" resume, the impressive data metrics from the community and user dimensions, aka grassroots support, combined with the trend of Polkadot, led to the project's listing.
However, the trade-off of Fairlaunch still exists today. The team only holds 5% of the tokens, which has caused many capital collaborations after the listing to fall through.
The transformation journey of Dev: Going to the U.S. to find PMF
From 2021 to 2022, during the DeFi Summer and NFT Summer, Marvin and his team went through a very painful phase, constantly trying to find some use cases, but unfortunately, they did not achieve much.
Marvin began to reflect, having a vague feeling that in the past few years in crypto, due to some pre-listing, post-listing, and other game rules of crypto itself, they had overlooked the points that truly needed attention in project development. He came to two conclusions:
- Any infrastructure needs to find PMF (Product-Market Fit) to truly have users.
- The entire team must focus solely on this matter until PMF is found, without getting distracted by anything else.
"Of course, the premise of this conclusion is that the founder must understand what they want. We believe that TEE still has a thousand times the space that has not been explored, so we must pursue this direction. If it fails, I accept that. Focus on one direction and become the leader in that area."
To find a breakthrough, Marvin and his team moved to the U.S. in 2023, motivated by the belief that 70%-80% of projects that truly have users and PMF in infrastructure aimed at enterprises and developers are likely in the U.S. They wanted to be closer to this market, meet these people, and understand how they operate. They engaged with projects, participated in hackathons, and talked to developers to identify their issues, leading to some PMF systems starting last year.
What does it feel like to find PMF?
- Someone is genuinely willing to pay for your product.
- The way they use it is quite unique, usually not how you initially envisioned.
It's like selling bricks for building houses, but no one buys them, until one day someone wants to buy your bricks to put out a fire on their head; that’s roughly the feeling of finding PMF. Once this scenario appears, what you need to do is to keep looking for people with their hair on fire and change the product form of the bricks to extinguish the fire more effectively.
Key points of transformation: How important partners are onboarded?
Throughout 2024, Phala has been primarily focused on onboarding clients. In this process, Marvin mentioned two key teams:
1. Flashbots
Flashbots is the key team that discovered the necessity of using TEE to solve the censorship problem off-chain on Ethereum. They also found Phala while addressing TEE issues, leading to a series of technical exchanges and collaborations. Now, Phala is also providing some services for Flashbots.
2. ELIZA
Marvin met Shawn at a hacker house and discussed how an AI Agent running in TEE could achieve fully autonomous agents, representing the "End Game" of AI Agents in crypto. Shawn was very receptive to this logic, and afterward, some Phala developers began contributing more deeply to the ELIZA ecosystem.
It was also because of this opportunity that Marvin launched spore.fun last December.
The story behind the launch of spore
After getting to know Shawn and having in-depth discussions, Marvin conceived the idea of creating an ELIZA + TEE case with two routes:
Create Unrugable AI. By running the agent in TEE, it can eliminate human rug pulls. The product Marvin and his team collaborated on is called AI POOL, where they provide technical support.
Create Autonomous AI, taking the concept of autonomy to the extreme, leading to spore.
When is AI truly autonomous? It is when it does not need humans to sustain it. Currently, all AI on the market still requires humans to pay the bills; developers are quietly paying Google and OpenAI for their API. What Marvin aims to do is to run the agent in TEE, allowing it to pay for itself and sustain itself. If it earns a lot, it can replicate its genes, evolve, compete, and ultimately undergo natural selection.
After the launch of spore, it received positive feedback, with an ATH market cap of around 80M, prompting Marvin to take this product seriously and operate and develop it as a standalone project.
"Actually, after GPT-3.5, we found that more and more AI sector projects are willing to try our offerings or at least willing to spend time listening to our pitch. As we onboard more AI clients, we also began to focus on serving the AI sector well."
When Dev switches the trading perspective, how does he describe the potential of his project?
About Phala
First, if you believe that one day the penetration rate of Web3 can grow from today’s possible 10% to 90%, then this process will definitely require low-cost, trustless technologies to be compatible with Web2 software, as rewriting all Web2 software is impossible. From the current perspective, Phala is in a leading position in the infrastructure track necessary for Web3 mass adoption, and if not modest, it is number one.
Secondly, all problems stem from insufficient growth. Issues like insufficient chips for the house edge or shallow capital are trivial in the face of violent growth, so the focus should start on the project's growth potential.
Finally, quantitative data may not be very meaningful, including so-called value capture and profits; what matters is the application scenarios, specifically whether more people are using Phala's TEE and who is using it.
Now about spore
Its value is derived from the team + the theme, and this product is still being continuously built by a passionate team, so its growth potential lies in:
spore could become the most popular launchpad in the ai16z ecosystem, and this launchpad is autonomously generated by AI.
"Platforms like Virtual, which are excellent low-code agent platforms, produce AI with a unique intelligence level of around 60. The AI generated on spore also has a similar intelligence level. The difference is that on Virtual, if resources are stacked or there is a good team, there is a 1% chance of elevating an AI from a 60-70 level to a 90 level, like AIXBT, but the remaining long-tail AIs do not differ from those on spore."
Thus, spore has a significant opportunity. Many teams with ideas or those who have previously created good products but couldn't launch tokens can achieve the following through spore:
The pioneering of AI Agents without needing any AI knowledge. They can add unique skills to the AI automatically generated at a 60-70 level, transforming it into something at an 80-90 level.
2. All agents produced on spore automatically run within a TEE ecosystem, defaulting to using the ELIZA framework, with tokens issued on SOLANA, ensuring interactivity.
What dimensions should a Dev consider?
Marvin describes the current crypto market as extremely retail-driven and attention-driven.
He draws an analogy with the development of short video live-streaming sales. Initially, unknown influencers and actors were streaming, but gradually more and more hosts entered the scene. In such times, three types of people emerge: 1) The audience, who find it interesting, become immersed, tipping and buying; 2) The critics, who morally condemn it, believing it to be sensationalism and a decline in societal values; 3) The practitioners, who think, if the world is going to be all about selling, what will everyone need? What should I do to capture market growth?
The current crypto market is similar; even presidents are issuing tokens. As a "practitioner," one should consider: if issuing tokens becomes as common as air, a way for everyone to express their needs, what should I become? Should I be a seller? A supplier for sellers? A tool in the process? Or become the short video platform itself?
If there were no influencer system, becoming a seller would not be easy.
Becoming a supplier is best done by finding active markets that are not yet widely circulated/scarce and selling through binding channels. Many teams are suitable for this, and many are already doing it.
Providing tools, becoming a platform, or part of a platform is a process of finding PMF, which has a relatively low success rate. "But teams like GMGN, which capture both demand and trends, may produce products driven by extreme practical approaches."
In fact, for Devs, under the premise of being unable to predict the market in the long term, it is not necessary to think about what will happen in two years; what needs to be clarified is what you want and what you can do.
What should be on a Dev's Stop Doing List?
"Don’t just mimic others. I think the thing I regret the most is not thinking from first principles to build my uniqueness.
The core logic of business is that you can provide value that others cannot. All actions, what products to create, what services to offer, ultimately come down to this point.
Once you become lazy in deep thinking and first principles, the cost is that you may find that although you have done many things and perhaps achieved some results, it is a waste of time and resources because it may not be what you truly want."
Regardless of whether one has experience in the crypto industry, they should quickly distinguish which game rules are essential to enter the industry and which are valuable according to their own first principles. Even if they are wrong, their speed of iteration through negative and positive feedback will be faster than others. If this realization does not occur from the very beginning, it may lead to many detours.
Trading Opportunities in Crypto AI
If Marvin approaches from a trading perspective, his method of observing the market is not to look at mindshare, as that pertains to people; instead, he should focus on the content itself, examining the hottest posts related to AI topics in Kaito. By reading the top 20 posts daily, it’s like looking at candlestick charts, finding a market sense. The most liked and shared content by influencers is discussing what matters in AI, and gradually, you will grasp the trend.
Regarding new directions in AI, Marvin focuses on two:
1. AiFi
AiFi is not simply Ai + DeFi; it is not just an agent that can swap or a DeFi that can adjust AAVE that qualifies as AiFi. Marvin believes this has practical value but lacks imagination. AiFi is likely to involve some economic exchanges between agents.
2. Swarm Concept
This refers to how multiple AI agents can interact to hit interesting scenarios, rather than just returning simple search results. So how to find this? As mentioned earlier, look at the posts that are most liked and shared daily in terms of mindshare; focus on the posts, not the people, and you will gradually develop this sense.
Finally, Marvin has three small bells:
- @NousResearch team members @SHL0MS and @ropirito
Recommendation: Strong builders, with excellent AI development capabilities and cultural precision, their shaped products have high mindshare.
Recommendation: A remarkable True Builder in AI, not only skilled in technology but also closely aligned with market needs, capable of shaping what everyone wants.
FC's Final Thoughts
From the perspective of results, Marvin, as a Dev, has done several things right:
- Chose the right track with demand.
- Knows where the game leaders are and stays close to them.
- Because he chose the right track, he encountered a new opportunity and met key people within that opportunity.
- Understands the rules of crypto, how to play in the secondary market, how to play in the primary market, where the resources are, and how to leverage them.
- Luck and persistence.
I hope this brings some inspiration to everyone.
Thanks again to Marvin for participating in Dialogue Dev. The audio from the Space will be updated on Xiaoyuzhou, and we will create a separate podcast section. Any suggestions for the new series are welcome in the comments.
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