Edge and Node Co-founder Tegan Kline and I discuss Web3, DAOs, dApps, and the importance of questioning official narratives.
Guest: Tegan Kline, Co-Founder and Business Lead at Edge and Node, a Forbes 30 Under 30 honoree, and a sought-after speaker on all things blockchain.
Immutable: Episode 6, with Tegan Kline
“Decoding Web3”
Josh Burek: This is Immutable, from Harvard Kennedy School’s Belfer Center for Science and International Affairs. I’m Josh Burek. In today’s episode, we hear from Tegan Kline. She’s the Co-Founder and Business Lead at Edge and Node, a Forbes 30 Under 30 honoree, and a sought-after speaker on all things blockchain. We cover Web3, DAOs, dApps, and the importance of questioning official narratives.
Tegan Kline, welcome to Immutable. It’s great to have you on the program
Tegan Kline: Thank you so much for having me. I’m excited for the conversation.
Josh Burek: Tegan, you and your team at Edge and Node are making a really big bet on Web3. And your vision is one that's founded on decentralized infrastructure. Your team talks about scaling human coordination online so that people have more flexibility, opportunity, and choice. Can you walk us through some contrast between the governing assumptions of Web2 and Web3?
Tegan Kline: Absolutely. Yeah. So let's first start with Web1, and this was really where companies created content and companies owned that content. And this is commonly referred to as the read-only web. This was from 1991 to 2004. And the creators on Web1 were generally developers. And there was quite a high barrier to entry to create content, and companies kind of owned that content, but the companies also created that content.
And Web2 is where we are right now. So we create content and the companies own that content, those platforms like Tik TOK, Facebook, Instagram, Twitter, that list goes on and on. And the creator economy really began with Web2. And so we had social media, we have smartphones, and this is really where you can write and you can monetize on the web and you no longer need to be a developer to create content on Web2.
So that barrier to entry has been reduced substantially. Incentives are everything. And so in Web2, users are very much the product and the Internet, as we know it incentivizes this because Web2 companies, they need to monetize. We love to use these platforms – Tik-Tok, Twitter. They're great places to educate until a Web3 alternative is ready.
Many of us will continue to use these platforms, but economics 101 is there's no such thing as free lunch. So nothing is free. And this applies to these Web2 platforms.
And so with Web2 platforms, those centralized companies, they're in control and the users don't get to make the decisions.
The users have little power. Data is owned and controlled by these centralized companies. And then they generally monetize them. Also these Web2 platforms generally own the user identity. So imagine you're kicked off of Facebook or kicked off of Twitter. Your identity on those platforms is gone – like years of your life. It just vanishes in the matter of a second. In these centralized Web2 companies, they have all of that power. So—
Josh Burek: It's really a server-centered paradigm.
Tegan Kline: Absolutely. Yeah, so the servers have all of that data and those servers are owned and controlled by those centralized companies, which is really what we're breaking open with Web3. And then beyond just selling ads and monetizing, and you look at the privacy breaches that have happened with Equifax and other platforms, and you quickly learn that these centralized databases that you're trusting with your most private information, pictures of you, your license. They're not secure and there's breaches. So who knows where that data is today. We, as the users, are kind of like this frog in a pot where the water is boiling, it's getting hotter and hotter and we need someplace to jump and that place is Web3.
Do I love the Internet as it is today? Yes, I'm grateful for everything the Internet has done and given us, but there is a problem. It can be better. And so Web3 is making it better. So Web3 is a brand new platform for decentralized applications to live. And it's very much about protocols on this platform that is Web3, not platforms itself. And that Web3, these applications, they need to be fully decentralized, and this will give the user the power to own their content, own their control, their data. They'll be able to be rewarded for early participations and contributions and it's really about giving the power and that control back to the user.
Josh Burek: Tegan, that's a great 30,000-foot overview of these differences. Let’s dive in. At a practical level, I'm thinking about a product like Waze. You talked earlier about how users are the product. It's remarkable that I get to use a service like Waze without paying for it. But of course I am paying for it with my mindshare, receiving ads that I don't really want to opt in to.
So, of course users are the product in a sense. How might a killer app like Waze or other really popular features of Web2 evolve in a Web3 way that would alleviate some of these pain points – even, as you mentioned, as a frog proverbial hot water, we might not feel it?
Tegan Kline: So I think there's one big problem and that's they have their data and it's gate-kept behind these walls and they have little incentive to give up that data and that ownership and that control. So I can't imagine a Web2 company easily accepting Web3. What we're seeing is a lot of web to developers and individuals at these Web2 companies, they're jumping ship into Web3, either to work on protocols or to create their own protocols. And I think that that trend will continue. The mass exodus is very much on. But how it would look, if it's a decentralized Waze, is taking an example of Twitter. So on Twitter, or even Waze, you as a user, you were an early user of Waze. You didn't get anything for being an early user to Waze even though Waze needs you, right? You as the user make that platform. Similar to Twitter, like Twitter is nothing without its users. But you aren't compensated for that early participation and you aren't incentivized to stay in those communities.
And so within the blockchain space, within Web3, we've seen a lot of different use cases like, you know, Uniswap for example, which is a decentralized exchange. They rewarded their early users via their token. LooksRare is a decentralized art marketplace and they rewarded their early users with tokens.
And so these tokens are a very powerful way to incentivize and reward early participation of these platforms and these applications. You are, I think for the first time, like compensated commensurate to the value that you bring because you as the user are bringing that value. And there's no centralized company at the center that's taking a fee or a cut for not providing a ton of value. So it's a very exciting time in the Web3 space,
Josh Burek: What is the connection, if any, between blockchain and Web3? Does one depend on the other?
Tegan Kline: I'm glad you asked because rewind five years ago, there was this narrative that's still lingers today that it's blockchain, not Bitcoin; blockchain, not tokens. And there very much is a connection between blockchain and Web3. Blockchains are where information live and on these blockchains, you can verify that on-chain information.
Which is extremely powerful in a time of a lot of fake information and news. And so with these blockchains and with Web3, you need to have these tokens for these protocols. And if we look at an example of a centralized Web2 company saying, you know, I'm here to tell you, you don't need the token, you can just use a blockchain. It doesn't make sense because all it is is a database. It's a federated database and we've had federated databases for over 30 years. And there's absolutely nothing new there. And so tokens are kind of necessary to secure the database and align incentives around parties.
So with Web3 companies, they don't want to give up that control. They don't want to give up that walled garden, so they don't want to invite this new data, this new way of doing things. And federated databases themselves, they are not really used because they're very difficult to monitor and to run.
And then it's a federated database. You need someone kind of overseeing that. And that's generally corruptible, that centralized power and control is quite corruptible.
Josh Burek: Tegan, I’m really curious to ask you about a big idea that the Edge and Node is building: The Graph. And before I ask you some questions about this, in the spirit of disclosure, I want to share with Immutable listeners that for the past year, I've made some modest investments in The Graph and those investments are about equal to 10 days’ worth of groceries. Tell us what you're trying to build with The Graph. What could it mean for this landscape of Web3 that we've been talking about?
Tegan: Yeah, absolutely. And before I dive in, I just want to preface that The Graph is very much a utility work token. And so you should only buy what you plan to use in The Graph network. But with The Graph, it's core infrastructure for Web3. And The Graph is one of the most used protocols in the blockchain space that has developer mind share of over 27,000 developers that are building and using The Graph.
And The Graph, what it is, is really just open data on top of blockchains. The Graph is there to support every network, every layer one, every layer two blockchain, um, and every single use case. So The Graph is really organizing the world’s on-chain blockchain. And we believe that all data should be open and transparent and there for anyone to be able to use and search and build with.
And so that's really what The Graph brings to the Web3 space. The graph is backed by Tiger Global, FinTech Collective, DCG, Multipoint, Reciprocal Ventures, but many individuals, as well, are contributing to The Graph.
Josh Burek: You say at one point on your website that what Google does for the web, The Graph will do for blockchains. When Google began, of course, it was just a better search engine than Lycos, AltaVista and Yahoo. It has since become something much more. Talk to me about a trajectory for The Graph. How might it mirror this Google precedent?
Tegan Kline: So, many know the Internet via Google. And so The Graph is doing a very similar service in that The Graph is helping to organize all of the world's data and information on the Web. The difference is Google is really kind of at the center of that and they own the data, they own the info and they can kind of decide what is true, what is shared, what is not shared.
The Graph removes that centralized intermediary and The Graph does this in a decentralized way so that all the information is verifiable, and coming from on-chain, public blockchain data, which is very powerful in this day and age. Google started out with very pure intentions, but again, everything is incentive driven. Google, I think is a clear example of this. So Google had to find a way to monetize after providing this great service to the community for free. And a lot of cool stuff happens within Google, but they kind of throw it to the wayside because nothing comes close to the amount of money that they get through the monetization of advertisements.
Google has all this info and the users. And Google kind of monetizes their users by selling ads to companies, and then selling those advertisements to the users of Google. And this isn't just Google, right? It's every, almost every Web2 company on the internet today. And I don't believe that this is what the Internet was created to do You know, when the worldwide web came out, you know, you thought there's so many unlimited possibilities and we have this new way to communicate and free-flowing info.
And it was such an exciting time with very unlimited potential, but instead we have this, you know, we have Web2 companies that are kind of monetizing their communities, influencers, monetizing their communities, and applications are trying to keep you on these applications for as long as possible.
So it's about attention and it's about consumption. And to me, this is sad. And so Web3, I think, is how we take the Internet back. And it's how we give the power back to the users and allow humans to have the tools to really reach their full potential in a way that the current Internet can't.
Josh Burek: You made a fascinating point there about Google's best intentions. There's the old truism that culture beats strategy. And I think in Google's case, right, incentives beat taglines. They built their company around the tagline “Don't be evil.” But Charlie Munger famously said, “Show me the incentive and I'll show you the outcome” Tegan, I'm hoping you can give us a tour of decentralized apps. What are they, how are they different from conventional apps? And are we using them already without knowing it?
Tegan Kline: DApps: it stands for a decentralized application. I want to preface this by saying that right now, a lot of applications that are dApps are not meeting that definition of fully decentralized, but it's because the Web3 stack is still being defined and solidified. A lot of these applications are built on top of blockchains, but they've kind of had to cut corners around centralization just to kind of keep up with demand.
And Moxie [Marlinspike] actually, who's the co-founder of Signal, which is one of the only encrypted messaging apps, he has a blog post that he put out recently on Web3 and just kind of diving into some of the centralized pieces that exist within Web3. But this is all changing and evolving.
And they’re very much layers to that decentralized Web3 stacks. You have Ethereum at the base layer, The Graph at the indexing and query layer. Protocols like arweave and IPFS at the storage layer. And then Ceramic and 3Box Labs more at the identity and data layer. And so there are many use cases that we have seen that have reached the masses when it comes to these decentralized applications.
decentralized finance was really the first big boom in the Web3 space. So there were decentralized exchanges, like the NASDAQ, but it happens in a decentralized way, like Uniswap and then users can be liquidity providers, so you can give your capital, and be paid for that. So you can be this market maker in these decentralized exchanges. And then there's PoolTogether, which is a no-loss lottery.
Coming from traditional finance, a lot of the things that happen in defy can't happen in traditional finance. We're seeing so much innovation because of a lot of that transparency that exists within the space. But there's also like digital art, which is a really exciting thing right now that's touching the masses, which is NFTs and their marketplaces like KnownOrigin and art blocks that are allowing for NFTs to kind of touch the broader masses. But then there's also DAOs, which is governance and that's helping to kind of scale organizations in the way that people organize online.
I'm sure many of your listeners, if they've ever interacted with any of these protocols or tokens, even on like centralized platforms, like Coinbase, CoinMarketCap or CoinGecko, they've used Web3 infrastructure without knowing it. So these platforms all pull via The Graph. So though they're kind of centralized companies, they're still leveraging decentralized protocols.
if anyone's ever traded tokens on, on Uniswap, it's doing more volume than some centralized exchanges. So a lot of people have played with Uniswap.
Josh Burek: Thinking about the mainstreaming of conventional apps, software applications have existed for decades, but it wasn't really until the iPhone 15 years ago that we saw a proliferation of apps, and, of course, the phrase “There's an app for that,” mainstream. As you look at the next year or so with dApps, is there a similar need for something like the blockchain equivalent of an iPhone to trigger a much greater uptake in usage or, do we already have it?
Tegan Kline: With your iPhone, you can actually get a lot of these decentralized applications, so you can download like Uniswap or, or use that on your iPhone, which is great. But I do think that there is a chance that once Web3 kind of impacts and changes many people's lives and how they operate on the Internet, that the hardware could also evolve and change to shape around Web3.
And I know that there are people kind of thinking about that already. And right now, one of the big things we need to focus on in Web3 is the user experience, and improving that and making it much easier to use. And so I think with the change of hardware that could help as well but I don't think it necessarily has to at the moment.
Josh Burek: A lot of the news headlines and, frankly, VC funding in this domain tend to be oriented around decentralized finance or DeFi, but Tegan, you mentioned decentralized governance or DeGov. That's a big idea. A lot of Immutable listeners might not have grasped this at the same degree you have. Can you tell us a little bit about DeGov and what some of the use cases of this concept might involve?
Tegan Kline: Governance in the Web3 space is usually spoken about in the form of a DAO and that stands for a decentralized autonomous organization. So everyone listening interacts with governance in their everyday lives.
So you can think about universities to get a paper published. It has to go through a governance process to be approved. Or applying for a job. There's a governance process generally within that organization. And you have to be approved into that job. There's also, of course, the government. You vote, things pass through that you don't vote on, but the government kind of takes care of.
The problem with a lot of this is when these groups are small, they have the majority of the power and that can be easily corruptible in the event that the right governance and things overseeing that power is not in the right place. And so with DAOs, it's really changing how people coordinate and organize using on-chain governance and programmable money, through these tokens. An example of this is Syndicate DAO. It's a great platform where many DAOs live. And a DAO, you're really gathering around a shared mission or shared interests. There's generally no hierarchy within a DAO. Everyone is equal. Certain people will put up bounties and they'll want those bounties filled.
For example, like you could put up a bounty of a $1,000 to the DAO to write up a blog post on that DAO. So anyone from that DAO could take that bounty on and get paid for that work. And then some of the things, there are shared missions or interests, so there’s Investor DAOs, so people are pooling their money to be able to invest in projects, which generally you don't have exposure to unless you're like a venture capital firm or a family office, which is really exciting because a lot of individuals can participate.
There's also like women-founder DAOs or woman-investor DAOs, DAOs around collecting art. But you could imagine you could create a DAO to help clean up your city or help reduce poverty in your neighborhood or educate or really any societal issues, you could create a DAO.
Anyone could join and contribute. And some of these DAOs are even launching tokens, which allow them to incentivize the community even further. And so many gather on online communities like Discord or Telegram. And it's exciting because you no longer have to be like in a city anymore. You can really work from anywhere and anyone across the globe with Internet and a computer, an iPhone can participate in these communities. So it's really exciting.
Josh Burek: The author and historian Niall Ferguson has described history in large part as a contest between hierarchies and networks. As you're talking, I'm thinking here about DeGov being a tool to empower the side of networks. And think about, you mentioned work, employees for the past two decades have really only experienced true democracy in the workplace only if their CEO embraced it. I'm thinking here of Zappos. And there's a few other organizations that really tried to embody that, but never quite had the architecture of what you're describing. It sounds like this could extend in terms of social impact beyond Web3 into our real lives.
Tegan Kline: Absolutely. It really is all about the network. And I think it's the next big, exciting movement beyond DeFi, beyond NFTs. I think DAOs are really what's next. And a lot of the tooling is being created today. So if this resonates with any listeners, there's a ton of opportunity to get involved and help contribute to the future of DAOs.
Josh Burek: Tegan, you shared a fascinating tweet a few weeks ago. You wrote the world does not gravitate towards the truth. The world gravitates toward the market. This is why we must market the truth. In one tweet you have deep cynicism and deep hope.
Tegan Kline: Totally: a story of my life. So I think there are narratives and these narratives are often stronger than the truth and sometimes the narratives are the truth. But there are times when they are not, and this can then be politicized. And then people form groups around these shared beliefs. You know, sometimes those beliefs are based in facts and sometimes they're not.
What happens is there's little room left for questions. But beyond that, there's very little incentive for people to research and find the truth, or, you know, think through the truth and thinking through the truth is quite difficult. But oftentimes with these strong narratives it takes about 15 to 20 years before we can accept that they were not true or not correct.
One example is the food pyramid or the low fat, high carb, high sugar as like the only way to think about health. And some people may still agree with this.
And for some people, this may be the best thing, but I think it's much more complex than this. We see paleo and keto diets are actually quite healthy for many people, which is like very little carbs, very little sugar, sometimes high fat. So I think it really depends on the humans. Another more extreme example is with the Iraq war. You know, we went to war over weapons of mass destruction; we went to war over a narrative that wasn't true.
It's profound when you think about this and when you realize this. And I hope, you know, many of the listeners, it won't take 15 or 20 years for them to find the truth. And I think it's really important to kind of question everything.
Josh Burek: Early in your 20s still, you had secured a coveted position in the financial services field, but you left to take on this ambitious project at Edge and Node. What for you was your Newtonian trigger moment?
Tegan Kline: So I learned about Bitcoin back in 2011. That's really where the seed was planted, but I put it on the back shelf and kind of went down this traditional finance path on Wall Street. I was there for six years and I'm grateful that I did this because it really led me to kind of understand the not so bright side of finance, kind of the dark side of finance, the dark side of banking, and really see the friction points that banks can add in the cost. And so when I learned about Ethereum in 2016, that's when it really clicked for me. And that's when I saw this new financial system, this new internet, and the opportunity to remove third parties, to improve efficiency. And so that's really where I dove in head first. I kind of learned along the way. I started focusing on the private side of things, really like giving people equal access to the Internet and then moved over to The Graph ecosystem two years ago to really focus on making all data verifiable and public and giving everyone this equal opportunity on the Internet.
Josh Burek: A lot of our conversation has been technical in nature, but there's obviously a social impetus behind your passion. Say a little bit more about the social impact you think could begin to take shape as these technologies get mainstreamed.
Tegan Kline: I can share a little bit about like the vision behind Edge and Node, if it's helpful. We believe society is very much a meritocratic community at each level of organization. And our vision is that people have the information and the information that they need to make an educated decision.
And it's really about creating this equitable and transparent system that works for the people rather than the other way around. And ownership implies stewardship. So people are kind of empowered to solve the world's biggest and most pressing problems and, you know, incentivize along the way for, towards these goals. What are the most pressing problems in the world? It's a big question, but you could say like poverty, you can say world health issues, greed, misinformation, you know, and so why on the Internet are we focused around selling advertisements around consumption?
Why aren't we focused on solving these issues? And so that's why I'm super excited about Web3, because I think Web3 is really what's incentivizing this to change and it'll allow everyone to kind of achieve their fullest potential or at least have the opportunity to achieve their fullest potential.
Josh Burek: That's something that gives me hope as I think about the incentives of Web2 that have effectively attracted literally some of the world's brightest people, including neuroscientists, devote themselves to creating slightly stickier ads for people like me and what it would mean to redeploy that brain power towards something that has a little bit more social impact, that alone gives me hope.
You’re a Forbes 30 under 30, obviously doing some exciting things. What are some things that might surprise listeners about you and your interests outside of Edge and Node?
Tegan Kline: My interests outside of crypto have reduced; I need more hobbies. But I would say like one thing that I've never shared publicly is I was actually born with a brachial plexus injury. And so when I was born, I almost died, and thankfully I was revived then, but the nerves in my left arm were damaged.
And I distinctly remember when I was younger, I would use this, right? I was like this smart bratty child. And so I'm like, “I can't do that; I have this injury.” And I remember my oldest brother, Logan, he was babysitting me, and I might've been like three or four. This is one of my earlier, vivid memories, but he told me to go put my shoes on.
And so I needed to put my socks on. My mom would always help me with my socks, and I was like, this injured child. So I would always ask for help. And so I asked him to do this for me and he says, “No.” Like “You can do it yourself. You're old enough to do that yourself.” And I screamed, I cried. I threw this big tantrum, which is probably why I remember it, like the trauma of this moment.
But he didn't help me. And so I put those socks on myself in that moment for probably the first time ever. And from then on, I didn't use my arm as an excuse. Like I can do it on my own. It taught me this lesson that I then used in my life, over and over.
It's just like, don’t make excuses and don't use something that you could make an excuse for. Like, don't just use that. And I think another example kind of going back to like the question everything is when I was born, the doctors told my parents like, just wrap my arm, don't let me use it. And my parents kind of questioned that and they did the opposite of that.
They made me use it. And I think I have mobility in my left arm today because they did question that. So I'm really grateful to that. but yeah, that's something I've never shared publicly.
Josh Burek: Well, it sounds like you have at a minimum, a remarkable older brother and remarkable mom and dad. it. Thank you for sharing that story, but more importantly, thank you for sharing your time and insight with us. Look forward to following your progress and look forward to continuing the conversation.
Tegan Kline: Absolutely. Thank you so much for having me.
Julie Balise: Immutable is a production of the Belfer Center for Science and International Affairs at Harvard Kennedy School. Our program is produced and edited by Josh Burek, Director of Global Communications and Strategy. The Associate Producer and Technical Director is Benn Craig. Digital Communications by me, Julie Balise. Thanks to Deb Henderson for our podcast artwork. Upcoming episodes and additional information can be found at belfercenter.org/immutable.