The Birth of Tensor: From YC to Solana Pioneer

Tensor, a leading NFT marketplace on Solana, emerged from an unlikely beginning. Richard Wu, co-founder of Tensor, shared the fascinating origin story of how he met his co-founder Iliya through Y Combinator's co-founder matching portal. At the time, Richard was working as a quant researcher at Two Sigma but felt the entrepreneurial itch to build something from scratch.

"I wanted to look for a co-founder," Richard explained. "And that's when I went on YC startup schools, co-founding matching portal. And that's where I found Iliya's profile."

This serendipitous connection led to a partnership that would eventually create one of Solana's most innovative NFT platforms. Richard's background in computer science and software engineering, combined with Iliya's self-taught programming skills and experience building on Solana, proved to be a powerful combination.

The Tensor Advantage: Catering to Pro Traders

What sets Tensor apart in the crowded NFT marketplace landscape? According to Richard, it's their focus on professional traders:

"We basically saw the same thing. We saw that existing NFT marketplaces are really, to some extent, like carbon copies of existing Web2 marketplaces, like Amazon, like eBay, like Etsy. And they were really geared towards the retail audience."

Tensor identified an underserved segment of users who wanted a more sophisticated trading experience for NFTs. By creating a "terminal-like experience" similar to what professional traders use for stocks or cryptocurrencies, Tensor tapped into a growing demand for advanced NFT trading tools.

Compressed NFTs: A Game-Changer for Digital Assets

One of the most exciting developments discussed in the podcast was the emergence of compressed NFTs on Solana. Richard explained the revolutionary potential of this technology:

"Compressed NFTs on Solana is basically a way for people to create million NFTs instead of for, you know, tens of thousands, hundreds of thousands of dollars, you now create a million NFTs on Solana for less than $100."

This dramatic reduction in minting costs opens up entirely new possibilities for NFT use cases. From chat stickers to in-game items to loyalty programs, compressed NFTs could enable mass adoption of digital assets in ways previously unimaginable due to cost constraints.

The Tensorians: Proving the Concept of Compressed NFTs

To showcase the potential of compressed NFTs, Tensor launched their own 10,000 piece PFP (profile picture) collection called the Tensorians. This project served multiple purposes:

1. Demonstrating the viability of large-scale compressed NFT collections
2. Creating a dedicated community of Tensor supporters
3. Providing a way to easily distribute rewards to engaged users

Richard elaborated on the strategic thinking behind the Tensorians:

"For us, like, you know, we're able to do a lot of cool things that we hadn't have done before. So one thing is like, we're able to, we did this a couple of days ago, but we're able to a drop a bunch of rewards to all of these holders and all of our super fans without having to try to figure out like, okay, let's have, you know, without having to like have some sort of like survey on our website, asking people like, are you a super fan?"

The Future of NFTs: Beyond PFPs and Art

While much of the early NFT hype centered around digital art and profile pictures, Richard sees a much broader future for the technology. He highlighted several potential growth areas:

1. Consumer applications (e.g., chat stickers, digital collectibles)
2. Gaming assets
3. Loyalty programs and engagement tools
4. Potentially even financial instruments like bonds

However, Richard emphasized that Tensor's focus remains on providing the best possible trading experience rather than specializing in any particular NFT niche:

"Ideally, you want to become the most comprehensive marketplace, the fastest, the most user-friendly marketplace and platform to trade any NFTs if you're just there to buy and sell."

Solana's Role in Mass NFT Adoption

Throughout the conversation, Richard expressed strong confidence in Solana's potential to drive mainstream NFT adoption. He sees Solana as particularly well-suited for high-volume, low-cost NFT use cases:

"I think that's where Solana would differentiate itself, is with these really cheap NFTs that are used for consumer use cases, for example, like chat stickers or massive like art or drops that that's sort of like what trip does. I think that's where Solana will shine. And I think that's where mass adoption happens for NFTs is on Solana."

This perspective aligns with Solana's reputation for high throughput and low transaction costs, making it an ideal blockchain for consumer-facing applications that require frequent, inexpensive interactions.

The Challenges of Building in Web3

Richard didn't shy away from discussing the difficulties of building a startup in the rapidly evolving Web3 space. He mentioned the learning curve involved in working with new technologies and the challenge of creating user-friendly experiences in an ecosystem still largely geared toward early adopters.

"We basically ate glass for the two to three months before doing this collection," Richard admitted, referring to the work involved in enabling compressed NFT trading on Tensor.

This candid acknowledgment highlights the dedication and perseverance required to innovate in blockchain technology, where best practices are still being established and tools are constantly evolving.

The Power of Community in Crypto

One recurring theme throughout the conversation was the importance of community in crypto projects. Richard emphasized how valuable it is to have a dedicated group of supporters who believe in your product:

"And I think if we have, you know, right now it's, I think, 2003,000 unique holders. If we have, you know, eventually 10,000 unique holders who are constantly telling their friends about like tensor, why it's the best marketplace on Solana, I think like we're off to the races at that point."

This grassroots, community-driven growth model is a hallmark of successful crypto projects, and Tensor seems to be leveraging it effectively through initiatives like the Tensorians NFT collection.

Balancing Innovation and User Experience

As Tensor continues to grow, Richard highlighted the importance of balancing cutting-edge features with user-friendly design. He noted that while their initial focus was on catering to professional traders, they've seen increasing demand for a simpler interface:

"What we're seeing is that the number of users using the pro interface has actually plateaued for us while the number of users using our light mode is actually still increasing day over day."

This insight is driving Tensor's product development, as they work to create an experience that appeals to both power users and more casual NFT enthusiasts.

The Role of Speculation in Crypto Adoption

Near the end of the conversation, Richard offered a nuanced perspective on the role of speculation in crypto:

"For better or worse, speculation is one of the only product market fits we're seeing in crypto right now. Everything in crypto is about speculation. That's right. Everything is in crypto is about speculation, but that's okay, because that's how we bootstrap."

While acknowledging the downsides of excessive speculation, Richard sees it as a necessary step in the evolution of the crypto ecosystem. By attracting early adopters and capital, speculation helps fund the development of infrastructure and tools that will eventually enable more diverse use cases.

Tensor's Vision for a Comprehensive NFT Ecosystem

Looking to the future, Richard outlined an ambitious vision for Tensor that goes beyond just being a marketplace:

"The vision for tensor is an ecosystem where you as a collector, you as a trader, you as a creator, you as an asset issuance can go to one ecosystem, one stop, and do all of that without having to think about, okay, how do I create NFTs on this launchpad and then get it into tensor? It should be a seamless experience across the mentend, and that's what we're really digging into."

This holistic approach could position Tensor as a central hub for NFT activity on Solana, streamlining the process for creators, collectors, and traders alike.

The Potential for NFTs to Replace Tokens in Reward Systems

An interesting point of discussion was the potential for NFTs to supplant tokens as reward mechanisms in Web3 applications. While tokens have been the go-to choice for many projects, Richard sees unique advantages to using NFTs:

"I think what differentiates NFTs from tokens, and why people even trade NFTs to begin with versus tokens, is that there's a highly emotional and social aspect to them that you won't be able to find with tokens."

This emotional connection and the "endowment effect" associated with owning unique digital assets could make NFTs a more powerful tool for user engagement and retention in certain applications.

Challenges in NFT Interoperability

One hurdle facing the NFT ecosystem is the difficulty of moving assets between different blockchains. Richard explained why this is particularly challenging for NFTs compared to fungible tokens:

"I think bridging NFTs is extremely difficult. And I think it's actually net negatives for someone to bridge an NFT from Ethereum to an L2. And the reason is, you can actually fungibly settle these NFTs like you would with tokens."

This limitation could have significant implications for the development of the NFT ecosystem, potentially leading to more chain-specific NFT communities and marketplaces.

The Evolution of Ethereum's NFT Ecosystem

When asked about the future of Ethereum's NFT ecosystem, Richard predicted a bifurcation based on value:

"I think Ethereum will end up differentiating itself. When it comes to NFTs, differentiating itself as a chain for essentially the collectible NFTs, the status symbol NFTs, where fees don't really matter if you're trading those items, right?"

This suggests a future where high-value, "blue chip" NFTs remain on Ethereum's mainnet, while more affordable and utilitarian NFTs migrate to layer-2 solutions or alternative blockchains like Solana.

The Importance of User Habits in Web3 Applications

Richard emphasized that one of the strongest moats for Web3 applications is simply becoming integrated into users' daily habits:

"I think it's actually, it's a mixture of a really great product and people's habits being tied to using your product every single day. I think that is something that is very hard to disrupt."

This insight underscores the importance of user experience and product design in the competitive Web3 landscape, where switching costs can be relatively low.

Tensor's Approach to Decentralization

While many crypto projects rush to decentralize, Richard took a measured approach when discussing Tensor's plans:

"We do want our protocol to be decentralized in the long term. We want our protocol to be frozen and mutable to the Solana blockchain, so it essentially becomes part of Solana, and then obviously it's managed, the parameters, the fee settings are all managed by people who are part of the tensor ecosystem instead of us managing it."

This gradual approach to decentralization reflects a broader trend in the industry, where projects are balancing the ideals of decentralization with the practicalities of building and scaling a product.

The Potential of Crypto as Global Financial Infrastructure

Despite his focus on NFTs, Richard expressed excitement about the broader potential of cryptocurrency to revolutionize global finance:

"How do we move essentially the entire world and the financial system onto crypto and build incentivization mechanisms to do that? I've sort of been thinking like, okay, how do you build a space? What do you call it? Like a Venmo, that's built entirely on crypto and incentivize consumers to use it."

This vision of crypto as the backbone of a more efficient, accessible global financial system remains a driving force for many in the industry.

Learning from Past Mistakes in NFT Incentives

Richard candidly discussed lessons learned from Tensor's experiments with NFT airdrops and incentives:

"We learned from that, you know, next time, let's not, if you say an air drop, let's not do a raffle-based air drop, as people who don't get anything will be frustrated."

This willingness to adapt and learn from user feedback is crucial in the fast-paced world of crypto, where community sentiment can make or break a project.

The Importance of First Principles Thinking in Crypto

Throughout the conversation, Richard emphasized the importance of first principles thinking when approaching problems in the crypto space:

"So for us, we're fairly first-prinched with Thinker. And so I'll come out and say that we're not at all Solana Maxis, but we are UX Maxis, and we are like technology Maxis."

This approach allows Tensor to remain flexible and open to new opportunities, rather than becoming overly attached to any particular blockchain or technology.

The Role of Mobile in NFT Adoption

One significant hurdle for NFT adoption discussed was the challenge of creating mobile experiences due to app store restrictions:

"I think that's the biggest hurdle right now to why there is no NFT trading app on mobile right now. That's used by millions of people."

Richard suggested that progressive web apps (PWAs) might offer a potential workaround to these limitations, highlighting the industry's ongoing efforts to bring crypto experiences to mobile users.

Building for the Next Bull Market

While much of the conversation focused on current challenges and opportunities, Richard also touched on the importance of preparing for the next crypto bull market:

"When the next bull market comes along, you're suddenly hopefully going to have more sort of normy retail participants entering the market. And so I think it makes complete sense to try and get ahead of that really and make sure you guys can capture that as much possible."

This forward-thinking approach demonstrates Tensor's commitment to long-term growth and adoption in the NFT space.

Facts + Figures

• Tensor was founded in early 2022, with development starting in May and a public launch in July.
• The founders met through Y Combinator's co-founder matching portal.
• Tensor's light mode interface is used by up to 75% of users, surpassing the original pro trader interface.
• Compressed NFTs on Solana allow for minting 1 million NFTs for less than $100, compared to tens or hundreds of thousands of dollars previously.
• The Tensorians NFT collection consists of 10,000 compressed NFTs.
• Tensor currently has around 2,000-3,000 unique holders of their NFTs.
• Richard estimates that 20% of traders make up 80% of trading volume on exchanges, including NFT marketplaces.
• Tensor launched their closed beta in June 2022 and went public in July 2022.
• The Tensor team spent 2-3 months intensively working on enabling compressed NFT trading.
• Tensor aims to eventually have 10,000 unique holders of their NFTs.
• The NFT mint fee for the Tensorians collection was 1.69 SOL.
• Tensor swept approximately 2,300 NFTs to airdrop to Tensorian holders.
• About 60-70% of Tensorian holders did not receive an NFT in the initial airdrop due to its raffle-based nature.

Questions Answered

What is Tensor?

Tensor is a leading NFT marketplace on the Solana blockchain. It was created to cater to professional traders who wanted a more sophisticated, "terminal-like" experience for trading NFTs. Tensor offers advanced features and a user interface designed for high-volume trading, setting it apart from more retail-focused NFT marketplaces.

How did Tensor's founders meet?

Richard Wu, one of Tensor's co-founders, met his partner Iliya through Y Combinator's co-founder matching portal. Richard was working as a quant researcher at Two Sigma but wanted to start a company from scratch. He found Iliya's profile on the YC platform, and after several conversations, they decided to work together full-time on what would become Tensor.

What are compressed NFTs?

Compressed NFTs are a new technology on the Solana blockchain that dramatically reduces the cost of minting NFTs. They allow creators to mint up to 1 million NFTs for less than $100, compared to the tens or hundreds of thousands of dollars it would cost for traditional NFTs. This breakthrough enables new use cases for NFTs in areas like chat stickers, gaming assets, and large-scale digital collectibles.

How does Tensor differentiate itself from other NFT marketplaces?

Tensor differentiates itself by focusing on professional traders and offering a more advanced trading interface. While many NFT marketplaces cater to retail users with simple interfaces, Tensor provides a "terminal-like" experience similar to what professional traders use for stocks or cryptocurrencies. This approach has allowed Tensor to capture a significant portion of NFT trading volume on Solana.

What is the Tensorians NFT collection?

The Tensorians is a 10,000-piece NFT collection created by Tensor using compressed NFT technology on Solana. It serves multiple purposes: demonstrating the viability of large-scale compressed NFT collections, creating a dedicated community of Tensor supporters, and providing a way to easily distribute rewards to engaged users. The collection has helped Tensor build a strong community around its platform.

How does Richard Wu view the role of speculation in crypto?

Richard acknowledges that speculation is currently one of the primary use cases in crypto, including NFTs. However, he sees this as a necessary step in the evolution of the ecosystem. Speculation attracts early adopters and capital, which helps fund the development of infrastructure and tools that will eventually enable more diverse and practical use cases for blockchain technology.

What is Tensor's vision for the future?

Tensor aims to become a comprehensive ecosystem for NFTs on Solana, not just a marketplace. Their vision includes tools for creators to mint and manage NFTs, advanced trading features for collectors and traders, and a seamless experience that doesn't require users to juggle multiple platforms. Tensor wants to be a one-stop solution for all NFT-related activities on Solana.

How does Tensor plan to approach decentralization?

While Tensor recognizes the importance of decentralization, they are taking a measured approach. Their long-term goal is to make the Tensor protocol decentralized and immutable on the Solana blockchain, with governance and parameter settings managed by the Tensor community. However, they acknowledge that fully decentralizing all aspects of the platform, especially off-chain components, presents significant challenges.

What challenges does mobile present for NFT marketplaces?

Mobile adoption is a significant hurdle for NFT marketplaces due to app store restrictions, particularly the 30% fee imposed by Apple and Google. This makes it difficult to create viable mobile apps for NFT trading. Tensor and other companies are exploring alternatives like progressive web apps (PWAs) to bring NFT trading experiences to mobile users without running afoul of app store policies.

How does Tensor view the future of NFTs on different blockchains?

Richard predicts a bifurcation in the NFT ecosystem. He believes Ethereum will remain the home for high-value, "blue chip" NFTs where transaction fees are less of a concern. In contrast, he sees Solana as the ideal blockchain for more affordable, high-volume NFT use cases like digital collectibles, in-game items, and consumer applications. This split could shape the development of NFT markets and applications across different blockchains.