On dorm room crypto mining, Layer 2 Bitcoin, Web3 disruption, and much more.
Roneil Rumburg is the Co-founder & CEO of Audius, a music streaming platform and fully decentralized community of artists, developers, and listeners collaborating to share and defend music.
Prior to Audius, Roneil co-founded Kleiner Perkins’ early-stage seed fund, KPCB Edge. At Kleiner Perkins, Roneil was responsible for seed investments into Blockchain and AI companies, including Lightning Labs.
Before that, he co-founded a Bitcoin peer-to-peer payment company called Backslash. Roneil attended Stanford University where he received a BA in computer science.
Roneil Rumburg
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[00:00:00] Alex: Roneil Rumburg is the co-founder and CEO of Audius, a music streaming platform, and fully decentralized community of artists, developers, and listeners collaborating to share and defend music. Prior to Audius Roneil co-founded Kleiner Perkins early stage seed fund, KPCB Edge. At Kleiner Perkins Ronell was responsible for seed investments into blockchain and AI companies, including lightning labs.
Before that he co-founded a Bitcoin peer-to-peer payment company called Backslash. Roneil attended Stanford university, where he received a BA in computer science. Today we talked dorm room crypto mining, layer two Bitcoin, web3 disruption, and much more. I hope you enjoy.
[00:00:41] Alex: So to kick us off here I thought it'd be good to sort of start at the beginning just to give some context.
Like we were just chatting about earlier. I heard you were born in LA, but moved to the DC area early on, which you know, is where I'm from. So that's pretty cool. But I'm curious to hear it, you know, was there any interest early on that in hindsight might point to Audius right? Like an interest in distributed systems or in music or anything like that?
[00:01:02] Roneil: That's a good question. Yeah, so, so I I was a drummer for, for a number of years, like from elementary school, through high school and kind of like destroyed my hearing in the process, but learned, learn my love of music through that. And it, you know, that, that was great, but To your question.
I was very interested in like computers and software engineering II kind of stuff from like middle school or so onwards. And it turned out I was a little bit better than that then, or sorry, better at that than playing the drums. So my parents kind of rightfully, or like, you know, Do this don't do that.
Right? Don't don't try and don't try and make music for a living. You know, you're going to have a bad time. And I was like, you know, fine. I, I liked playing with the playing with computers a lot anyways. It's sorta like doubled down there worked all my summers through high school, like various software engineering, he kind of roles.
And yeah, I was super interested in excited about distributed systems kind of stuff. But the first, I guess the first way I like got interested in sort of like computers more generally was in this hacking Tosh community that started in like, you know, around when I was in middle school was when it first started to get gain a little bit of ground just because I was when the first Intel Macs came out.
Right. So you could actually run things. And I had happened to have a laptop, you know, that, that my parents got me for school and whatever that was close enough to compatible that I could get to something pretty good. But you know, there were still some nagging issues around it and that was when, you know, digging into like, okay, how can I get the sound to work?
How can I get this to work? And then ended up like actually developing or like building on top of. Someone's existing sound driver for like the 17 inch version of this laptop to get it to work with the 15 inch building is a charitable worded. I was basically just like twiddling numbers in this like pecs table and then like, I'd test it and see what happens.
And then I finally found a combination that worked and released it out to the community, which was fun. So so yeah, that's, that's kinda where I got my start and then, you know, just, just. Kept kept with it. Yeah, I mean, there was no like intentional master plan or something. I just kind of like stumbled my way along into things that I was interested in and just kind of kept working on stuff.
That was fun. That was, that was my, like, that was my only like guiding guiding principle.
[00:03:33] Alex: I guess the path becomes pretty clear in hindsight, but you know, before we move into talking about Audius I'd also love to talk about Backslash this other project you had sort of started right after graduation, if I'm not mistaken.
So firstly, the entry point into Bitcoin for you in college was like mining off of Stanford's electricity, right? Yep.
[00:03:52] Roneil: What's the story there? So yeah, I mean that's, that's basically the story we uh, you you know, in our dorms we had. Electricity. And there was a lot of mining hardware in the market that was unprofitable for other people to use.
But you know, its profitability is determined by your cost of electricity. Right. And if, if that's zero any mining is profitable, right. Because you, well, you still have the payback period on the hardware, but like, Price of the hardware had depreciated so much in the market because this was like, you couldn't you know, even it, yeah, like you couldn't overcome the cost of even the cheapest electricity in the U S if you were mining with this right.
In, in Washington or parts of yeah. Like areas where there's a lot of hydro-power. So so yeah, we were able to, to get. Hardware that was unprofitable for others and, you know, start start mining and doing that thing. And yeah, that was where I first started to get interested in and excited about crypto more broadly.
Right. Was I was like, oh, you know, this is a good source of beer money. You know, like I wonder what, you know, what actually you know, is what's actually like leading to me getting this money. Right. Like, how do I how do I learn more about that? So that was, yeah, that was that was kinda what led led me down this whole And then what led to backslash was in that group of friends that were doing the mining we all had a bunch of Bitcoin and we wanted to start paying each other for things in Bitcoin, because we had no money.
We were poor for college students or whatever. Right. So so the idea was like, what if we can make a Venmo for Bitcoin that was sort of like a social layer on top of a Bitcoin wallet. So we built it launched. It grew to like 25,000 or so. A monthly like spenders. We called them basically people sending sending, sending Bitcoin and we couldn't figure out how to grow past that.
And we kinda hit a, hit a ceiling there. And in retrospect, I think, you know, there were, there were two issues. One was. Like we wanted to send a Bitcoin back and forth. Most people don't, most people want to like buy and hold Bitcoin, not spend it in like Paymency use cases was, was kind of issue.
Number one. You know, you have sort of a broken marketplace if only one side of your, like, if you. Both, you know, people wanting to receive Bitcoin and people wanting to send Bitcoin to work, but you only have one of those two, your it's not going to work. Number two also was just the market was so T at that time.
And we just ended up with. Feeling like it didn't you know, we were fighting an uphill battle. This was in 2014 or so, so there just was so little, there were so few people in aggregate using crypto and our kind of use case was not one. Like was designed to onboard new people to crypto. It was more like for folks who already have Bitcoin to do stuff with it.
And there just weren't that many, those people, so a few hard lessons, but was a good, a good learning. And I think a lot of those learnings ended up like helping us later with, with audience. But yeah,
[00:07:07] Alex: no for sure. On that sort of same topic, you know, seeing as Audius is now built on, I believe like a combination of Ethereum and Solana, do you have any strong convictions about like the promise of, you know, quote unquote, like layer two Bitcoin? Like I know there's, there's arguments to be made about, you know, the centralizing forces in ETH 2.0, and you know, what true decentralization is because of the size of archive, nodes and whatnot.
But I think like broadly I've sort of been convinced that building something totally new on Bitcoin. Maybe isn't worth it when other options get to like 99% of the way there. I'm curious. What do you think.
[00:07:42] Roneil: Yeah. So when when in my last job before Audius I was working at Kleiner Perkins, a venture firm, and we seeded or helped seed this company, lightning labs.
It makes the lightning network on, on Bitcoin. So I'm still a huge fan of, of what they're building and what they've done. And I do think there's still. A lot of progress to be made in the Bitcoin ecosystem more broadly. I think the thing that I find really frustrating though, is that like somewhere along the way, the narrative around Bitcoin shifted towards like, You know, basically stability and like not, not changing anything, being a core value proposition.
Even for them to get like this recent taproot upgrade integrated took like years and years of like grinding and lobbying, even things like the block size, debate and whatnot. It, it's really interesting to see how governance plays out when there's no. Sort of individual or set of individuals that have any mandate whatsoever with respect to like speaking on behalf of the community.
And you have such a stark contrast to. The community where, you know, people do look to Vitalik as that kind of guiding a guiding sort of person, if you will. But yeah, I think it's, it's it's just been frustrating to see that, right? Like if you, you design a thing to do like it to intentionally.
Kind of not improve, not get better not do anything. You know, it's, it's unfortunate, but I think, you know, despite that like community stigma, if you will, towards change Elizabeth and the lightning team have done a really, really good job of like pushing the ball forward. Despite like many people.
You know, kind of helping them in the process. So I think that's that has been really cool to see, but anyway, long story short, I do think there's still like value to be built around the Bitcoin ecosystem. But Ethereum clearly has like, and, and I think Solana and, and the, the kind of more programmable blockchains have.
Kind of you know, runaway momentum at this point that it would be very hard for like Bitcoin to catch up with. And you know, we'll see, we'll see where, where things net out, but like you know, the number of active like users of Ethereum Salana you know, directly. Is is now like quite a bit in excess of, you know, Bitcoin users depends on how you define a Bitcoin user.
Like if I bought Bitcoin five years ago and haven't touched a wallet, like, am I still the user of it? I would say no, but I think a lot of people in the Bitcoin community see that being the core, like use case for it is like buy this and then do nothing with it. And, and, you know, I guess that's, I guess there's a place for them, but it's just a.
But you have to have a very pessimistic view of the world to say that like, you know, technological progress is bad and we should, you know, try to not make progress and not improve and not, you know, change anything. So Yeah. I mean, but to each their own, you know, we'll, we'll see how for sure. Now
[00:10:55] Alex: you, you totally like anticipated my next question with the with the lightning sort of answer there.
And yeah, you're right. It is, it is sort of this weird, like purist attitude that a lot of people seem to take on, but. Yeah, I suppose we'll see how it pans out, but on the topic of founding versus funding, cause you've sort of been on both sides of the table here. What was the driver for you to leave Kleiner and go on to build something again?
You know, I think people have different sort of opinions on this. But do you think working as a VC made you a better founder and going off to build Audius?
[00:11:28] Roneil: Yeah, I think it definitely did. And I, I feel really fortunate to have had that time and that opportunity. It made me a better founder for two reasons.
One was that I built up this incredible kind of network of relationships, both with other VCs and with you know, other founders and, and getting to kind of see. That journey that others were going through and, and see it like, yeah, you know, these are, these are just like normal people figuring, figuring their shit out, just like all of us.
Right. That was kind of number one. And number two was, I think it gave me a much better. Like ability to think analytically about markets and market opportunities, which I think was the key kind of lesson and failure of my prior project backslash was like, not, not being very thoughtful about like, who actually wants to use this.
Why would they want to use it? And how many people are there that look like them? Had I, you know, asked those three questions in advance of working on it. Like we probably. Worked on it. Right. But there, the reason for working on it was quite simply that you know, we thought it could be built. And me and my co-founder wanted it.
So we were like, great. Let's do it and see what happens. And you know, it's not not a great approach. So, so yeah, I think those two things like really did help later on with, with audience. I think also just having a little bit of time to like grow up first was, was definitely, you know, not a, not a bad thing.
Because I felt like you know, like I, I also, I left college a year early. I did finish my degree, but I wrapped up in three years rather than four. So I think I was, you know, I still had a little bit more growing up to do there and, and You know, going into audience. So I guess like the reason I left Kleiner was because I wanted to get back to building stuff.
I really missed that. And so I, you know, left it to kind of like, you know, build things again. I didn't know that. Founding a thing or working somewhere or whatever, but you know, I just started like hacking on some, some random projects and getting myself back up up to speed with, you know, like what are the cool things happening around, I guess it was really, you know, crypto is quickly where, where I found my interests draw me.
And, and Yeah. The, the two areas that I covered at Kleiner were crypto and computer vision and like kind of AI more broadly. And. Yeah. And it's been really interesting to see like it's hard. It's still today. Not really possible to build like a consumer scale product using like deep learning AI, any of these things, right.
Unless you're Google or Facebook, you don't have like, The budget, the like R and D muscle to actually pull off something like that. And you know, that was sort of the conclusion I came to at that time, which is like in 2015 or, or sorry, 2017 or so, like, it's not, it's not really possible to, I was really interested in like summarization and texts analysis kind of stuff.
And. Yeah. I mean, I, I do think there's still a lot of opportunities there, but you know, what we typically see is AI companies starting and then getting like bought by Google, Facebook, et cetera, for their talent. Right. And if it's like, okay, if you're, if you're just a a good way to like, attract good talent You know, that's, if that's the only utility that like your company can, can provide that's, you know, it's not as interesting I felt, but yeah.
And there are aberrations to that. Like, don't, don't get me wrong, but it felt like the Greenfield around crypto was a lot more interesting, but also a lot more tractable for a small team to go make an impact, right? Like you don't need to hire 500, you know, like AI PhDs to build something of value in crypto.
Right. A very small team can do really, really cool things. And I think the nature of the. Fundamentally means that like a lot of incumbent players that would otherwise be competing here, like can't really or aren't positioned to be able to. So very
[00:15:36] Alex: cool. All right. So let's, let's get into the the fun stuff here at firstly, the broad question, the one you get, I'm sure.
Every single day of the week, when you're giving the pitch to someone who's otherwise like totally uninformed, what is Audius?
[00:15:49] Roneil: Yeah, Audius is a digital streaming service that connects fans directly with artists and exclusive new music. I think like a de-centralized SoundCloud is, is kind of the beachhead go to market there.
But from, you know, from there, I think where things have gotten much more interesting is this kind of fan engagement tool chain that exists around. The ecosystem, but the key point of differentiation between audience and between a lot of the other players in the market is that direct connection, direct engagement, and for an artist, the ability to own the relationships with those fans to get all the data associated with them and to do anything they want with them, right?
Because this is. Open programmable ecosystem. A lot of folks have like built out their own tools. The community is built out their own tools to do things like import a podcast episodes to an audience account and keep the account up to date with new episodes published on the RSS feed, things like that.
So so yeah, that's, that's it in a nutshell it's it's it's it's it's this kind of fan engagement tool, chain and EcoSys.
[00:16:54] Alex: Gotcha. You know, I think the music as a field is really interesting as a went three application, you know, of, of, of any industry. It seems really ideally the most ripe for real disruption.
You have these like really big streaming platforms that, that really thrive solely off the presence of artists and their choice, right. To use their platform. At the same time, I think the metric I read is that artists only see something like 12% of generated revenue. So when something like audience comes along and gives the option of connecting artists and listeners directly it's, it's a pretty strong value proposition, right?
Like, am I, am I missing anything in sort of that.
[00:17:28] Roneil: No, I think you're, you're pretty spot on there. That was exactly our kind of thesis for, for audience too, was that the ultimate like step in direct engagement would be to remove the company from the equation. Right. And the crypto economic tools that we get from, from crypto is what enabled us to kind of cross over that threshold.
So so yeah, I You know, I, I often describe audiences, this kind of scalable co-op of sorts, right? It's like we're the artists and users of the network are actually getting to use and own it in, in the process of using it. Right. And, and that's, I think something that like, you know, we still. As a, as a you know, music community, you know, we still haven't like fully wrapped our heads around the broader implications of that.
But the 200,000 odd artists that, that use audience today you know, Enjoying it getting a lot of value out of it right now. And it's their experimentation. That's going to lead to, you know, the next million artists, having more templatized mechanisms for monetizing on audience for building fan bases for doing these, these sorts of things.
So yeah, it's been, it's been really amazing to kind of see all this play out over the last four years or so. We're a little under four years, but But I still feel like we're just getting started. You know, we, we've got a lot more work ahead.
[00:18:55] Alex: So on a more technical level now, how does everything actually fit together?
Right. Like I'm aware it's running decentralized manner and people can sort of stake the audio token, but how are these sort of financial awards or micropayments or anything like that actually done? Like, what's the reward mechanism here?
[00:19:12] Roneil: Yeah. So. The reward mechanism today is audience tokens. So there's mechanisms by which you know, folks in exchange for helping contribute content to the network curating playlists that get listened to a lot.
There are a number of different actions that folks can, can take to earn some audience tokens that the network distributes to them. So that's, that's kind of the primary monetization mode right now. As, as things evolve we see there being a more kind of direct economy with with folks, fan bases around things like digital experiences, exclusive content merchandise like NFTs and, and other things that we would consider to be.
Broadly under the spectrum of, of merge. So really excited to see folks kind of exploring and flushing out these different verticals within, within the ecosystem. But but yeah, we, we felt that the place to start here was building a critical mass of, of users that it actually started to make sense, to think about monetizing, you know there are now artists on audience with over a hundred thousand followers and that's like enough that You know, if you could get 1% of those people or even 0.1% of those people to convert to a paid offering of some sort you could actually get some pretty real money.
[00:20:30] Alex: If I'm not mistaken, you guys are using a mix of Ethereum and Solano to sort of keep everything up and running, right? Like what's the reasoning behind doing that?
[00:20:40] Roneil: Yeah. So I, I think you know, more generally different Different tools are suited to different jobs.
Right. And that applies quite similarly to, to blockchains, I think as well. So you know, if theory of them has a bunch of benefits around the network effect that it has the integrations with. Custodians exchanges with all, all these various ecosystem participants such that like a token that exists on Ethereum and a highly financially sensitive use cases tend to benefit from being based on Ethereum.
So in audience, that means the token is on Ethereum. The staking system around the token is on Ethereum. The governance system is on Ethereum. So anytime people are voting on. Changes to audience and things like that. That's all happening on, on Ethereum. And. It kind of, you know, putting all that together you know, users are able to kind of do all of the functions that exist around the token via Ethereum.
Oh, and, and the node registry. So like all the. Third-party nodes that that help host content on audience and metadata and everything. Those are all registered on Ethereum alongside of staking. So so yeah, that all exists there. Solana is really, really great at processing a lot of transactions quickly and reaching a level of finality around them very quickly.
And the cost per interaction is very low. Right? So so Ilana is super well-suited to kind of the social and user engagement, sides of audience. Like the things that everyone who uses audience touches, like every time they repost a track or make a playlist, or do things like that. Their browsers actually signing and submitting Solano transactions directly to a salon in the process of, of doing that.
And the indexing nodes in the audience ecosystem pick up those pick up those changes and index them to be read back. So. So yeah, that's all kind of you know, that's how things are split right now. And I think, you know, so far that split has suited or our community, I think pretty well.
But the gas costs of using Ethereum have continued to climb. We launched all this like a year and a half ago. Right. So the. Environment that you know, the Ethereum side of audience launched and was quite different from today. But there were a lot of costs to switching highly financially sensitive things, right.
Namely, you know, audits and things like that. So so yeah, I think we're, we're kind of you know, happy with the situation as it is today with the exception of you know, it'd be, it'd be nice if the Ethereum were a little bit cheaper.
[00:23:24] Alex: Yeah. So what's the, what's the strategy behind getting artists or listeners to try out the platform?
Obviously you guys have seen some great support from the web through community, but the, the behind the scenes technicals are obviously a lot more complex than your average music listener artists sort of can get behind. So are you, are you banking on, you know, increasing crypto literacy being a driving factor here or is the.
You know, UI of the whole thing done in such a way that it's, it's simple enough for pretty much anyone to understand.
[00:23:52] Roneil: Yeah. It's you know, the way audience is set up today, you don't need to know anything about crypto to, to use the product. You can click, sign up, you can sign up with a username and password.
You can upload content. You can start engaging with content. None of that requires you to even be aware that you have a wallet, let alone all of, all of this other stuff. So. I think that approach is what allowed us to grow as quickly as we did. So majority of our users are not crypto native, right? They don't, they don't have metal mask installed.
They don't have all these things. So we've been, I think, a really effective like gateway for folks to start to get involved. Cause you know, with the broader crypto ecosystem that is because once folks get like earn their first few audience tokens into their account, they're like, oh, You know, this is interesting.
What do I do with this? What does it mean? And like, you know, there are a number of artists from our community that have ended up like down that rabbit hole through, through this, which has been really cool. So so yeah, I think. We feel quite the contrary actually, to, to what you mentioned, which is, I think products need to meet users where their capabilities are today.
Not the other way around, like if you're, if a user needs to like read a blog post to learn how to use your product. I think you as a product builder have like failed. Right? I think there's there's too much of this. Kind of mentality and crypto that you know, people are just too stupid to use our products.
Right. And it's not like you know, your, why I think people were just like missing the point when, when they think about things in that way. And, and. Yeah, I mean, we see time and time again, these issues recur around people not really understanding how the wallet works, how these things work, and then they get fleeced and lose money because of that.
Right. And, and I think it's up to the crypto builders to build better. Like tools to help users who aren't as like technically capable, not the other way around. And, and that's, I think that stance that audience has helped us grow quite quickly.
[00:25:57] Alex: Great segue to the last question I had for you, which is what other categories do you see crypto apps moving into?
Right. Like obviously you've seen great success so far working in media. Again, like a common criticism is this lack of real value add applicability in other areas. Right? So maybe you have high gas fees, poor UI, or any other factors, like, are there any areas in particular you're really excited about when it comes to web three?
[00:26:22] Roneil: Yeah, there are there are quite a few, I think. I would posit that like any kind of. Network product that exists in Web2 will eventually have some Web3 analog that outcompetes it over time. The reason being that the incentive structure around making users, owners has the ability to bootstrap a network effect on a novel network, that's extremely powerful. Right. We saw this play out with Audius but I think we'll see this play out with many other network kind of kind of products. So Whether or not the market is actually ready to adopt those things or the usability of a crypto is at a level where it's possible to do that.
I don't know. But you know, I think with music, we are fortunate that there's a very, very motivated, excited user base. You know, Right. People were extremely disenchanted with SoundCloud and the other tools that were available to to help them distribute music directly to fans.
Right. And that kind of the. Like strategy. I'm not sure how well it, or how motivated the user bases are of say like Instagram or like Twitter or, or things like that. But I, I do think if you can find like some niche within those user bases and build something. Helps them solve their goals better than, than what the existing tools can.
There's a lot of opportunity to use that starting point to like build up to some bigger like user owned and operated structure. So. I'm really excited about brain trust. As, as another project. It's like, I'm a user owned and operated a freelancer market, so you can go there and eh, and, and, you know, hire, hire folks to do work.
And then the way that like reputation scoring happens, the take rate of the market, all of that is, is operated on chain. And the freelancers doing work actually get to own You know, brain trust network over time, right. Through their earnings of tokens. So so I think approaches like that are really, really compelling, exciting.
And yeah, I'm excited to see more, more kind of markets you know, go after similar, similar kind of approaches. Awesome.
[00:28:38] Alex: Roneil, I think that's our time, I appreciate you doing this really. It's been a awesome to get to this.
[00:28:43] Roneil: Yeah, likewise good luck with everything
cheers.
[00:28:46] Alex: Thanks so much. You too, right. Bye bye.