Salad Business Model - An Interview with our CEO

INSIDE SALAD

SaladCast Episode 10: The Salad Business Model With CEO Bob Miles

Published: August 21, 2023

Salad Technologies

Welcome to SaladCast! In this podcast series, we introduce you to Salad Chefs from all corners of the Infinite Kitchen. We hope you’ll join us as we get to know members of our community, indie developers, and teammates from our very own Salad staff.

In today’s episode, Salad CEO Bob Miles joins the SaladCast to discuss our company’s business model, Salad’s humble beginnings, and the exciting future for our distributed network.

Watch the whole episode at the SaladChefs YouTube channel.

Episode Highlights

Highlight content has been edited and slightly reordered for clarity.

How did Salad first come to be?

There was that big runup with crypto back in 2017, and one of the things that I found really curious was…a lot of the gamers that I knew weren’t actually mining. That sent me down a path of investigation to try and understand, “What’s the friction? Why aren’t people sharing their idle computer to make that 50 to 90 bucks each month?”

What hurdles did you identify back then?

After a lot of conversations, three main hypotheses formed. Firstly, too many people still think of crypto as a virus. It’s guilty by association from the early days of the Silk Road, and gets lumped in with hackers, drug dealers, and other nefarious actors. Even when you install our application today, most antivirus software will flag Salad—with a false positive—because of that kind of thinking.

We also realized that most gamers either don’t have the technical aptitude or the sheer willpower to go out there and mine themselves. Think about it: you have to figure out the most profitable protocol for your machine, find the right library, configure it from the command line interface, run your own private keys, and then make the transactions—and those are taxable events. Most gamers throw that in the “too hard” basket.

That’s a big opportunity for us here at Salad, and one that I hope we’re executing on better and better, day by day—making it easy to get the value out of your idle PC.

The third and most important thing we learned: the value proposition for cryptomining is just completely wrong for most gamers. If you tell them, “run this application for a month, and we’ll give you 0.0086732 ETH,” or FileCoin, or Storj, or some other kind of token, it’s not as motivating as the value proposition of “share your PC for a month, and you’ll get games, Nitro subscriptions, gift cards, or skins.” That’s real. That’s tangible. That was the big “why now” moment for Salad. Every computer has meaningful value. We want to make it easy to deliver that value to gamers.

How did Salad overcome those frictions?

There was a huge amount of friction back in 2017. Gamers were really pissed off at cryptominers. We even tried that somewhat cringeworthy, classic sort of “By Gamers, for Gamers” tagline back then, but that didn’t last long. Gamers are sensitive to bullshit. The key was recognizing that gamers already had this value locked up in their PCs and showing them that they could participate in crypto for their mutual benefit.

Would you say gamers have embraced cryptomining?

Back then, we didn’t have the foresight to understand what it would blossom into today, especially when you consider how meaningful something like the Metaverse could be. The first communities to really adopt digital goods were gamers. Thanks to DLC, skins, and in-game currencies, gamers already have a mental model that imbues digital items with inherent value. Gen Z is entirely digital natives. They’re spending increasing amounts of time in these digital ecosystems. They already understand the importance of a digital persona and digital ownership.

How will the Metaverse change things?

We’ve always lived in a society of “CTRL+C, CTRL+V.” For the first time, the blockchain technology behind NFTs has created true, verifiable items that exist in cyberspace. That’s absolutely revolutionary. Nowadays, the average American spends seven hours a day online. As these big market trends come together, value lies where human attention is focused. If we can now leverage this technology that allows true and verifiable digital ownership, the only limit is your imagination.

What will it take to create the Metaverse?

It’s going to be absolutely fundamental to ensure the integrity of those blockchains and those networks. If it ultimately comes down to all of these blockchains being powered by AWS, Google Cloud, and Microsoft Azure, that’s a centralizing force that starts to eat away at the integrity of that digital ownership. So that’s the future we’re building towards here at Salad. We believe every device will generate value, not only in terms of games and subscriptions but also in terms of purpose as a self-sovereign server to ensure the integrity of that ecosystem.

What’s the biggest challenge for Salad going forward?

We’re introducing an entirely novel value proposition—share your idle PC in return for rewards—and we’re bringing it to market in a world where people have zero attention span and zero patience. We’ve all been conditioned by our phones to move on to the next thing. We’re not talking about a get-rich-quick scheme. The challenge for us is to reconcile that desire for immediate gratification with the actual unit economics of compute sharing. It takes patience to reach that “a-ha!” moment when you redeem your first reward on Salad, and it clicks. But in five years’ time, this model will be ubiquitous. “Pay with your PC” will be well understood. The analogy I like to use is: imagine if we were pitching AirBnB or Uber in 2008. A complete stranger’s going to pick you up in their car or sleep in the bedroom next to you tonight. Most people would have been like, “Hell, no! You know there are axe murderers in the world.” Now you look at it and go, “Of course!” The exact same thing is going to happen with Salad. We’re at the very start of an S-curve of adoption.

How will Salad’s network change as it grows?

The bigger we get, the more meaningful we become. We’ve got 20,000 daily active nodes on the network and thousands of simultaneous machines. We’re knocking on the door of the world’s fourth-largest supercomputer in terms of processing power. That means we’re very meaningful in the crypto mining space; we’re minting many Ether and other tokens every day. But we’re also meaningful for machine learning, AI, and deep learning workloads. We’re not quite at the critical mass of network density that will make us meaningful as an edge network, but we’re headed there. Today, we’re just doing proof of work mining—securing these different blockchain networks and validating transactions—but our users are only earning about a fifth of what AWS, Cloud, or Azure charge for spot instances.

Will Salad users earn more in the future?

We give users everything they earn from their PCs. It technically works out to 96% since we deduct to cover mining pool fees, transfer fees, and exchange fees, but we give them everything otherwise. And that could be five times more as we start exploring these AI, machine learning, and deep learning workloads we’re working on in the background.

Does Salad’s growth surprise you?

Sometimes, you’ve got to step back and take note of these sorts of things, but I rarely do. Of course, we do benchmark our network internally by looking at those numbers. We’re eightfold the size we were on January 1st. We’re about thirteenfold the value distributed to our users. That’s a couple of million bucks paid out, year-to-date. Twelve months ago, I would have fallen out of my chair at those numbers. But everything’s relative. Now, we’re at a point where we just have to set the bar higher and higher. We figure there’s a total addressable supply of about 400 million gaming PCs. In terms of market penetration, we’ve only hit about 0.005%. We’ve got a long way still to go, but we’re building the supply relationship that will make us the easiest way to share compute resources, whether that’s processing, bandwidth, or storage.

How has Salad’s reward model helped its growth?

If you think about the competitive landscape, the only other successful distributed computing projects that most people can think of are SETI@home and Folding@home. They had a different incentive model, which was warm and fuzzies. Altruistic, charitable actors shared their computers to find the aliens or sequence those genomes, and they were able to grow to a massive size. Every other startup that’s attempted distributed compute has failed to attain that size. The torpedo that killed so many of them was the fraudsters on the Internet. Having gone through a phase where the fraud almost killed Salad, we learned that proof of work is a ‘why now moment’ to ensure the future integrity of the network. Crypto was the unlock that allowed us to build, fund, and maintain the network. It provided us a way to verify nodes as trustworthy or untrustworthy. Now that we’re at a critical supply, we can level up to more exciting workloads and unlock those higher-paying jobs.

Is Salad a “crypto company?”

No—and yes. Our monetization method is cryptocurrency, and our users are largely paid for their compute cycles. But we’re exploring other workloads that will leverage other kinds of compute resources. We see ourselves as an infrastructure company. Our incentive model abstracts away the workload itself. Our users, the Salad Chefs, aren’t signing up to support Monero, or Beam, or Ethereum. They’re coming for the games and the gift cards. That makes us workload-agnostic.

How does Salad make money?

The business logic goes like this: you download our application, and you tell us what Salad can be used—when can we use it, do you want Auto Start on or off, do you want certain hours of the day… Eventually, we’ll have how much monthly bandwidth we can use, how much storage we can use, and so on. Our software detects your host hardware and finds the most profitable workload for your computer based on your hardware specs and your chosen configuration. When Salad’s running, we’re custodians for all that value you’ve generated—so there’s no taxable event for our users. We then project that Balance to our users, and that’s 96%, to cover operating fees. When they redeem games, gift cards, and rewards at our storefront, that’s where we take our margins. We have direct relationships with suppliers like Discord to arrange wholesale and bulk purchases of Discord Nitro subscriptions and other rewards.

What are you most excited about in the future?

There is a paradigm shift underway. My favorite quote of the year was Satya Nadella, the CEO of Microsoft, saying, “We are at peak centralization. The future of the cloud is ubiquitous and distributed.” The likes of Microsoft are actually facilitating our transition to different workloads via containerization and virtual machines. Soon, we’ll be able to distribute these workloads across the network in a standardized computing environment. In Windows 11, any software that gets downloaded will be first run in a container. That means Salad can operate and execute in a containerized, separate, and secure compute environment, which is far safer for our users. We’re going to have an à la carte menu of compute jobs for our users to opt into—and make a bit more doing it.

More SaladCast Coming Soon

Like this episode? Stay tuned for a continuing series of interviews featuring Bob and other faces from Kitchen HQ in the weeks ahead. These upcoming SaladCasts promise an open-source look at the Salad recipe. In the meantime, browse our full catalog of community slices from Jared and Alec below.

Have questions about enterprise pricing for SaladCloud?