Are they using nostr protocol?

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No, it’s a walled garden feature within the substack ecosystem. They’re trying to move away from pure email because that’s not a defensible moat and in to people using the substack app. Creators like it because substance does cross promotion for lead generation. Substack likes it because they’re able to control the relationship between creator and audience.

For us it’s mostly useful as validation of the model and a place to learn from others as we build out our open ecosystem.