2023 Predictions zkEVM disappoints L2s vs Multichain, Wallet Wars

Transcript

all right everyone welcome back to another episode of bell curve before we jump in quick disclaimer the views expressed by my co-host today are their personal views and they do not represent the views of any organization with which the co-hosts are associated with uh nothing in the episode is construed or relied upon as Financial technical tax legal or other advice you know the deal now let's jump into the episode all right everyone this episode is brought to you by our friends at Avalanche they're the layer one blockchain that is fast stable and scalable you're going to be hearing all about them later in the show for now let's get into it I don't think there's going to be a single L1 with more tvl on it than an L2 by the end of 2023.

uh welcome back last bell curve Roundup of the year you got Michael's one and two Vance and piano fellas welcome last uh last Roundup of the Year little birdie uh told us that you guys were gonna be in Mexico Vance and Michael uh tomorrow is this can we can confirm is is this true we will be celebrating in Mexico nice what are we celebrating 2023 the end of fighting foreign yeah they're Silver Lining it's just not not a lot to party on I mean about

listen just happy that survival was was made this year yeah and I mean we've talked about this but I feel very fortunate that framework was able to evade most of the explosions actually all the explosions you know and some of our portfolio companies got hit but it is uh it's tough to see a lot of others get hit a lot harder there's there's always someone down worse than you you know that's uh that's always true well cheers to that cheers to that it might be bad for you but somewhere out there someone's getting it way worse so at least at least you're not AVI or or SPF that's true yeah yeah I'll be got

arrested this week I guess poor went out for workout manipulators yeah doesn't pay yeah okay well we'll get that doesn't pay kids um all right guys so we said we're gonna do a predictions episode and not look at 2022 because I feel like we're happy to leave that in the rear view mirror um who wants to start first anyone have any predictions going into 2023 so I I kind of bucketized mine into there's like bucketazz is that the is that the 20 23 yeah you know what I mean I put mine into three different buckets uh the first the first is uh macro so like

Financial macro uh the second is crypto then the third is just like random usings and thoughts um so I don't know if we want to break it up like that but I feel like having some structure to how we want to how we want to talk through this would be helpful let's do it I like that why don't we start with some of the macro stuff and then we can get deeper into crypto let's do it hit us with your first macro prediction Michael well it's a very simple one but I think the FED is going to do exactly what the FED says it's going to do oh I think everybody is talking and thinking that there's going to be some pivot there's gonna be some change but I think basically everyone uh this is like

a total mid curve perspective but I think it's just gonna be exactly what they say it is and they're going to raise rates until you hit like five and a half percent and we're gonna see more pain along the way and then at some point probably mid-year next year we're going to start to see a pause or uh or a stop and that will be the moment of a positive trajectory from just like a asset perspective um but I don't think it's gonna happen in January I don't think it's going to happen probably even in like March I think it should be closer to like June how does how does that impact your take Michael on where you think equities go and um and and just like thoughts around a recession so well

equities obviously it has an inverse relationship Equity values generally have an inverse relationship with interest rates so as interest rates go up you start to see asset prices go down um I think what will happen though is as we start to see more dovish language come out of each one of these different announcements you're going to start to see markets actually front run this process so you're you're probably you know what we saw with 50 biffs in December we're probably going to see you know 50 bips in January maybe 25 bips in January but we're still going to see continual raises and so I think markets actually won't have too much of an impact on this unless there is some major deviation in interest or in uh inflation numbers coming in a lot harder uh versus the

soft that we've seen so far macro Mike how does this line up with some of your macro thoughts I am basically a contra indicator on the macro so I I it sounds good to me but that you know tpd if that's a good thing or not um I actually had a I'd like build off that prediction I have a prediction that sounds a little bit like hopium but I've backed it up with some some semblance of research which is I I think that honestly the theme of my predictions is positivity I Jason and I did predictions in November like right around the top like the end of 2021 and it was painful to go back and look at what I predicted

like agonizingly painful to read what I had written and put out there one of them was a a dow will buy a sports team a professional yeah but the the reason I got that so wrong other than the fact that I sit in the middle of the bell curve is I was extrapolating what had happened over the past year and I think it would be a mistake to do that uh with this so I think the ultimately I think we've seen a bottom in terms of price in crypto but I don't think that the worst is in for equities and here's my logic I still think everything is basically trading off liquidity and interest rates so when you're looking at what's going on with the FED there's the quantity of money there's the price of money

crypto tends to front run expectations around liquidity I actually had a chart about this before so I'll see if I can retroactively put it in but you can literally match up what's going on with global liquidity and the S P 500 slash the NASDAQ Bitcoin and Bitcoin and crypto tend to front run that by about one to two months um so that was a super tight relationship that's held for largely most of this year but that broke in June and crypto crypto decoupled lower and the reason why it decoupled was because we had fundamentals going on in the market which trumped liquidity expectations the fundamentals were horrible it was like Terra Luna collapsing and then all these um basically a credit collapse in crypto

but we decoupled from this broader relationship and then something important happened then which was basically all of these larger more macro focused investors left the space so that was the thing that made that correlation work so I think basically crypto is front run a lot of the expectation of pain around liquidity but I just don't think we've gotten there so far in stocks because basically all you've seen is a correction in terms of valuation but it hasn't even started to digest earnings which I think are going lower so this sounds a little bit like opium but and I don't mean this to me I still think we've got a solid bear Market ahead of us but I think in terms of price barring like dcg going Buster tether being a fraud or

Finance collapsing I think we basically put in the lows and we'll probably stay around here and there'll be a bear Market but I still think I think the worst is largely behind us in terms of downfall but I still think there's there's more to come for equities so that's my macro prediction for you I'm I'm probably somewhere in the middle of you and and and Michael framework Michael um I think that the January CPI is going to be pretty soft and you're going to see sentiment turn on that I think we're going to get to March there's probably one more hike it's probably or I guess February the 25 basis points and something in that range and then after that we've kind of digested the the ramping part where we are thinking

about how how high it goes and then it's just about how long it takes to to wring out inflation and I don't really think that's going to take that long and that combined with you know there's 200 years of mean reversion data on stocks that say if you have a double digit down year there's an 80 chance that you have a winning year the next year in stocks you know that's a pretty powerful force and so I'm somewhere in the middle I think a lot of the different Industries within the stock market and even in crypto have a lot to play out like Robin Hood's not going back to its all-time high you know a lot of these SAS companies aren't going back to their all-time high they're going to have to basically rethink how they do business and what their business is in some cases

and I think that's probably a larger point that isn't quite macro but Tech is going to have kind of like a midlife crisis next year I think and that is going to be the underpinnings of a lot of the stock market just because it's so big I've got a I've got a question on this just to back it up like if I ask you to guess like what is the like fractal or what does the price action look like for Bitcoin I'll just use Bitcoin as a proxy for crypto between like end of 2018 beginning of 2020 what would you expect that chart looks like so like right now it's trading at like 800 billion something like that um what do I think happens to crypto once again fans bouncing in and out um

I would I would say that we're probably flat for the first half of next year and you've got a couple of really kind of large things that are still looming on the horizon some positive some negative and I think it kind of depends on how you look at them if these things become nothing Burgers then they could be positive catalysts but there's still going to be things that live on the horizon in particular you've got the mount rocks the distribution of the remaining Bitcoin from that estate um you know unwinding of that how big that's going to be nobody really knows there's a lot of liquidity on those claims so maybe a lot of that's already been sold we'll find out but that's something that's living and I think it's supposed to start to happen in in the

first half of next year the second is uh Shanghai which enables withdrawals from the ethereum state uh chromatherium's taking and that uh amount of eth the amount of heat that's going to become on the state and want to be sold once again remains to be seen so once we get past those two events or we start to see the the magnitude of those events I think that that actually that's kind of just something that holds everything in place for a while um but once we get past those I think that's where we really start to see what what price action will be for the broader Market um just just as a reminder this sorry this is what I've got pulled up here this was this is price action for

just Bitcoin as proxy again from end of 2018 to beginning of 2020. so it's just kind of interesting to look at because if you lived through that period of time in crypto you remember it is basically this at least this this is my memory of it it's basically this just Bleak expanse of nothingness right where no one wanted to believe any good news is down only is just just apathy and and uh it's like a wasteland but actually over that period of time you know crypto yeah it's market cap almost doubled over a period of time bitcoin's price action almost tripled and it was actually it's an interesting Mark of that bottom because that was able to happen without anyone even raising their hopes of the return of a

bull market um so I think the thing that I'd still be looking for a little bit I think we're almost there but I don't think we're there yet is a full sentiment bottom where you could see a double basically a full double in the price and no one even gets excited about it so maybe we never get frankly to that level of um what do you think again but what do you think the center that's the thing that June or November definitely November yeah yeah November yeah I think it took time yeah it's her time it also well what I'm in particular referring to is the blow up of FTX it's sort of like if you you hold these you know sacred beliefs that these

institutions are actually you know telling the truth they're doing the right stuff you've got all this public-facing activity and then that's a complete facade that I think is where you kind of like call into question all the other beliefs that you have all the other perspectives that you have and everybody starts to go on a Witch Hunt and you know that's where we started to see some of the murmurs of all this other stuff happening which I think mostly are for naught just gonna go out and say that I don't think that there's a ton of issues where people are calling smoke right now but I I do think that you're gonna it's November because it is calling into question poor beliefs whereas like the other stuff that happened that was surprising but it wasn't really that outlandish to think that Luna and three arrows were you know complete charades

as well I I still don't think the sentiment bottom is in I still think we've got I think the sentiment bottom is like six months from now because because I think what like at least I'm just purely basing it's not my memory this is what I think logically will happen again it's like okay that FTX explode was like citing in a weird way you like couldn't take your eyes off like emotions were high but the thing that I'm sort of waiting for is like deep apathy after that which is like okay FTX is done and there are teams are like okay now we can get back to doing what we're doing but you know users aren't entering the space nothing's necessarily working so there's this like try to grind higher and that doesn't necessarily work and then some

teams like give up and that's when people relate to leave I think so I the reason why I would say that I I don't completely disagree I think that there are some ways that sentiment has still yet to bottom but the one major difference and I was trying to think of you know the way that you said it might have like what's what's the way what's your perspective broadly on what these predictions are and you said optimism I I actually was thinking originally and I like wrote out a bunch of different perspectives predictions and then I was like okay well like why am I thinking these things and it's it's because I was using the frame of mind of like okay we just went through 2018 what is 20 23 going to look like it looks like 2019.

and the major difference there is like there wasn't anything that was working in 2019 there was no stable Point like there was no activity there was no developer interest like some people were starting to work on things and like some of the teams were starting to put stuff together but I remember and I think I've said this before but like I have so many you know Investments that probably three different Investments where we tried to bring in friends who were in the space investing in the space and they were looking at some really awesome what ended up being awesome investment opportunities and and in three instances people pass because they're like I'd rather just hold Bitcoin at this point and like not invest in applications not invest in middleware not invest in infrastructure that ultimately ended up way outperforming Bitcoin but that's

kind of what the narrative was back then because it really wasn't like there was any developer activity or like Tech activity it was all just sort of money crypto um so I think that it's really different this time around like the developer activity and the and the tech side of the crypto industry is is working and like there are games that are growing hundreds of thousands of new users every single week like there are there are there's still a lot of activity in the D5 applications that are working and one of my other kind of broad predictions is that you next year we see the flipping but not in the way that everybody talks about it I think next year we see the flipping in terms of the amount of act actions or activities so like volume trades traders that are interacting with

D5 over C5 and I think that will be one of the indications that this industry is like still humming along and growing but I think that's going to happen in 2023 too I'm going to use that to Pivot into my first prediction which is that um I think the kings of trading and the kings of nfts so Kings of trading and like buying would be I'd categorize that as coinbase obviously it's Finance but like us-based so uh and then with nfts it's openc I think that they both lose pretty drastic amounts of market share so on the unit uh so on the coinbase side I think that uniswap ends up passing coinbase and volume uh not just in like spurts not just on like one-off date like one day of the month but like

I think a pretty substantial amount of days in 2023 uniswap will pass coinbase and volume and I I'm hope I'm hopeful that c5's failure is actually going to push users into self-custody wallets um and so if you actually look at the metrics uh in defy summer or like fall of 2020 uh the decks to centralized exchange ratio hit an all-time high of 16 so Dex volume to sex volume 16 now it's at like eight or nine percent I think it is it's it's been I think cut in half it's it's sub 10 I think that'll hit like 20 to 25 in 2023.

um and I think that'll just be like uniswap you know when when unit swap did pass uh coinbase and volumes was like front page Wall Street Journal or New York Times I forget who wrote about it I think that'll be this big moment in the industry in 2023 as uniswap passes them continuously I also think leading to uniswap um I think you just by the way I think unisoft's gonna have a big year in 2023 I also think it's going to be uh led by Open Sea falling in market share so in the Bull Run openc had like 75 to 85 percent of the market share for nfts this colossal like stronghold on the nft market today they're sitting at like 40 to 50 percent I still think that's way too high so I think a uniswap I just rolled out just rolled out nfts I think

they're going to do very well there's these like professional Trader experiences like blur that will do well there's like these new kind of mechanisms for flipping and trading nfts like um who was it pseudo swap right like the amm style like floor trading I think we'll see vertical specific exchanges so like music exchanges gaming exchanges fashion exchanges I think Brands will do what Nike did and end up launching their own white labeled marketplaces so I think all of those things oh plus um uh the like royalties battle right Open Sea faces this like big trade-off between attracting uh trading volume and then protecting artists and creators it's like all those things I think will lead to open C having a tough year so

both openc and coinbase I think we'll end up uh losing a substantial amount of market share yeah curious what you guys think of that one I think um generally I I believe that D5 will increasingly penetrate the market and become you know just as dominant as coinbase on an average day I think the question is if it's uniswap or somebody else if it's a wallet if it's a payment for order flow protocol of of the of the Legacy incumbents um you know you have Ave you have compound you have uh curve you have synthetics you know not all these have the same amount of market share we're just like raw Revenue but uniswap seems the most vulnerable

and and not uniswap the front end or uniswap you know whatever they're coming out with and they just did the big raise for but like specifically uniswap V3 in in my opinion that's been just a very big missed opportunity in terms of there were supposed to be people building margin trading in swaps and interest rate derivatives on top of unib3 but it just has not you know either by the fact that it's just such a nuanced and difficult system to work with or the fact that there really hasn't been a community Groundswell like your swap's main advantage in my mind is not like their on-chain contracts it's their brand reputation and the amount of eyeballs they get on their site and if they can leverage that I think they're going to be very successful I think on the back end you know if you swap is

very successful on the front end on the back end I think there's going to be a question of uh if LPS are getting run over in all sorts of ways and your long-term stakeholder is these LPS is this really the best liquidity model to serve what would be a very successful front-end business and I think things like payment forward or flow um will generally come back and or you know come to the foreign and be dominant I also think you're going to see a uniswap V2 Revival of people who are just like V3 is too complicated doesn't have the things that we want doesn't have easy yield farming doesn't have Easy distribution tokens and that'll be another source of potential strength for them but yeah I generally agree just not on the u-swap part I think uh one of the points that I

really agree with on the Open Sea Side of that and this is just anecdotal evidence but something that we see quite frequently is a lot of the games that are building ecosystems so you can imagine like a studio that has five titles that they all want to kind of like interrelate in this new world they want to own their own white label Marketplace and it's not something where like they just want to be able to go put this on openc and put this you know out into the open and you know have people bid on these assets it's like no no they want to control the end to end and have a user experience that's built into the game which is their Marketplace and they're not going to run the infrastructure they're not going to do the regulatory jump through the regulatory hurdles to get that

Marketplace up and running they'll pay somebody to White Label it and so one of the things and this is sort of kind of a philosophical perspective of like do you think it's pfp nfts that take over the the trading volume in 2023 or do you think it's sort of like utility driven or like application specific nfts that are the things that drive nft volume in 2023 yet I lean more in the in the latter camp where I think you know game assets or assets that kind of provision access to things and have fundamental utility versus what we've seen historically with pfps is going to be the driving force of nft volume going forward and a lot of that to your point you know Aggregates and kind of gravitates towards application specific vertical specific marketplaces so I

totally agree with openc you know kind of getting disintermediated I I got one that's pretty specific within crypto um and and the take is basically that ZK EVMS have a softer year than that people are expecting I think a lot of people are expecting I think there's like probably 20 or 30 ZK EVMS at this point they're going to launch and they're going to you know somehow save crypto and they're going to be ready immediately and this just reminds me of 2019 in uh Defcon Osaka when uh optimism released unipig demo with uniswap and it was right around the corner and we were all going to use it and it was going to be the best scaling technology ever um and what happened was it took you know two and a half more years the

transition process was slow and for a lot of the time you know even conceptually uh which is a similar scenario uh we had low transaction fees in East through the bear Market of last bear market and so like l2s were like nice but like yeah if we were to get that successful that'll really matter just a lot of excess capacity potentially I think we're in the same scenario where there's a ton of cheap block space you can't ZK EVMS are differentiated in some ways but mostly not um and I think it's also going to be a long transition so I think the zkebm hype will really die down and um you're going to see that come to the market in a very real way yeah software always takes twice as long as everything in 2024. I do think they will be powerful over time I just don't think

in 2023 they're going to do a whole lot one uh so one kind of orthogonal point to that I was listening to uh I think it was bankless um on my Myriad of flights over the last 36 hours um but uh Justin Drake was talking about how what ZK Roll-Ups can actually bring to the table which is New State Management composability um where you know in the previous model of where we thought ethereum was going where you had whether it was 64 or 100 or a thousand in however many shards it was going to break composability where you had basically these different evm chains that were going to uh you know run executions individually well with the ZK ABM you're actually able to take

each one of those and have them be composable with each other to where you can have composability across the different shards and with both Proto and Dane Chardon or dank whatever it is both of the the new sharding um I forget which ones first always um but the Proto dank or dank um but the idea is that with both of them you'll actually be able to have Roll-Ups that have composability um so not to say that this changes the timeline of execution but once we get that I think it's going to be extremely powerful it kind of brings us back to like the old ethereum you know composability narrative which I think has been lost we're going back to to

tradition back to the original chains back to uh I think likely I'm just looking at all the D5 chains right now I don't think there's going to be a single L1 with more tvl on it than an L2 by the end of 2023. I think this feels like a good time to uh throw a mic in here as I know he's got a counter prediction for you I have I have a kind of because I want to get that I want to get the conversation going here I think l1's survive and thrive uh in 2023. and I've got I've got I'm gonna try to steal man this I know you guys don't agree with me so I'm gonna break it down in a number of different ways um all right I think if you think about

it from a desired end state of smart contracts I do not think it's a good thing I do not think it's a desirable end straight to have everything settle back to one smart contract layer I just don't think it is and I think there are two reasons for that one uh if there's some sort of weird day one bug in the evm or some code vulnerability that we just don't know about we pretend that doesn't exist in crypto it really does uh there's just an enormous amount that's a huge Factor uh if if an enormous part of our economic value ends up getting generated on and settling back to Smart contract layers I just don't think it's a good thing to have it all settled back to one layer the other thing is uh if you have everything that settles back to one layer

I know eth doesn't do this right now I just trust people's incentives over a period of time eth will eventually they'll have a monopoly over settlement and it'll become rent extractive and ultimately you probably want other settlement layers that can compete and drive down price you guys are laughing at me I can see I see the face but like let me get through that the Restless um I think there's a structural reason why this is always going to work because there's the problem with l1s they have to face is they've got a balance capacity and demand and I they haven't been able to do it so far um I don't think they'll probably be able to do it in the near future because demand is only going to get higher so that leads this like overflow problem right you saw this when gas fees uh

spiked on eth and it led through no merit other than it's just way too expensive to transact on Eve to wanting to transact on other networks for that reason alone I think alternative layer ones are always going to be successful uh or there's going to be some demand for layer ones here here's the other one that um I haven't heard people I haven't even heard any debate on this but I think about this sometimes to myself which is right now everyone is going off of the assumption that layer twos and roll apps like layer threes will essentially be extensions of eth in the ethereum community but I don't think they will be because if you have layer twos that have their own token and then layer threes or roll apps that have

their own token you have three different sets of economic incentives and if the idea is that most of the users are going to be on the layer 2 or the layer 3 then the incentives between ethereum holders and the holders of the tokens of Layer Two or layer 3 ecosystems are not necessarily in alignment and if you think about the entire business model of selling block space in a layer one where you have data availability uh you know computation execution that's all being coordinated by one instrument on ethereum's roadmap you have multiple different sets right it's all distributed across different layers with

different economic instruments and I don't I I don't think they're probably in alignment and that becomes evident next cycle when most of the activity and users migrate to layer twos and layer threes and then they start to try to exert their leverage and power to pay less fees to ethereum the blockchain so I think I am a huge fan of eth but I've just I sense this like overwhelming consensus narrative about it and frankly it makes me nervous like I've I've like listened to the episodes of up only and been like bitcoin's going to the [ __ ] Moon and I've just that's like never been the right thing to buy you know so that's my that's my counter narrative what do you guys think about multi-chain

Futures gonna be kept alive if it is still alive by Cosmos finally figuring out what it's doing um and I think a lot of it is you know the proposals that didn't pass you know a couple months ago that was supposed to reinvigorate the ecosystem like there will be some re-attempt at that but generally like we haven't seen any of these Cosmos chains take off beyond the level of Osmosis but if they're going to separate from the pack the bear Market is is going to be the time they do it so I think that is one way that that the multi-chain vision survives my bone to pick is is basically about like these monolithic chains that are kind of off on an island I wouldn't say Avalanches this because Avalanche has the concept of subnets

um but things like you know Solana and like Phantom and and like Harmony and kind of all of the who's who of the last cycle I just don't see the economic value proposition um especially when you have to inflate away your tokens applied to keep the network up and running um at least you didn't say lightning Network or anything around that you know I I I I think lightning network is in for another year where people just realized that the story around Bitcoin is Shifting and it's not really built for that purpose I also think you know your point about the l2s and l3s is correct like you're gonna see some economic incentive conflict when all these things have tokens and they're fighting each other for fees I generally think an L3 having a token

just is not a good idea like in L2 having a token like you still kind of need to squint to see like what exactly it's for and now it can be decentralized but I think you're going to see optimism arbitrum and polygon take the first steps towards figuring out like all right how do we split up the pie um and I think a lot of things are not going to make sense as they are today um I also think we'll probably see an L2 blow up at some point somehow uh something will happen either on the D5 side of the consensus side and that'll be something that we kind of look at and they're like okay that's new I think that those are definite uh uh those are good predictions because they they definitely run counter to a lot of the perspectives that you know we

probably hold but I I'd say it's good to when you get this that tingling sensation of uh you know some top tick or some consensus perspective it's it's good to revert back and and uh go the opposite direction just to test it out and I agree with a lot of those I think I could see a lot of those things happening um I I also really agree with Vance's point on Roll apps probably not needing nor can support their own tokens and you know the way that I've always thought of them is is more of just like execution layers that are probably paying their fees in terms of you know the whatever the cost basis is in the layer two or the L1 that they're built on top of um but one of the one of the

perspectives specific to you know apps or l2s or anything built on l1s that have tokens I think one of the things that I've always thought um is that there's just so many new entrants into the market over the last cycle that were literally priced out of Ethan it sounds so basic to think about this but like buying an eth for a couple thousand dollars and not even or or even just wanting to put a couple hundred dollars in and not even having the ability to have one of the units is a prohibitive stance for a lot of you know people who don't have uh tons and tons of money who want to interact in these ecosystems and so I kind of see the ability to have you know optimism tokens and and maybe eventually arbitrum tokens it kind of enables a new possible

possible Avenue for people to get into this space just because of the price point of being so much and and once again I know that this is like total you know behavioral economics and psychology overriding this but and not rational thought but but it is something that I think has driven a lot of people away from eth in lieu of other alt later ones over the last year and a half what do you think about the idea that it's not a great desirable end state to have everything settling back to one smart contract layer like do you think at all about like day one coding risks or anything like that like the example would be you know if you have a something that's Mission critical to a company right like if you're building Jets or something you don't want only one supplier right to for your fuel or whatever it's it it's

not it's not the same analogy um because the analogy would be do you want to have multiple operating systems Manning the control modules for that jet yeah or do you want to have one yeah okay yeah I don't love the supply I think it's like yeah open AI chose Microsoft Azure and like if something if there's like a day one bug with Azure like they would just move the code to AWS they would just they would just build it on AWS there's a there's a definite Lindy effect when it comes to software systems like we're talking about and so whatever is the most Lindy will will have the ability to have the stronger security the l2s I think were the most crowded

Venture trade over the past year and a half and it was like a sneaky crowded trade but I call it like the diet L1 approach where like maybe you don't want to throw 50 million at you know Aptos or sui at like 3 billion but like oh there's an L2 that's raising like 500 and you know two is close to one and therefore like you know this might go up and optimism is at 5 billion but like what people don't realize is that's a very historically Supply constrained Market it's only been optimism that's really kind of been the standard Bearer for setting valuations there but you're going to see scroll you're going to see you know all these I I can't even remember all the different l2s that we've seen But like they're very little differentiation and they're going to launch with this High fully loaded

evaluation and I think you're going to see a lot of price discovery on what has been a very crowded Venture trade in 2023 yep also so just to throw another one out that's sort of orthogonal to something that you were talking about or that you guys are talking about um I actually think that next year is the the first year that you see kind of the broad Bitcoin cohort come together and and realize we need to change course had something change something so far down the river I don't I never said that who's leaving that church I never said I never said that it's going to happen I'm just saying that the narrative is going to become more pronounced that okay we need to actually change something for

the longevity of this asset class here's yeah here no I don't want to go off on a Bitcoin thing but like too much but but my problem with that is um in my mind the best thing Bitcoin can do is to do nothing it and what they're trying to do is like go build the Lightning Network or go build there was a fund that raised 150 million bucks to go build defy on bitcoin like that doesn't feel like the right move in my mind well I mean maybe maybe something like strike just to be charitable like but like their mission is that we're not doing anything I just I have a hard time getting with that mission I I think they need to change their

I think they're gonna have to break the 21 million hard cap but I actually don't think I think I don't think they're gonna be able to get the support talk about like I think they will here's where I think they will I think they're actually smart people I think they'll realize that they need that it's security or a transaction fees alone won't you know pay for the security budget for the network I think they'll figure out they need to do something Jason you talk about building Cults right Bitcoin I like Bitcoin but it is a cult for sure and you know there's this funny study about Colts you know how they're all these like Doomsday cults that predict the end of the world like the world's gonna end on March you know 1975 and then the date comes you would think logically that that disbands the

cult because they're like yo this didn't happen but actually what happens is it strengthens the belief in the cult because they were like we made a miscalculation here like Zora the Lizard King actually said you know 85 instead of 70 and they it like doubles people down they're like yeah we're on we're on board with this new message and I I don't mean to be insulting but like I kind of think that's what's gonna happen I think they're gonna break the 20 million cap there's gonna be revisionist history oh go back to the white paper Satoshi never said anything about a 21 million cap can't you see these tweets like that was never part of the Satoshi white paper and I think yeah gets broken for like of several years like until like 20 30.

your your version of the date like that March 1975 the world doesn't actually die is going to be the having so I think starting next year the Bitcoin crew is gonna be like all right guys only one year out until the having like the having's coming and and all like next year starts to happen the free pump where it's like the hobby is coming back let's go and then and it's all just so many like so much having porn on Twitter and then the having is Gonna Come and bitcoin's not gonna be at like 250k and then everyone's gonna be like whoa stock to flow model but that's gonna be the version of the March 1975 it's gonna be like yeah 22 million Bitcoins yeah

are you sure all right next prediction next uh next prediction Michael what do you got on the crypto side of things Michael I've been calling out a couple crypto predictions um kind of like what we talked about last year I think visa and Mastercard or last uh pot I think Visa Mastercard are going to use the the bear Market to really start building out feature-rich payment rails so like adding chargeback fraud adding like all the little categories that they have you know when you buy a digital stamp versus you buying groceries like

the credit card actually clears that it's two different items or buckets of items at least like they're going to build that they're going to build a lot of different features and I think this is going to be the year where you actually see them start to double down in a very meaningful way so I think the stuff that they're doing on starboard is super cool I was reading it after the last pod and I think you know that's just going to continue this year there's a real use case for them and it's it's immediate the payment payment when you say like payments people are like what I can already send usdc it's like no like people with distribution and real Financial Acumen are going to start operating these things sorry I said that comment as a payments nerd myself understanding the the interwebs of payments yeah it's there's

a lot of stuff that has to go through for payments to actually work from a consumer payments perspective and and we are not anywhere close to enabling that yet foreign touched on a number of them but they're actually like really hard to figure out you got to do identity verification so knowing that a person is actually a person um you know the reason why everybody talks about credit card payments and charging three four five percent um it's because when you're actually you know the the issuing Bank you're taking on the price risk and and so that's why they're issuing Bank whoever issues you the credit card is the one who takes the bulk of the fees it's because they handle chargeback support so if you call your bank and you're like hey I never

made this charge like somebody stole my credit card or you know I don't know they stole my credit card details and made this car made this charge all of that is baked into the risk model and that's why they charge the the rates that they do that is something that just hasn't been contemplated yet in crypto like imagine if you send usdc and it's for the purchase of something and you as the receiver of that value are charged four percent every single time you you know you accept payment and usdc like there has to be a lot of infrastructure both like 10 technical but also kind of business infrastructure that has to be built out for payments as as we know and and use them every single day rails are more expensive to use than traditional

financial payment rails if you include the credit card fee people are always saying like oh I sent you know 100 million dollars Bitcoin for five cents that just doesn't reflect the economic reality or use case of a traditional customer and and that's the stuff that once it once you can get that credit card charge fee down blockchains are the de facto payment Network for the rest of the world all right everyone quick break from this episode to talk about our show sponsors Avalanche many of you know Avalanche as the fast reliable and scalable layer one uh the folks at Avalanche have a really great message for those of you who are in the crypto industry right now which is bear markets are for building so while a bunch of our friends over in CFI are kind of going through these struggles and travails the folks at Avalanche basically put their

heads down and are shipping products that Builders want the latest solution elastic subnets right and just to expand on that Avalanche is consistently upgrading all of their platforms right it's on the platform side you've got elastic subnets you've got new VMS on the infrastructure side of things you've got core which Mike I just I know you used that the other day yeah exactly exactly uh so they're upgrading the infrastructure side with core and Enclave the chain has had like no downtime super customizable for devs uh yeah if you're a builder avacs.network uh avax.network great place to be but do Yano and I as well so you definitely go check them out but click the link at the bottom of this episode click the link oh it's not going to get any credit come on yeah give us a like at the bottom all right give us the

credit exactly so yeah big thanks to Avalanche um yeah you I mean you you just had a great experience with them the other day on the user side of things so go check them out guys thank us later let's get back to the show um I think uh all right so so the first prediction that I had about like some like coinbase and Open Sea lose market share was predicated on the fact that folks will move out of C5 and into self-custody um my next prediction is also around that so I think the rise of like more and more people moving into self-custody is going to create a fat wallet war or basically just the wallet Wars so if you look back like every couple of years we have these like huge Wars and I mean we call them Wars but like there were the what were some

passwords like 2017 we had the exchange Wars it's like binance came onto the scene really challenged coinbase okx like kwobi like these really intense um exchange Wars and then in 2021 or 2020 2021 we had like the L1 Wars so you had these ecosystems like battling like Avalanche and Solana even Phantom like Tara when they're still alive I think in 2023 and really into 2024 we're gonna get the wallet Wars uh so right now the only wallet really is like metamask but metamask has so many problems with it the reason they haven't improved is because they have no competition and I think this year is really the year that that that changes so you're going to see

Phantom which was primarily a Solana wallet get into eth and compete with them there you're going to see I think the brave browser has like a super clean wallet I think Brave is actually doing a bunch of cool stuff with their wallet Argent is doing a bunch of cool stuff with their wallet you're going to see like big players who already have a lot of capital launch their own wallet so I think so coinbase launched their own wallet to go head-to-head with metamask Ledger did the same uh uniswap I heard is maybe working on something there and then there's like new ones too like I think there's one called backpack uh I don't know there's like new wallets so let's throw that in the third bucket and I think in the future there's going to be a lot of value that flows to these wallets and I think right like right now

if you look at how if you look at how SAS evolved SAS evolved by basically like getting distribute like get it getting in with the customer and once they were big enough uh the best SAS companies like a slack or a sales force ended up turning not just they went from just SAS companies into platforms so now they're companies that are entirely built just on the back of the dev kit from slack for example like troops AI is like a sales tool that was built on the back of slack and I think you're going to end up seeing the same thing uh where like someone like a metamask launches a dev kit people build inside of metamask and um yeah so like I think account abstraction comes I think um like smart contract wallets will end up becoming

like this big buzzword next year so yeah the fat I think 2023 the big is the the year of the fat wallet I like that what I would say is so it's going to happen and it's going to happen because we finally get clarity on how the App Store treats mobile apps like that's going to be their Trojan Horse to take over a lot of the market and have the breakout success is just you know account abstraction plus you know availability on the IOS app store you know that's going to really kick-start it and I think that's going to be you know a large competitor for a lot of the traditional exchanges I would say the other one that I think of in terms of just a potentially like a different angle that they take out the same incumbent players I think block explorers are going to get pretty

interesting going forward just as you're able to have more context and more information and and people spend more time just looking at stuff kind of like a traditional social network on chain it won't be as much about the exchange it'll more just be about the general context so to go back to you know your point on wallets one of my predictions and it's sort of kind of splitting the difference between what you and Van said um I actually so maybe one of the questions that I have is like where do you consider custodial versus non-custodial like is a smart contract wallet with account abstraction that effectively has the ability to move assets around per some guidelines or parameters that are set is that like I would consider that to be a custodial wallet essentially um where you don't you're not signed a

transaction with a ledger device you're not signing you know it you don't have access to the private key Etc um that's custodial in my mind I was going to say that with that definition custodial overtates non-custodial in terms of assets on wallet in 2023 and assets could be nfts or crypto or stable coins whatever um but I think custodial experience is just based on what van said which is custodial walls are kind of the only walls that are supported by iOS going forward like period end of story and that will have that that will be a requirement for Mass adoption and so you're going to have to have some custodial experience that has the ability to interact with D5 but it's still a custodial wallet on the back end

um and so I I so well I think I might put well can't you have you can have a self-custody wallet um like an Argent for example but you can introduce account abstract like account abstraction can help bring a bunch of things like multi-call for like one tap Crypt so like you know how like sometimes you'll have to approve three transactions but or like four transactions but like elping into uniswap there's like three or four transactions in there but really that you want to do that in one click like that like AAA brings that to the table um like session keys to approve things so there's not like a million pop-ups when you want to do an app action like it kind of solves that there's like social recovery for security gets better um like it like you can add like plugins for flexibility

I'd so I I guess help me understand so like you don't you don't think something like metamask when or uh not not metamask specifically but like a self-custody wallet like a metamask or a phantom you don't think they end up winning this you think it's a no no I mean they would have to change to be a custodial experience so the reason and the logic here is if you want to have a wallet on your phone that wallet has to be a custodial experience and I know that there are some like I have I have metamask on my phone right but I I'm not sure that with the new guidelines going forward that they will continue like look what happened when uh coinbase tried to upgrade to a new version and basically

um Apple said no I think apple is going to start to clamp down on non-custodial wallets in the App Store and you're not going to be able to have either continued upgrades to what exists currently or the ability to add new wallets into the IOS app store because they're clamping down on them and they want custodial experiences like you can't maintain your keys in an iOS device I just tried to log into my metamask on my phone metamask encountered an error due to reaching a storage limit the local data has been corrupted you say your private key [Laughter] lovely lovely lovely yeah everything for us it's gonna be great

so because of this and it's not like a true historical experience like having coinbase on your on your iOS device it's gonna be a custodial wallet that has some sort of account abstraction and controls around like multi-party communication to enable certain types of transactions but also certain other ones would be blocked and you're gonna be able to set those parameters it's kind of like where I see the wallet Wars growing and I but I do completely agree that while Wars are gonna take off in 2023. do you think the value in the wallets ends up coming from like something something like payment for order flow try to uh if you try to apply and put an application on the IOS app store one of

the questions that they have is where what liquidity are you sourcing how are you getting this exchange functionality are you trading with North Koreans or are you trading with like people that we don't want you to be trading with and you like a couple years ago a year ago you probably could just say like we don't have an answer for that this is just so new I think they're really going to get strict especially through the App Store of who is providing liquidity for this thing and I think that both from an economic standpoint payment for the flow is going to be out of the box modernization for a lot of wallets but from a compliance standpoint it's going to be okay you know this person or like these set of people or like you know it's not just like whoever's in the univ3 pool I don't think that's a an

answer that's going to fly with apple in 2023 can I I have a prediction actually around this and it kind of dovetails with uh MVP or that payment for order flow I just could call Meb question I think Mev basically emerge is just a dominant business model for D5 protocols and has implications for wallets and I think exchanges as well um if you go back and look at the internet we're like I mean the In the comparison between crypto the internet is kind of pretty done but there were like in the early stages of the internet there were like all these different ideas and things that could work everything basically most things did work but there are three dominant business models that kind of emerged there were there's ads so that's like what you have with Google and Facebook

um there were there was SAS right which is kind of like the Microsoft or the Salesforce of the world and then they were platform models like uber and Airbnb and I think you'll see something like that in crypto I think a lot of stuff is going to work at crypto but they're going to be a couple models that make the most sense and Mev I think there's a really strong stated preference in Trad five for hidden or variable fees like people don't like paying upfront fees to transact like Robin Hood but the final nail in the coffin so we don't pay five dollars for a brokerage fee but value still gets extracted from financial markets through payment for order flow and mevs like largely that I think um like the way you can order transactions and I think you'll enshrine

proposal Builder separation I know that's happening on Eve that's happening in Cosmos as well um but you can do things like back running and less harmful forms of Med so I think value will be extracted through Mev and uh Jason to your point I think that's I think that's gonna happen on the wallet level like they're at the very front of the Mev value chain basically but I think where there's a pretty interesting intersection of people that have insight into they have a large customer base and a wallet is actually coinbase or exchanges in general but I think coinbase is actually pretty interesting to pay attention to here because coinbase gets beat up for they're like the fee that you're charging consumers

is going to go away eventually I they know that right I think what they'll eventually realize is like hey actually one other way that we could monetize is we are we are responsible for a bunch of transactions that are happening on the blockchain they could either decide to get into Mev that way or I think everyone is sleeping on coinbase wallet it's super [ __ ] convenient I don't really use it but like I'm all I'm also like why don't I use this I still keep a good about my assets on coinbase um so again you're not allowed to upgrade the new version of the coinbase wallet until they do it custodial so no one's going to be able to have access to it until they changed there are some for sure you can have access to it just not right

yeah not a but mobile is going to be a big yeah yeah of course yeah I'm I was yeah so I don't know I think that's a there's like a little bit of a jumbled prediction there but if you look at Mev as the dominant way that D5 Protocols are going to monetize then kind of look at where transactions are happening and who has leverage over the consumers that are making those transactions and questions question on your definition uh do you consider payment for order flow or the concept of payment for order flow to be me I know it doesn't really exist right now in crypto but let's say that I mean they're not the same thing they're exact opposites is something that Mev is an externality of D5 protocols that

are I would just say like sub-optimally designed so like you know you try to swap you know 100 000 East for usdc and there's slippage and the block times are you know the blocks aren't adding to the end of the chain fast enough and so you have someone saying which attack you or you have someone sandwiched at you in reorg it to get a little bit of slippage with payment for order flow what you're trading against is uh you know basically a market maker or a series of market makers that are competing for best execution and it's kind of like trading against an oracle print and that's how you're supposed to get the best execution but it eliminates all of the MAV externalities because you don't have this thing where okay you're actually jamming a transaction through uniswap you're creating the Arbitrage opportunity and then you're having this

sort of mempool that you can bypass by private arbitrageers like you know um not gonna name them but that's the other side of the coin they're two totally distinct Concepts yeah but the but the idea is the same right it's important it's information that's given to privileged parties or transactions occur with the goal of arbitraging off of crypto retail users right right what I mean is more of the concept of Meb not like how Mev is considered today with unisop in particular yes I agree and amm is like an inefficient way of transacting and therefore it's you know the Meb that we've seen is based on slippage sandwich attacks but what I mean is the concept of Mev where there's some like beta in val it's like when you when like for instance when you get charged taxes

on a lot of different digital platforms what they do is they don't actually like add the tax what they do is they just say it's 9.99 and they take the tax out after the fact and so the the merchant ends up paying the tax which is like baked into the price like I consider that to be kind of the same concept which is when you're doing payment for order flow like you're still transacting and they quote you a price but you know there is some value that's attracted from the market maker at a later date it's more like the concept of Mev not like the actual MAV that we've seen today mm-hmm so so like yeah I I so I I agree my to to your other point like Mev inclusive of payment for order flow I think become the dominant you know business models

I think you're going to see the rise of something that looks like kind of like guilds in crypto basically associations of um like laborers and the reason I think this is because you know one of the dominant growth engines for crypto in the last Bull Run was yield farming and basically you were encouraging Capital to come onto your platform and that was pretty successful for the ones that did it in the beginning now that model is kind of being rethought because there's like mercenary liquidity there's constant cell pressure and like a lot of protocol Founders that we talk to are like yeah we don't really love this and really what they need actually is labor right they want people to contribute and like build things on the protocol the problem with that is that capital is totally fungible labor is not

functionable at all right like not all labor is the same it's super differentiated so what you need is someone to set the clearing price for that labor you need them to underwrite that labor and that's actually why you had guilds uh back in like the Medieval Era they like set the clearing price for like what how much does it take to bang this metal into this other shape of metal right and uh they and they um underwrote and you know they basically said okay you're good enough to be like a blacksmith as part of the blacksmith Guild and they also negotiated they sort of acted as like unions of the day and they actually wielded an enormous amount of influence so I'm kind of watching this Dynamic of like protocols saying we don't really want uh Capital at the current rate what we need is like labor someone's going to need to

group that labor together they're gonna need to underwrite it and price it and I think you actually might see the emergence of these like guild-like organizations so that's a pretty far out one but um I think there'll be one for delegates like people already call for this all the time and governance right like we need a professional class of delegates um like Jason's a delegate at maker and it's so hard I mean the fact the idea that people are just going to do this is free time just to contribute is like nuts right it's way too specialized knowledge and it's not enough compensation so uh I'll speak what you

need what you want right is like a A specialized group of people to say hey like these are what clickable unions do so like delegation um but there might even be something as like basic as just like design and branding work like design and branding Guild for web3 like so many of these dials need help with that and like we've looked for design firms it the ones that like get it like our crypto there's so few of them um so who knows it could be the other one I was yeah the other one I was gonna say is Community Management you know it's very portable across Community managers and like a great Community manager versus a fine one makes the world of difference from what we've seen

um and yeah I mean once you have that skill set like it's really easy to Port it over into a new one and and that is a very very important job I was gonna say I have a I have a little bit different of a vein maybe to take us to the tech worlds and and those types of predictions but I think um there's going to be a lot happening in traditional technology next year it's it's probably going to be the biggest year of tumult that it's it's experienced since probably you know the.com crash you're gonna have yeah I think you know on the legislative side I think tick tock tick tock is going to get banned um and that's going to open up the field for either Instagram to consolidate more of a lead or or potentially Michael the

Revival of Snapchat we'll see if they can pull it off I'm hoping for them um go back Tick-Tock gets banned opens up a lot of you know Greenfield for a lot of other players uh it already has been for governed employees by the way for what if you saw this yeah that's that's that's the start that's the start yeah really I didn't know that yeah well it's not just so it's not just I guess it is technically employees but anyone who has a government issued phone is not allowed to download tick tock wow so Tick Tock band uh other players get

in there mix it up something happens uh I'm not hopeful for a new type of social network that's built off of a blockchain but I think there's going to be some churn um I think Twitter is going to work and it's going to work with like a fourth of the employees and eventually this is going to be I think elon's Cash Cow that he uses to fund a lot of other endeavors and it's gonna it's gonna be pretty impressive but I think born out of that and born out of you know people like Tama Bravo which is a large software private Equity Firm and Vista Equity Partners which is another large software private Equity Firm they're going to see this a lot of these companies are going to be down horrendous these these technology companies especially the small and medium-sized ones not the fangs and they're going to buy them and

they're going to turn them around and so that's going to be the other thing is that we strip a lot of the costs out of tech and and that sets the standard for you're gonna have kind of two types of technology companies and even when you look at um you know Vista equities portfolio versus like your traditional growth stock they look a lot different like Vista Equity is buying head count organization planning software stripping out 80 of the employees giving them a literal handbook and telling them to follow this to you know appropriately reduce costs and then you have all of these people that are kind of like doing cartwheels through the field and like you know who knows what they're actually doing but like you know Robin Hood is a good example coinbase is only at seven and a half billion I don't think

coinbase is you know doing anything wrong I think they're actually on a really good track but um you know you're going to see a lot of people start to take shots in these companies and I think eventually it's going to boil down to how down bad is the company in a lot of cases it's just pretty bad second one is just governance you know can you actually Force the change that you need to um nobody's going to take Snapchat private nor necessarily would they I don't think they've ever turned an actual profit in the quarter is that right yeah zeros um so I think it's going to be a year where Tech changes a lot and like for me my first impression of Technology when I got out of college was the Google movie with uh I forget it was like Owen Wilson and Vince Vaughn it was like their first

day at Google yeah you know they're like we watched that they're wearing the hats and I was like man if I can go work in one of those companies that'd be the best thing ever my life would be complete and now I think you're going to get a lot different of a Vibe where it's like we're stripping out the cost everyone's working 14 hours a day like good luck uh I think that drives a massive amount of talent into crypto by the way I think uh yeah like if you every like 15 years or so the the hottest industry kind of changes or maybe every 20 years so if you look at like the 80s it was like trading in like Wall Street trading like if you're like you're graduating you wanna yeah uh yeah well probably P got built up after Barb yeah after

J or well yeah yeah um okay so you have like that era right like private equity and like trading on what basically just like the Wall Street game then it then it moves into um I would actually say probably investment like it moved into when when trading got stricter it moved into it was still Wall Street but like Investment Banking like I remember when Mike and I were in school like you know all of our friends wanted to go into either invest in banking or Consulting like go to like a BCG or McKinsey or IB at like ever core and apply Mike and I were the our only friends who studied liberal arts and did not go to IB so we're a little salty about that and then and then everyone realized that Ivy sucked so they went in

so they were like the new hot job was like p.m at like at a tech company which you guys obviously Cha-Cha realized you know and they were going to like Netflix and snap and stuff like that and now I think that becomes the new IB and crypto in crypto becomes being a PM is so lame now and the reason that I can tell that it's lame is because those stupid videos that people make on Tick Tock about like day in my life as a product manager at LinkedIn excuse me taking the bus excuse me eating you know yogurt like it's like whenever I watch those I just picture Michael literally I've banned yoga it's all foods been banned nobody's allowed to take breaks we have one food we have one food that's

allowed it's flaming hot Cheetos so you better yeah I I like I like both those I like it actually ties nicely into um Michael's prediction at the beginning which is like Tech shifts from growth into value and Vance I think that ties it together um and like I also like this idea of kind of these smaller Acquisitions or like taking companies private this focus on like extreme profitability which I think the Elon experiment will go well um I think we're all maybe a little biased there but like I think it will go well and um yeah people will see that you can run these companies with like 90 less people and um yeah you can actually become profit so this is maybe more on the weights but this is sort of an

orthogonal point a prediction that I had um which is just I think dovetails and also kind of um runs afoul of Vance's prediction but like most of these companies that we know like all the tech companies like the dropboxes the Snapchats like those are not gonna be the ones that fall into Vance's prediction mostly because they literally can't the founders have 10 to 1 20 to 1 voting shares and unless it's Drew or Evan who are supportive of this acquisition it's never going to happen and so I think you're going to see this absolute dichotomy in the tech industry over like companies that have Pro governance rights basically like the ability for shareholders to to actually participate in governance as the way

every other company works right now versus this like adjunct thing that happened over the last like 10 years basically after the Facebook IPO where like all the founders were like I need all the rights and like I'm gonna have control forever and it works when it's working but like when it's not working and you've done a cash cow like Dropbox that trades at eight and a half billion dollars and prints a billion dollars of cash every year and like it would be the perfect takeover Target do you never it's been the exact same valuation ever since it went public oh yeah but it's highly profitable now it's just the valuation models and like the the multiples have just shifted downwards for them but you have this ability to like see which companies are like Pro leaning into governance and maybe some

of these Founders will like take the stands but you're never I think 2023 is once the IPO Market comes back and I think it starts to come back in 2023 it's basically been dead all of 2022 but once it comes back you're going to see like zero of these founder Clash shares going forward anymore I I agree with that I also think I mean there's interesting history to that like the I think that was that originally was proposed by like Morgan Stanley and one really famous IPO I think it was actually the Google IPO maybe or the Facebook IPO or one of them but like yeah Google yeah um which is fascinating I'm curious do you guys think because like the next logical step after that governance conversation is like stock based compensation um there's a guy Joseph Lang he's a

pretty interesting analogy of like if you think about these tech companies as like printing their own currency that they used to pay employees with suddenly if that currency isn't as valuable uh you can do one one of two things right you can either cut that compensation or you have to print more right to keep the nominal value the same you have to issue more shares to get to where you were and investors suddenly care about stock based comp but they're not gonna allow that yeah how do you see that so this isn't this isn't my metric but I I really liked it I think Brad gerstner for all altimeter Capital was the one that really kind of coined it but he said ebitda minus stock based compensation is the new net profitability so basically what you're saying is whatever the actual cash that the company is generating ebitda minus

however much stock based compensation that is creating every year to generate that cash is the new net profit but I mean there it is technically part of the calculation for for profitability but like investors when they're looking at things in investors when they're looking at things you know try to reduce things down and so that's why you have like ebitda in the first place but uh or like the 40 rule where it's like growth plus profitability should equal 40 um and so like those types of rules of of guidance I think are good and and this just basic equation I think is a good way of thinking about what's like the real profitability for these businesses or the profit that actually matters right

so right right well they they just did that with Koopa and Koopa was like at 5.7 Revenue multiple or 5.7 Edge Revenue like these things are not trading yet they're not buying them at these like Mass evaluations anymore which is you know another point so sort of an orthogonal Tech point but also sort of crypto I think um or prediction I think in 2023

you start to see at least two to three like what you would consider to be traditional crypto funds stop making Investments and the reason why is because they've run out of cash they just haven't said it yet and even more so they aren't able to raise because nobody's going to be able to raise at least in the first half of 2023 and so you're just going to see these Tech these crypto funds that you would normally see on a monthly basis announcing new Investments stop making announcements and you'll look back and say oh wow the last time they made an investment or at least an announcement announcement was in like of so I think you're going to start to see that and then the follow-up to that would be um when they do actually raise which

would probably be in six months to 12 months from then so maybe 2024 it's going to be a smaller fund than they previously raised it'll be the first time I think you see you know successive funds go smaller this is just the nature of the business a lot of startup deaths you know now plus six months minus six months or kind of when people have started to shut things down um you know like turn of the year you know people want to get on to whatever their next thing is I think that's real also the burn rate and the amount of cash that they raised in early 2021 for many of these folks just doesn't match up so I think we're going to see a lot of startup deaths and frankly there's probably too many startups in crypto

right now just for the level of product Market fit that we've achieved I remember my prediction it took me 12 minutes um I think we moved I think we uh I think we moved past the jpeg year of nfts I think uh I think 2023 is the year of digital like not not just in crypto but in I like that I like that look Michael that means I like that it means you got a question here so I think digital is like basically every every company right now I don't know I talked to the team at um at Adidas and they're like the most important customer is this under 18. and the under 18 person is on fortnite right now uh they spend 92 a month on digital Goods kids age 12 to 17 spend 92 bucks a

month on digital goods and the only way to reach that person is by launching these like yeah isn't that crazy stat so like they have nuts they have they have skins so they have skins but imagine like imagine you're a company that doesn't have skins how do you reach them so the way that they are all think about reaching them right now is like the word I don't know I just I heard this on this call for the first time fidgetal which is like imagine you're a 15 year old and you buy a pair of Nikes well you're not just gonna get the Nikes that you bought for 100 bucks shipped to your door but you're gonna get Nikes airdropped into your wallet and then you can wear those Nikes and you're like in your metaverse of choice or something like that and so I think like the rise of fidgetal I

think um basically like in the in the way that you know 10 or 15 years ago every single company had like a social media strategy I think this year it's like every single company every exec's gonna be asking their team like what's our web3 digital Goods strategy and that's gonna be on the back of things like Nike is gonna absolutely crush it they're already crushing it with their swoosh launch um like big shout out to their team there and then also Starbucks right I got a demo I'm Mike knows this I'm completely red pilled on what Starbucks is doing but like I gotta I was very bearish very anti-big corporates doing crypto stuff because I'm scarred from like 2017 blockchain not Bitcoin Walmart putting their supply chain on the blockchain and

then I got a demo of what Starbucks is doing and it's really freaking cool and I think it's basically just like loyalty programs on a massive amount of steroids and if you think about loyalty programs as something that haven't been innovated on in like 10 years look is it anything insane no but it's just an improvement on loyalty programs and every single company is going to wants to improve their loyalty uh yeah their loyalty program so I think that's I think like huge year for Brands getting into nfts nfts move Beyond just like jpeg era that being said I think there are going to be generational buying opportunities for like the blue chip jpeg nfts I think like Blue Chip jpegs are going to be a multi-billion dollar asset class

um and we'll see generational buying opportunities for things like you know like crypto punks like the like the absolute I don't own crypto funks by the way but like the tier one of of the of the jpegs and the and the rest of them will all die so I mean since Vance and I were doing Ashley's we've been saying that utility has to be the driving force of value for nfts it's only they're still not there for five years yeah next year we're still not there yet well I think we'll I think we'll get it I think we'll get nfts with utility and like more nuanced more personalized also much more commercial uh nft drops but that's just the way the nft space is going to go damn 92 dollars a month that's a lot of paper dude I was trying

to back in this I was seventh grade at that point like I did not have close to 92 a month to spend on that kind of stuff absolutely not does this let me ask you you know does this um I got that from a block Works uh things I hope that fact is right good plug either way um does this impact like you know that gay Bladen sort of thesis about how nfts are going to get people in does that intersect at all with your wallet thesis like do you think um if people are all getting into like opening up a wallet right because they're corporate nft or whatever does that impact do you think we see like nft based wallets or like

how does that intersect me a role of thesis you probably will get wallets that just like have a much better like friendliness for non-crypto people you know um and and like there's less about so I think wallets right now are all about the crypto asset they're about the they're about the the like treat they creep they treat crypto like an investment which it is but like that's what all wallets are based around I think you'll start to see wallets that are based around like your home for your digital life like everything you do in your digital life will be inside your wallet and I don't think wallets have that mentality now but I'm sure I'm sure some will so just to beat a dead horse here that's where the custodial wallet experience that exists on an iOS device

has to happen Italian did you did you guys just make an investment in like a custodial wallet that is doing this no just think about it though like RFID tagging instead of paying for something with Apple pay you tag off to be able to get access to the Loyalty program and that drops an nft into your wallet on your phone yeah yeah yeah so anyways big year for brands dudes yeah all right fellas thank you for a good year last part of the year yeah when we started this I didn't know what to expect it's been a

lot of fun did you like my holiday present ation [Laughter] I was like this guy's probably sitting on his couch and get some random King from Yano get up and go to that same thing you've done a thousand times it was really just a a way to get a new podcast listener he said he's gonna listen to the Pod so we're gonna love it I love it I showed my entire family that and they were just like the whole thing yeah anyways good enough to end it on it's been an awesome year guys um and everyone who's listening appreciate you guys listening to everyone

thank you