The a16z State of Crypto report and the case for a breakout year

Transcript

Yeah, the history of technology, it sort of unfolds with overlapping uh innovations sort of amplifying one another. And one of the most recent times that this happened is with social, mobile and cloud. Um all these trends were distinct separate kind of things going on in tech. But the overall effect was that them coming together uh them converging uh was greater than the sum of their parts. And we're expecting that AI and crypto are going to be complimentary and a lot of the things that AI does not offer uh crypto does and vice versa. And so these are going to be sort of naturally uh you know fitting with one another going together kind of like peanut butter and jelly.

>> GM good morning. Welcome to the Milk Road Show. The daily crypto show where the group chat goes from buy the dip to are we okay in under a minute. I'm your host Jay Hamilton. It's Wednesday, October 22nd, but it might as well be Christmas because A16Z just put out their annual state of crypto report and it is full of alpha. It also gave me a renewed sense of conviction which I think we all need right now as we experience this pullback because when you read read this report, you realize how early we are. you realize how much product market fit we are achieving and how many use cases are being adopted in so many different ways that honestly

when you're stuck looking at price charts all day, you forget this stuff. So, since I know y'all don't have time to read a 54-page report, I invited two of the authors of the report to the show today to break it all down for you. We are joined by Darren, head of data and fun strategy and also Robert, head of special projects and the co-host of their web 3 podcast. Before we jump in and hear from these two fine gentlemen, in case you missed it, Milro team has been cooking on our Milkro portfolio.

This is our portfolio that is available to pro all access members. It is our how we are trading our crypto portfolio. what we are doing with our allocation and we gave it a full refresh where you can look at interactive charts cater breakdowns see every move that we have made when we have made the move and it is available on our site right now so hit the link in the show notes if you are not a proaxis member unfortunately you won't be able to see it so you might want to upgrade if you don't sorry for giving you the FOMO today's episode is brought to you by Figure Markets grow your cash like a bank no lockups just real returns. It's also brought to you by the Gemini credit card. Stack Bitcoin

every time you swipe. No fees, no fluff, just crypto rewards. With that, Darren, welcome back to the show. Great to see you again. >> It's great to be here. >> Robert, good to have you. First time. It's a pleasure. >> Great to be here. >> All right, Jents. Very excited about the report. It's been uh is this the the fourth year that you've put it out? >> Fourth year. started in 2022, >> fourth year. I remember co I remember covering the first one uh four years ago on the podcast. Uh and it's as bullish as ever reading this report. Um I want to walk walk through as much as we can.

54 slides. We're not going to get through it all today. We will link to it in the show notes for those who want to go deeper and read the whole thing. Before we jump in, just want to open it up to give you guys each a a chance to sort of give your takeaway of working so hard and putting so much time and effort into writing this. What were the big takeaways for each of you? >> I can start uh you know like like you said, we've been doing this for four years and every year, you know, we see new data, we see new trends, kind of things move, but I think in 2025 things feel different now, right? I uh I I like to use this analogy. Robert's heard me say this many times, but uh the Bitcoin white paper was released in October

2008, which means the crypto industry is about to turn 17 years old. And to me, this year really crypto feels like a 17-year-old, right? Just kind of nearing the end of adolescence, starting to step into adulthood, you know, finally being taken seriously, but still like plenty of growing up left to do. Um, and I think that comes through in every kind of part of our report, right? The institutional adoption that we've seen, you know, people really taking the crypto industry seriously, the legisl the the regulatory environment and the pending legislation that we have in the United States, you know, really at the, you know, the the highest uh national stages, uh, you know, in in 2025. The infrastructure, uh, that crypto is built

on is now more mature. uh you know we're starting to see new types of applications emerge and so all of these things I think speak to the maturity that we've seen uh in the crypto industry and I think 2025 is really an inflection point where I think crypto is about to uh enter the mainstream and has has really grown up in all the the best ways. >> I think that's exactly right. I'll just add on and say you know this year just looking at what's changed over past years the numbers are just they're truly staggering. I mean, you'll see many slides where volumes are in like the tens of billions of dollars or in the case of stable coins in the trillions of dollars. It's just like seriously mindblowing numbers. Uh, and at the same time, you also have all of these big big

big financial firms, uh, all of these big brand names all getting involved across so many different aspects and areas of crypto. Um, so we like to really think about this year as the year the world came on chain. Um it is really kind of an exciting time and as Darren said we're very well poised moving forward especially as we start getting uh more and more regul regulatory clarity to see um you know what people are building and another just very interesting thing with all the infrastructure improvements that have had across uh blockchains recently you know we're seeing that begin to pan out into actual usage and adoption and applications that are finding product market fit. Um things are really popping

off now like they never have before. >> Yeah. And we're gonna dive into some slides. It's interesting to hear you say that this is the year the world came on chain because I think it's a lot of people view this as the year of of institutions, right? 202. It's actually one slide in the in this report is big year of institution 2025. But I think people are missing the onchain adoption because that is not especially in the western world and in developing countries that is not a conversation that we have as much because we have such great financial infrastructure. So that's a really good point and Darren I also just loved that you called crypto a 17-year-old. It just makes me think I my son is only two years old. But the the

volatility of a of a teenager at 17 very much describes the current price action that we are seeing. Although V is slowly going down as crypto is growing up and hopefully once we get into our 20s it'll be less volatile. But uh okay let's start with you guys start off >> gearing up finally. >> Yeah. Exactly. Exactly. You guys start off the report with a market overview. So, I want to go through a few of these market overview slides. Um, your first slide in the market overview section talks about just how cryp the crypto market has developed in cycles. Can you walk us through how you're breaking down market cap developers and user adoption here and the the trends that you've seen since 17 years ago when crypto started?

>> Totally. So, I think there's a few different lenses that you can look at uh to evaluate the or look through to evaluate the the crypto market. Um, you know, of course there's the macro environment. You know, we are less positioned to to speak to that, although we we do recognize that it's very important and can have an impact on these things. I think where we're really well positioned to talk about things is this feedback loop between prices, developers, and users. uh you know as a venture capital firm we meet with every day lots of smart builders who are launching new products and are kind of using crypto as a technology platform to kind of build uh products and and innovate in in new ways. And so that's the lens that I think we have the most

expertise to to speak to. And from that lens, we've seen these patterns repeat uh throughout crypto's history where prices go up, right? People get interested. Uh developers then launch new products. Those products then bring in new users and then the new users kind of kickstart the the next wave. And so that is this kind of price innovation cycle as we call it that we've seen repeat throughout history uh in in crypto. Um you know, we saw it in 2017 with the ICO boom. We saw it in 2020 with DeFi summer. We saw it in 2021 with the NFT surge. Um, and so, you know, this is a pattern that we have become familiar with and and like to to to look at. I think in 2022 though, we really

the industry really shifted away from that, right? The uh collapse of FTF FTX caused a lot of people to lose confidence in the industry. Uh people don't always realize this, but the launch of Chat GPT was less than a month uh apart from the collapse of FTX. And so a lot of the attention shifted toward uh AI. The US was under basically a full-blown regulatory attack. Uh you know, it just wasn't sexy to be building in crypto. And so as a result, we lost uh a lot of uh builders during that that dark period for for crypto. But I think now uh the tides are are shifting, right? We have this new stable coin trend that is bringing a new type of

builder into crypto. uh maybe from more of a traditional finance background or you know someone working in fintech. I think there's a a new type of builder that is emerging. Um and then I think the regulatory shift uh that we're seeing in the United States uh with the new administration um we're also getting uh clarity through uh legislation uh the Genius Act which is a framework for stable coins was signed into law this year. There's also a broader market structure legislation that has bipartisan support that's moving through the Senate now. Um, and together I think these bills signal that crypto is here to stay in America. I think it's encouraging people to come back and build in crypto. And uh, you know, I think that uh, along with stable coins

could be the catalyst for the next wave of developer adoption which as we've seen throughout history uh, leads to to new users and and more uh, overall interest for for crypto. >> Can I ask just a follow-up question, Robert, before you jump in here? Uh yeah, that catalyst that you're talking about is very interesting to me is you know and as an investor we're all looking for what's the next catalyst and I completely agree regulation and stable coin adoption could be that next big catalyst. What do you think the timing of that is because it is becoming unclear what is going to happen with market structure in terms of timing. I would love to know what you guys think timing of market structure would be. I

know it's impossible to predict what the pol politicians are going to do, but I would just love to get an insight into where you think that's at and what you think the status is. Government shutdown obviously impacting that. So yeah, so I definitely have uh I do not know what the timing of it will be. Uh both I don't think anyone knows and then also uh you know Robert and I are not the uh experts in DC who have the front row seat. We do have a team that I think is closer to that. Um but I think even they would say that uh you know we we we never know when it comes to what happens in in DC. I I will say that uh you know we already have uh the genius law that is uh now has been passed right and and

so we do have this clear framework for stable coins which I think uh regardless of how market structure plays out uh you know gives us in the industry some some important clarity. Um, and then I'd also say the uh the regul the regulatory approach to crypto with the new administration has already completely uh reversed uh the stance on how crypto gets regulated. And so federal agencies across the White House, the SEC, the CFTC have already issued lots of uh new rules guidance statements initiatives that have been overwhelmingly positive and supportive of the of the crypto industry. And so we have a favorable regulatory environment. We are trying to uh encode some clear rules uh with

market structure in the on the legislative front. Um you know we we are optimistic um but uh timing wise uh we just we just don't know. >> Yeah I'll just add on to that and say obviously the government is shut down right now which is its own separate issue but the administration has made clear that this is a gigantic priority for them. Um they've made this point uh previously and they continue to make it. So there is a lot of momentum behind it and there is a lot of strong bipartisan support on this issue. So I think all signs are pointing in the right direction and um you know things move slowly but steadily in government. You know don't hold your breath but uh it seems like like things are going

trending in the right direction. >> Yeah. Yeah. And I guess what you're saying, and Darren, that's a good point, is even if we don't get market structure this year, which to me seems very unlikely at this point. Uh, and and maybe it if we don't get it this year, maybe it who knows how long it extends. We still do have clarity from the legislation of the of the Genius Act and all the regulation that you're saying is coming out from all these regulators. So, there's actually enough momentum and and stable coin adoption. And we'll get into some some great slides that you guys put on stable coin adoption. I just want to zoom out for a second and point out one of the simplest but great greatest slides in this whole deck which is the total number of crypto users in

the world is impossible to predict but you guys are impossible to uh estimate but you guys are probably the best at estimating this. Can you walk through walk us through this? How big is crypto in a global scale right now? >> Yeah, so there's a lot of dimensions to how you can size up the crypto market, right? We show a few of them here, right? One is just how many people own crypto. Um, and that is like the the largest superset. I think that there's lots of people around the world that for, you know, uh, speculative purposes, you know, have purchased crypto and hold it in some account. But what we're really interested in is how many people are actually using crypto. How many people are interacting with crypto on chain on a monthly basis? Um and of course you know you can't just look at

active addresses across the blockchains because you know we have this problem in crypto where you know you can have uh many addresses uh you know there's bots there's other types of artificially inflationary practices and so we really have to kind of try to analyze the best to the best of our ability how many people do we actually think how many unique people do we actually think are using crypto on a regular basis. Um, and so we look at uh wallet user data. We do some onchain forensics. We've had discussions with some of our portfolio companies and industry partners who have uh kind of unique uh perspectives into to this. And we've come up with this range of 40 to 70 million estimated monthly active users of crypto. Of

course, it's a wide range because it's very difficult to to know for sure. Um, but that number grew 10 million from our estimate last year. um which we kind of think is a a sign that pe more people are coming on chain, there's new types of applications and uh you know it'll be very exciting to see how this number uh hopefully grows uh in the future. >> What's really interesting about this number is you know if you look at the estimated monthly active users it's about um compared to the number of global crypto owners there's like a 10 to 20x difference between those uh those numbers. And so right off the bat, you know, this there's this like semi-tapped market of people who are in crypto but are not using it regularly. Um that is

just this untapped pool waiting to be activated uh and shift in into a more sort of like uh active presence on chain. Um and that's not even talking about the market outside of that of people who aren't crypto owners who could potentially be brought on chain. But this is an audience that is already there just waiting to be activated. >> So if we have 700 million give or take global crypto owners and about 40 to 70 million of those are monthly active users. If we look a year forward from now, do you anticipate, Robert, that the monthly active users is going to increase as a percentage of the

global crypto owners or do both go up in the same scale? It's it's very hard to say. You know, I won't I won't go on the record with any particular prediction around that, but if we're looking at past reports, the numbers have been increasing over time. Um, and I think given that this is the year of institutional adoption, as we talked about earlier, um, you're going to see a lot of neo banks and fintexs around the world instantly up their distribution of they're going to use crypto and stable coins as a way to expand their market globally. I think that that is probably going to be a huge onboarding opportunity for much of the world. Um, and we could look at the

institutional player slide, but yeah, there's just so many names there, uh, of people who are excited about, yeah, here we go. So, you've got everybody from Stripe making huge moves, Robin Hood, PayPal, Visa, even um, it is just like every large financial institution you can think of is thinking about this and creating a strategy around how it's going to shape their business. >> And this story, by the way, we've seen the kind of institutional story play out, you know, many times throughout crypto's history. I think we've been in the space long enough to kind of see this come and go multiple times, but I really do think this time is different because if you look at both the names on this slide, but also more importantly what they're actually doing. They're not just kind of making some kind of broad statement or marketing ploy or saying

that our innovation team is going to look into, you know, what we can do with crypto. They're making real commitments here, right? and and I think it's because they now and I think a lot of this is due to stable coins see the opportunity for crypto to really reshape their businesses. Um and so uh you know this is an area that I think you know while you know I think I personally have always been skeptical of this uh in this narrative around institutional adoption. I think the institutional adoption in 2025 is different and I think it's more exciting than uh than ever. Yeah, I'll add to that and just say um I was a journalist uh some years ago at Fortune and wrote a cover story called Blockchain Mania back in I think it was 2017. Uh

>> and this time I can I can say is very very different from that last period. Um at that time it was like innovation departments within giant corporations that were looking at this stuff >> basically just trying to be cool. uh because if you slap the word blockchain on something, you instantly get coverage and headlines pretty much universally across the board. Um this time these players that we're seeing on this slide that you're showing here, these are their like their core business teams are looking at how they're going to adopt this stuff. It's a very very different kind of set of circumstances than it was back then.

>> Yeah. And and I can tell you I can say that the the two narratives that are happening within these organizations, fintech companies are calling themselves crypto companies internally now. They are they are fully in there is no difference between fintech and crypto anymore. If if you're a if you're Robin Hood and we've had Vlad on the show, he talks about crypto as if it's like the core part of their business, right? And maybe he doesn't publicly go say that necessarily, although they have done a lot of public announcements. But and then banks, they're saying it more quietly, but they know that if they don't adopt it, they're dead, right? And so those two narratives alone, like that's the future of finance. They're all they're all in and they know that they need to be here. Why do people

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I want to go to another slide that was really stood out to me which was was stable coins and obviously everybody in crypto knows that stable coins are, you know, the biggest use case and they know the adoption and they know all the incredible stats, but this I had never seen anybody break break it down based upon SEC filings. So, love how deep you guys went on this. Can you guys walk us through what you're seeing from major public companies in terms of them using and getting involved with stable coins?

>> I mean, you can see some of the examples on the slide, right? I mean, really uh they see the opportunity and I think uh you know that that has never that has never happened before. Stable coins have been around for a long time. I think we finally got the infrastructure to a place where stable coins now are kind of the best uh method for for payment in in in many cases. And now, you know, we're seeing big companies like Visa, City, and PayPal uh kind of make these, you know, bold statements about how state stable coins can fundamentally uh change uh how they do business. And uh you know we saw uh Stripe uh purchase uh uh stablecoin uh infrastructure company bridge um which I think kind of kicked

off this this whole wave earlier this year. We had a huge uh upsized IPO from uh from uh circle right which I think really started uh a lot of these trends and now everybody's on on board and wants a part of it. Um because I think there really is uh there really is something here. I think uh you know the the the future of payments uh will be built around stable coins. I think that's become clear. >> Yeah. And just to point out one of the one of the players on this slide uh city uh is on here and if we're talking about stable coins, you know, their analysts are out there saying that right now this the stable coin market is about 300 billion dollars. That's how big the market is. Um but by 2030 in just five

years they're expecting that to grow to three trillion4 trillion dollars. Um which is about a 10x uh increase. So you know this is city going out there saying this stuff >> and and what you can see on this slide is the number of stable coin related mentions in SEC filings. And it's it's it's it's just completely exponential in the last three to six months where we went from I mean basically in early 2025 we probably had 50 and now we have over 300 in it's just showing that every major public company is trying to figure out a stable coin strategy. And why

wouldn't you? You're a major public company. You move billions of dollars while you can do it at faster and cheaper. Okay, duh. like there's no no reason. Let's look at another slide on stable coins because this is also just mind-blowing and I remember this a similar slide from past years. I wish we could show the past year slide actually compared to this slide but give us what's the breakdown of how stable coins rival the world's largest payment networks. >> I mean I think you can see it right here. They're right in the mix. And uh you know there's many sort of nuances in this data right and that's why we show both like the unadjusted number as well as an adjusted number which attempts to filter out a lot of the bots and inflationary practices that we we see in

the data. Um but whatever number you look at stable coins are moving trillions of dollars uh around the world. Um and that is right there in the mix with uh you know the world's largest global payment networks like PayPal, Visa and even a which uh plums the entire uh US banking system and so uh it is it is pretty remarkable to see uh where stable coins have have gotten to and uh you know I think it speaks to the fact that they are a good product for payments. They have many different uses and really found product market fit this year.

Yes. >> Yeah. And all of this is due to all of this is due to all the infrastructure improvements that have been made across blockchains recently. It has become wildly wildly cheap and efficient to uh use blockspace across a number of different chains and that has just completely allowed this market to explode. The the thing that stands out to me is that there is a major trade that Wall Street is finally getting on to, which is stable coins and tokenization or call it real world assets, whatever bucket term you want to use for it. And I think a lot of people in crypto uh get we're we're too we're almost too close to it.

So, we can get really caught up with, okay, how do I make that trade? How do I make that investment? But it's actually quite simple. You buy Ethereum and you buy Salana because those are the two biggest networks where stable coins are today. And look, most likely will continue to be. So it is actually and I know that Wall Street is is seeing that and doing that and you can see it in in the data. The ETFs and the DATs and the way that they have exploded really show that Wall Street is saying, "Oh yeah, you want to invest in stable coins. It's not just circle that you need to invest in. you can invest in the foundational layer of this which is those two layer ones. I don't know if you guys have any thoughts on that trade and how Wall Street is thinking about that.

>> I mean I it certainly is true that uh these layer 1 and layer 2 blockchains underpin uh at the infrastructure layer all of the activity that we're seeing with stable coins and uh real world assets. So I think that's a good call out for sure. >> Yeah. And certainly if you're buying if you're buying a stable coin, you shouldn't expect it to appreciate in price given the fact that it is a stable coin. That's its whole function. So it's only natural that people are looking to adjacent or complimentary areas to uh uh to ride this trend. >> There's the there's the clip of the episode right there.

Okay, let's go to applications and use cases because if if anybody listening to this is, you know, talking to your uncle or your cousin, your friend, you know, who's giving you it's Thanksgiving is a month from now and you're sitting there saying, you know, well, it's all just a scam. The the typical rhetoric that crypto gets so much. Show them this part of the deck and you will see the tremendous amount of applications and use cases that are being built in crypto. It's so I almost forget all of these things. I I kind of want to walk through each one of these slides because you you show a bunch of different use cases. Let's start with with DeFi, though, because DeFi is obviously a big part of what crypto offers, but not

necessarily a part that gets a lot of talk or a lot of attention, not really since DeFi summer in a major narrative way, but what's going on? What's the story in terms of DeFi adoption? Yeah, this is actually one of my favorite slides. Uh and and sometimes people forget it feels like DeFi has been around forever, but it really only emerged in 2020, which is, you know, five years ago, right? And so, uh in five years, which is not a very long period of time, uh we've seen uh fairly steady growth in the percentage of spot crypto trading that happens in DeFi versus on on centralized exchanges. And now about 20% of spot trading uh is on decentralized exchanges uh compared to

centralized exchanges. And you know there's a little bit of of spikiness in the chart but if you look at it over the kind of full time period it's pretty linear growth. And I expect uh you know is in the coming years I I would hope to to see continued growth as more people come on chain as more people start to interact with uh DeFi and decentralized protocols instead of the uh centralized exchanges where historically most of the trading activity has happened. Okay, let's move on to >> you can you can look at some you know even Vitalic this year um put out you know a statement basically saying that like lowrisk DeFi is going to be one of the big applications for Ethereum one of sort of the the guiding lights um and so this is something you're seeing even

Vitalic who was not necessarily uh so interested in DeFi previously uh is getting on board so this has been a a quiet sort of gradual um appreciation for uh for DeFi and we're seeing out in the numbers >> and it and it's one of to to me my my three favorite trades in crypto are the Bitcoin trade in terms of the the debasement trade that I think we all are we all get and the rest of the world is slowly cluing into because inflation is not slowing down and governments are not going to stop printing money. I already mentioned >> on that.

>> Yeah, we'll get there. tokenization and the stable coin trade and then the DeFi trade, which to me feels like the trade that I actually get the most excited about because of stats like this and the fact that it's just it's still so early. As you said, DeFi is only five years old. We looked above the number of people that hold crypto versus the number of people that are monthly active. Well, what do you think those people are going to do when they go monthly active? They're going to use DeFi. That is the biggest thing that they're all going to use. So yeah, I get really really excited about this. Okay, I'm going to skip the next slide is about pers. I'm going to skip this one.

We've talked lots about per this year and hyperlquid and that tremendous story there. Uh but I want to go to real world assets. Um this slide shows that there's 30 billion in real world assets on chain. That's a pretty small number though still relative to the size of real world assets. We're talking about hundreds of trillions of dollars in real world assets globally. uh break down what's happening here and then I would love if you guys have any thoughts on uh where this might go in the future. >> I I agree with you. It feels small. I think I had this conversation with Robert at one point. He's like, "Oh, 30 billion." I was like, "That feels small, right?" Like the traditional financial industry is like you said, you know, in the it's a that's a that's a trillion dollar opportunity. Um it is nice and

you can see some of the growth here that we are I mean we have grown, right? And it is still early days. the opportunity is big. But uh yeah, this is a this is a number that I hope uh we'll see continue to to to grow because this really is the bridge to traditional finance uh that I think we need uh for kind of the next stage of of DeFi. Um and uh you know I think there's uh a lot of promising uh projects uh in this category that that we've seen. Um and you know I'd expect uh this to be a big trend. It does feel like we're at the very start of this transformation that's going on. Um, but you can already see in just the past

couple of years how it's gone from basically nothing to $30 billion. So, while that might be small, uh, the growth there is just really really incredible. Okay. Uh, let's let's keep going through use cases. Uh, we got to we got to go to DPIN. Uh, deepen is one of my favorite use cases, but never gets the narrative. Nobody ever talks about deepen but it is it it is I I believe going to be one of the biggest crypto use cases in the long term. Uh what's going on in deepen? >> Yeah, I mean I'll just say that this is another area where crypto is intersecting with um you know kind of the physical world. So if we're looking at like uh crypto intersecting with tradi that was the real world assets slide. This one is like where rubber

meets the road and where crypto is you know people say hardware is hard and it is. I think that's why deepin has taken a while to unfold. This is but these these sort of projects are looking at everything from telecom to energy uh to you know there are a lot of different areas but because it's grounded in the real world we're expecting this to take a little bit longer to play out. We're we're seeing though some of the early projects like here you can see uh Helium's been around for a while. They're one of the earliest sort of you know they kind of kickstarted this trend a bit. Um and the amount of revenue they're making is is

interesting. it's been increasing and um I think we're going to see from a lot of projects that you know not even just deep pin projects but just crypto protocols in general uh that they're going to begin generating fees and revenue. This is going to be a big shift across the whole industry. >> Yeah, we'll get to a slide on that in the regulation second section in just a sec. Uh okay, I'm going to skip over meme coins and NFTTS not because they're dead everybody. Uh and because I know everybody listening is like good thanks for skipping that. I lost money on that, but more so because there's just too many slides. But memecoins and NFTs are here to stay. And you guys do have two great slides on that and showing the future of them. Maybe not so much at least on the NFT side, not speculative

reasons, but for collectible reasons. But we got to talk about markets. Another massive use case. And I think here the big thing is a lot of people said, well, this was just all tied to the election. And once the election was over, prediction markets wouldn't see the same volume and the same uh adoption that they were seeing heading up to what was one of the biggest events of the past years. What have we seen with prediction markets post election? >> Yeah, prediction markets have one of the weirdest histories within the crypto industry, right? I actually got into crypto uh in 2016 uh because of Augur.

That was my first uh introduction to to the crypto space. Um, you know, there's lots of reasons why that didn't uh play out in the ways that I thought it would. Uh, one being we just didn't have, uh, the infrastructure to be able to do it in, uh, the the right ways at the time. Uh, you know, we then had kind of the rise of of Poly Market over the years that have done, you know, who have done done great work to kind of build some of the the key infrastructure around the space. You know, of course, like you said, a lot of people were saying, you know, this is only going to be popular around election cycles. I think 2025 kind of shows uh that that's not the case. Uh you know there's a regulatory story here as well, right? I think the the tailwinds that we saw on on that

front really unleashed uh this category in in a way that's that's very exciting. And now we have, you know, Cali and Poly Market uh fiercely competing for their piece of what seems to be a growing pie of users, right? I think the intersection with traditional sports betting is now inevitable. Um, and I think it's going to be really exciting to see the role that crypto will play in all of this. I think uh there's a a really promising opportunity here. And you know, of course, the the category is uh one of the most exciting things happening in crypto right now. >> Yeah. The irony is if you were betting on a prediction market about whether they would outlast the last presidential election, uh you probably could have made a bunch of money if you had said that they were going to because it was

conventional wisdom that they were going to, you know, people sort of assumed that that was just going to be it. they would only be big around these big, you know, these big moments. Um, but we're seeing that is not the case. They are growing pretty rapidly in recent months >> and and I think still so so early and as you said, Darren, the regulatory side is really opening up a lot of opportunity here. I I don't even think we understand what prediction markets are yet. And I don't think the rest of the world really fully grasps the future of media and the future of news is going to be very much tied closely to prediction markets. Uh okay, I'm going to skip the infrastructure section. um not because I don't want to touch on it but because we

have limited time and uh there's lots of great stuff in the infrastructure that basically shows that we are in a better place than we were a year ago and we are ready for crypto adoption to gain steam and to explode in a new way. But I've got to talk about AI and crypto because this is certainly one of the big stories of the last year. What why why does AI need crypto? I think this is a question that a lot of people can get caught up on because they're like, "Oh, well, crypto is an old tech now." And I mean, it's crazy to say it's old tech, but AI is the new hot kid in town and everything's going to AI. But you guys point out that there is actually some real reasons that AI and crypto need each other.

So I think if you would have asked me this question a year ago, right, I would have waved my hand and I would have said, you know, you know, AI is very centralizing, crypto is very decentralizing, and so like they're a good pair, right? But I think that's how I would have answered that question a year ago. Now I feel like I have real tangible examples of how these technologies are going to come together in ways that are extremely exciting. Right? We know how hard it's becoming to distinguish between uh you know AI and human generated activity online. We now have these new proof of human identity systems like world uh that could be the answer. You know more than 17 million humans verified already. Uh we've seen a lot of interest in AI agents but for them to really uh reach their full

potential they need to engage economically. Um and it turns out crypto might be the only viable payment rail using standards like X42. So a whole exciting category there. Uh you know there's the world of intellectual property an 80 trillion dollar market. AI runs on IP but we don't really have the systems for coordinating and transacting around that at scale. Turns out blockchains can make IP programmable. So a whole kind of world of opportunity there. And then of course right AI is very much concentrating power into big tech today. Um, and if we can decentralize the compute layer, uh, we can, uh, you know, really keep AI open, permissionless, and and neutral, uh, in in ways that, uh, I think we otherwise wouldn't be able to. And so,

you know, these are real examples that I can speak to now. Um, and I think, uh, it's only a matter of time before builders, uh, really recognize the shape of this opportunity and start to to to build in in these areas. Yeah, the history of technology, it sort of unfolds with overlapping uh innovations sort of amplifying one another. And one of the most recent times that this happened is with social, mobile and cloud. Um all these trends were distinct separate kind of things going on in tech. But the overall effect was that them coming together uh them converging uh was greater than the sum of their parts. And we're expecting that AI and crypto are going to be complimentary and

a lot of the things that AI does not offer uh crypto does and vice versa. And so these are going to be sort of naturally uh you know fitting with one another going together kind of like peanut butter and jelly. >> Yeah. >> Fantastic. And I mean and the numbers on this slide, you know, you talk about AI agents using using crypto rails moving money essentially. There's estimates that that could be $30 trillion by 2030 in the next few years. That's and we're probably at I don't even know what the number is today, but we're probably at you know billions. Like so you're talking huge huge growth potential as AI grows. Uh Robert, I know you got to jump

to to something else. So, if you got to jump, I'll let you say goodbye now. Thanks so much for joining us today. >> All right. Thanks everybody. Great being here. Jay, thank you and take care. >> Cheers, Darren. Appreciate you hanging out and continuing to jam with us. Uh, let's go down to this was brought up a little bit earlier. The the question that a lot of people have or the statement that I hear a lot is we're losing talent to AI, right? All the developers are leaving crypto and they're going to AI. And if you're an investor in crypto, that's that's concerning, right? Because you start to think, oh, like should I be investing in AI instead of crypto? Obviously, harder thing to invest in. But you guys break down on this slide that maybe yes, we

are losing talent, but we're actually gaining talent as well. Can you walk us through the story here? >> Yeah, for sure. I think we get this question all the time as well. Um, which is why we wanted to to do this analysis. The question of course being have we lost a bunch of talent to AI since the launch of chat GPT really kicked off that that industry and I think there's certainly some truth to that right like I think we have lost some talent and the data will will show that um I think there's lots of uh reasons for that of course AI is a hot trend we also you know we're under a fullblown regulatory crackdown on crypto in the United States and so if I was a smart kid coming out of college I could either go to the hot thing that's super exciting or I could

go you know work in crypto and risk being thrown in jail uh for some some reason. I think that has totally changed now. So like let's see how this trend plays out uh going forward. Um but we lost about a thousand jobs to AI startups on a net basis, right? So we gained some lost some but on a net basis we lost uh a thousand jobs to AI startups but we gained back an equivalent number of jobs roughly speaking from other industries like uh traditional finance uh and tech. Um, and I think that sort of speaks to the story, right, that we're seeing unfold in crypto right now. Uh, with the institutional adoption, the fintex, the banks, the asset managers all leaning into crypto. I think it's, uh, created an opportunity for a new type of uh,

crypto builder, um, which is kind of more traditional finance background, you know, more traditional tech, whatever it is. And I think we're starting to see that offset a lot of the talent that we've lost to to AI. But I will also say, you know, we are now in 2025 in a very different place since uh compared to what we were when chat GPT uh launched in 2022 and uh you know, I'd hope we can get some of that talent back going forward. So, I'll be interested to refresh this analysis in a year and see where things stand. >> Yeah, it's I I love this slide and the way you tell that story because I really I think everyone only focuses on one one side of that equation, which is everybody that's leaving crypto to go to AI. But as you said, there is a new

builder coming into crypto at basically a net rate. So yes, we are losing developers, but we're gaining developers at the same time, which uh is is obviously really important as we need we need builders if we're going to build great products for product market fit. Okay, I got two more slides that I want to touch on before we wrap here. Uh you got a whole section on regulation. I'm not going to go to every slide on that, but I want to highlight this slide which talks about how the regulatory setup is going to lead to a path for network tokens to finally share their revenue, share the value that they're acrewing with token holders. This is something that we've talked about since the

beginning of crypto. We all want that that that switch to be turned on for a lot of these tokens. It's like, hey, I'm a token holder. I'm an investor. Can I get some form of you want to call it dividends, whatever you want to call it, right? Can I get some form of value coming to me if the that that token is doing well within the ecosystem and regulation always shut this down and didn't allow this to happen? What's your thoughts on how this plays out in the future? >> Yeah, that's exactly right. I think for uh most of crypto's history the lawyers would tell the comp the projects that they can't do this right and and that was the advice that they were given and as a result uh to date very few tokens are actually productive value acrewing

assets but as we have been talking about the regulatory environment has shifted. We now are starting to to to see kind of the the the shape of what market structure legislation could look like. um you know defining kind of clear parameters around decentralization uh which is important to being able to uh do this in a way that is is legal and compliant with with all the the laws and I think the door is opening up to to to start to do that and now uh you know we we think that uh more tokens will start to do this uh given kind of the the new regulatory environment that we're in um which I think will have a very positive impact on the overall market for tokens

because today it's just very difficult to reason about valuations relative to fundamentals. We don't have, you know, good benchmarks. You know, people ask me all the time, right? Like how like why is this token worth this, right? And it's like hard to answer that. But and I think it just speaks to the immaturity of the industry on this dimension specifically. But if we get clear rules, uh you know, we can allow tokens to complete this economic loop. you know, the industry gets more mature, the market grows up, and you know, I think uh we start to see tokens in a very different way. Um, so that's that's something I'm personally very excited about.

>> Yeah. And what you guys break down this slide is that and I'm guessing this is in the last uh let me see this is figures annualized based on data from the last 30 days. So total fees paid by crypto users 33 billion revenue that leads to revenue generated by crypto projects 18 billion and that has led to revenue occurring to tokens in the amount of 4 billion but that is still a small number. You can see that it's starting but what this says to me as an investor is okay I love this loop. I love that this is going to happen and we're going to have real ways to value these projects. Who are these projects though? the ones that are generating revenue and which ones are generating revenue mostly it's DeFi. So that's

again coming back that's why I love the DeFi trade so much is I think we're very early in this story and I think a year from now when we get you back for your annual appearance on the show Darren this slide will look even better in the numbers and the amount that is acrewing to tokens. >> I sure hope so. I am excited to see what all these numbers look like in a year from now because uh you know it's always fun to to see how the space evolves. >> Okay, as we talk about a year from now, final slide I want to show is thoughts for beyond for the rest of the year and beyond. Uh you guys have a slide here of a few of your different thoughts. Would love to hear sort of your top thoughts in terms of the way you look at 2026 and

beyond. >> Yeah. Yeah. Well, I told you at the beginning that, you know, crypto is a 17-year-old. Next year, it's going to become an 18-year-old, which is going to really enter it's going to really enter the world as as an adult, and I hope on all of these dimensions that you can see here, uh it really uh does kind of start to to show that maturity, right? I think, you know, the stable coin stuff, uh we we really haven't hit the network effects of stable coins yet, right? like we're seeing institutions adopt it. But like there is going to be a point where it just makes sense from for merchants to accept stable coins, for users to hold stable coins and you know that is just going to be a flywheel that I don't think we've seen yet. You know maybe maybe next year we'll we'll start to see

that a little bit more. Um you know I think uh we've talked about the market structure legislation that you know we are really hoping we can uh we can uh get get done. Um you know I hope the infrastructure will continue to improve. I hope the AI story becomes more clear to more people. I hope we bring, you know, more real world assets on chain. You know, I hope the DeFi continues to grow and uh yeah, all all I think speaking to this theme uh that I just want crypto to continue to become more mature. Um and I think we're on a path to to doing that for sure.

>> Yeah. And and what you can see on this slide is all the different I mean basically if you're not watching you're listening there's nine different thoughts on this slide and it's essentially nine completely different paths where if only one of these paths really exploded in the next year that would be a major growth point and a major inflection point for crypto. But I think that all nine of these could could grow in the next year and most likely will. And it shows you just how bright the future is. And you said at the beginning that crypto is very much affected by macro. And we are feeling that this year in particular. And I think that that is leading a lot of

crypto investors to really try to become macro experts and to understand the macro side. But you have to remember as a crypto investor, you also need to understand the fundamental side. Which is why this report that you guys put out is so great because it really it it actually does not look at the macro side and it focuses on the fundamentals. And I just look at this and I think about like if you know if financial institutions, banks and fintexes we talked about if they they could have a big narrative in the next year. The banks are dead narrative could really come back and really explode.

Infrastructure, the privacy narrative. I keep waiting for the privacy narrative to blow up. Nobody It still hasn't. every every week we get a guest who wants to come on the show and talk about privacy and I'm like I don't really know that retail cares about privacy yet but you guys have a whole section in the infrastructure a few slides all about privacy and what's happening there in ZK proofs and the future of Ethereum and that is super interesting as well and then the real world assets side I I I can't the thing I can't figure out on the real world assets is is how quickly that is going to going to grow Figure Markets has been a sponsor of the show for a while and talking to them about all that they're doing with home equity loans on chain and the way that that has

grown is is incredible. But I just am still waiting for tokenization of real world assets to really have its moment and to really have that explosion. It feels to me like tokenized stocks is going to have a stable coin moment. Like there's going at some point, you know, the same way stable coins have had tremendous adoption and a lot of that adoption has been by the develop developing countries and developing world. Well, what is that? That same user base also often doesn't have access to US stocks and US equities. And you bet they want it and tokenization can do that. I don't know if that's the 2026 thing or if that's beyond and I don't know if you you have thoughts on that

but man I get excited about that. >> Yeah, all of these things that you mentioned are and you know there like you said there's nine things here. They all feel like they're right on the cusp and you know sure things will surprise us. You know things may go in different directions than we we predict, but there are so many things that feel like they're right on the cusp of of breaking out. Um and that's what we're we're really excited about. And you know if you look outside of the crypto market throughout history good companies are created in every market cycle right and with the crypto industry being at the stage of maturity that it's at you know a irrespective of the macro environment a you know breakout category or breakout project or you know a new chat GPT

moment for uh the crypto industry could kind of really uh really change things in in a positive way. So, uh, we're we're very excited. Uh, you know, love doing the report and hopefully, uh, some of this stuff materializes. >> Darren, pleasure to get you on the show again. Thanks so much for joining us and thank you to you and the whole team for writing this fantastic report. >> Thanks for having me, Jay. >> Thanks for tuning in all. I got to remind you, none of today's episodes investment advice. I am not your investment advisor, Darren. Robert are also not your investment advisors. If you need help with investments, you should speak to a professional. As I said at the beginning, if you want to see the Milkro portfolio, what we are buying, what we are allocating, how we allocate our dollars, the percentages,

what tokens we own, you should check out the new Milro portfolio page because it is absolute fire. Hit the link in the show notes. You might have to go pro in order to access it if you're not already pro, but I highly recommend you do. Have a wicked awesome day, everybody. See you back again tomorrow. Onchain betting only lets you bet on one event. Boring. SX Bet changes that. Parlay bets, boost payouts, no fees, straight from your wallet. Go to sx.bet now to get your slice of the $50,000 parlay launch tournament. Want insights on what's moving crypto markets and how we're trading each event. Subscribe to our channel and join the Milkro Daily and Pro Newsletters and start investing like the top 1%. This show is for educational purposes only. Nothing we say is

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