Avichal Garg On Investing in Crypto, AI and Ethereum’s Path Forward

Transcript

Nothing said on Empire is a recommendation to buy or sell any investments or products. This podcast is for informational purposes only and the views expressed by anyone on the show are solely their opinions, not financial advice or necessarily the views of Blockworks. Our hosts, guests, and the Blockworks team may hold positions in the companies, funds, or projects discussed. >> All right, everyone, very excited about this. We've got Vitalik Buterin, [music] uh, co-founder of Electric Capital, back on the pod. I think Vitalik you might hold the record for most times on Empire. You're at least top five now.

>> Oh, amazing. >> Yeah, yeah. Yeah, yeah. Well, there's like an incentive in, you know, podcasts. It's like if you bring the views, then we'll have you on more and we bring the views, so. >> Oh, amazing. Great. >> And, uh, some some good times. >> know, I only I only I do like your pod. I do Haseeb's. I do like I don't do I purposely don't do that many, actually. >> have any, uh, are you into see like rivals because you're both like you both have good takes and you're public figures and >> Uh, we're uh, I mean, he's actually a really good friend of mine. >> Yeah. [laughter] >> But in public >> got to get the drama baby. >> But in pub- in public we're we're we're frenemies. >> Nice. Nice. Nice. >> But I you know, I really I do enjoy The

reason I like going on his pod, too, is um, he's he's just opinionated and uh, he's not af- afraid to assert opinions and um, it's fun just like as an intellectual exercise to disagree with him. You try to steel man the other side of it cuz he's a really smart guy. >> Totally. >> And so you're like, what is the strongest argument for the other side? And I've I've now spent enough time with him that sometimes I will purposely like I know how to needle him a little bit, you know? And I you know, I mean, you have friends, right? And so like, you know, you know how to like get it under each other's skin a little bit. And so I know how to do that with him a little bit. It makes it really fun. >> That's great. Um, okay, so we are

recording this in San Francisco. You're at your guys's office, so first off, thanks for thanks for having me here. >> Um, >> I wanted to do this with you because we're at a interesting moment in time where basically AI has sucked up all of the attention, capital, human capital, financial capital, um, you know, we're on the precipice of the three largest IPOs maybe in the history of the world, SpaceX, uh, you know, Anthropic and OpenAI. And, um, you probably more than any other crypto VC or than most other crypto VCs are both at the center of crypto investing and have spent maybe two decades at the center of Silicon Valley investing. I think your angel, you know, record is yeah, pretty pretty good.

So I wanted to just get your take on like broad sense of how you think about crypto in light of AI sucking up all the attention and capital. >> Uh there's a lot of ways to cut that. I mean something we think about a lot. I think undoubtedly AI is the center of the universe right now. It's interesting though as an investor um that is very difficult, right? Because what you really want to do is be like the right time to be investing in AI was 5 years ago or 10 years ago. Um and it's really hard to do right now unless you are willing to throw a lot of money around and take certain kinds of bets.

Um you know, for example, investing in Open AI at 100 billion was still a good investment, right? Um but if you're an early stage investor, then what you really want to be doing is investing in the things that are not hot today. Um which I think crypto's not hot today. Fintech is not hot right now. Um you know, they're like those kinds of categories I think are actually from an early stage perspective more interesting in many ways than AI right now. Um because AI is just so so noisy. And I think that one of the lessons we've learned on the being on the the crypto side for a while too is um that's that's not when things get like this parabolic is like not the time that you want to be putting a lot of capital to work. You kind of want to be really

patient or you want to be investing so early in things where it's you're practically like pre-seed incubating them because it's like it's just going to take so long for the thing to work. So we just did one of those that's sort of at the intersection of crypto and AI. Um but actually it's it's it's very difficult to invest in AI right now and I think it's actually like pretty not that difficult to invest in fintech and crypto right now. >> Yeah. >> So it actually sort of it pushes us away from like let's let's let's go focus on the things that a lot of people aren't focusing on and aren't really popular right now. >> Yeah, interesting. How do you um how do you decide what those things are?

Do you have like, you know, big team meetings where you're like, "What's the second order effect of this and the third order and the fourth order?" Or do you have, you know, the smartest founders in the world come come pitch you guys and you say, "That's a good idea. I never thought of that." Or >> Yeah, a little of both. Um and so I think part of it um I'll I'll give you a concrete example, right? So, what we were just talking about this. So, um if you think about the side effect of of all these AI tools and mythos and all these things that are, you know, going to be able to hack all the things, um then clearly like cybersecurity starts to matter a lot more. And how do you how do you secure the code? And there are lots of different ways to do

that. And I think one of the ways that it would make a lot of sense to do that is um through formal verification. Um and so you can sort of think through like uh you know, what are the consequences of what's happening in the world and what are the effects of that and what does that mean? Um and and for us, we try to find things that are that are that are going to have some sort of like technical moat or going to have something where it's like hard for the average person for the average VC to to sort of get up to speed on it. And something like formal verification, um Curtis, my co-founder at Electric, um has gone down that rabbit hole for years. We we did a series A of a company called Certora, which does formal verification for a lot of

uh DeFi protocols and works really closely um with with many teams across Solana and Heath and in the whole ecosystem. Um and those guys are world experts. Like Mooly Mooly is one of the godfathers. He's a professor, was one of the godfathers of formal verification. Formal verification, for those that don't know, don't know, it is the idea that you can turn this very hand-wavy, so Mooly, I apologize. Uh but it's it's basically the idea is you you can turn code into mathematical statements. And then you can mathematically prove whether or not your code does what you think it does. And historically it was used in places like um aviation or or um space programs like satellites or NASA. And the reason you would use it in those contexts is you have a relatively cuz it's very expensive computationally to do these

things and it's a lot of work like from human labor to sort of construct these these proofs basically. But um you know, you would do it in places where you had relatively small amounts of code but the consequences of a bug were catastrophic. Right? Like you send a probe to Mars and if you have a bug in it the thing crashes and you're like, "Well, I just lost right like 18 years of work." Right? And so you really want to make sure your code is doing what you think it's going to do, right? And you don't you don't have bugs. And it turns out um smart contracts in DeFi are a perfect fit for that. Like relatively small amounts of code but the consequences are like you know, Aave secures you know, billions and billions and billions of dollars and so that's a perfect fit for that and so Certora

works well there for example. Um but now all of a sudden those techniques um become extremely important because if if Mythos or whatever you know, the open AI equivalent is going to be you know, these things that that can hack all the things um you know, you got to go back and check all the medical device software. You got to go check you know, every like bank software. You got to think about how do you harden your systems from um voice emulation. Right? So like I can I can social engineer people and so now my entire customer support group can be socially engineered and so how do I you know, there's like all these points of of cyber security you know, vulnerability now.

Um and so all of a sudden I think formal verification becomes super important. So if you have that insight then you say, "Well, that's probably not a thing that your typical VC is thinking about." Right? They're they're just it's like difficult to think about what the hell is even formal vacation and you know >> So an ideal like that is that you guys in a room whiteboarding saying second order effect, third order. Let's go find the best or is it someone who you know, you maybe you've had a relationship they come in and they okay. >> Yeah, both yeah. So yeah, a lot of it is I mean a lot of um it's it's sort of like preparation meets opportunity. Right? And so it's just like having talked to enough smart people you start to build some intuitions and then um you know, it's like some some person

that you've invested in is having a dinner and you go hang out and they invite one of their friends and their friend is really smart and then their friend says something and you're like, "Oh, that's really interesting. I never thought of it that way." And you take it back to your other smart friends, you know, that you work with and you have that conversation. And so it's it's pretty organic. It's hard to um, you know, we we try to put some structure around it. It's like, "Okay, let's go do a market map." Or let's go have this conversation about this topic and whatever, but a lot of it ends up being organic and you sort of have these moments of insight and brilliance where you're like, "That is a great insight from that person." And then that sort of cascades into like, "Oh, yeah, we really

should be thinking about that." Um, and then you have to intersect that with like where where you uniquely positioned to win, right? And so for us it turns out understanding cryptography and distributed systems and um, you know, Curtis and I both worked at um, Facebook on on large-scale machine learning systems and so we kind of understand that world and so you start to then say, "Okay, well, you know, like if if we're going to go try to try to work with a founder um, to build something cuz usually we're we're first money in. Can we do we have Is there a reason the founder would want to work with us versus Peter Thiel or Marc Andreessen or, you know, Roelof Botha at Sequoia? And so we we have to feel confident that if we go talk to that founder that we are we are uniquely well-suited to help that

person win, right? And so then you got to intersect those two things. So it's like you get some great insight about the way the world is going to be and you intersect that with what are you what are you uniquely good at? And it turns out something like formal formal verification we're like uniquely well-suited to do. >> Going back to just this crypto opportunity versus the AI opportunity, it feels like the only thing to invest in is some variation of AI, right? That's the That's the the moment that we're in today. Whether it's the memory stick, you know, whether it's SanDisk and Micron or it's, you know, you know, retail allocation to, you know, SpaceX or it's, you know, the squeezing in a last round of Anthropic before they go public. Like Up and down the capital stack, that is the the flavor of the of the moment. How

you know, the the thing that is definitely not the flavor are crypto tokens. How do you view even this, you know, this idea that you just brought up a formal verification? This is crypto meets AI in a sense, right? How do you view like the pure play crypto opportunities today? >> Yeah. Um we are still very very optimistic about that. I mean, that's for us when we when we first got off the ground in in 2018 we had angel investors before that, but that was sort of like when we formally created Electric Capital. Our the thesis paper that we wrote, which I think has turned out to be true, is we called it programmable money. We said like what this stuff is really uniquely well suited for is moving money around, and that's what it's going to be used for. And we call that programmable

money, and I think that that basically turned out to be correct. And when you look at it through that lens, I think similar to you know, I think both crypto and AI share this thing, which is that um at the end of the day, like what isn't AI? Like what isn't AI enabled? It's just going to be in every business. And I think similarly for crypto, it's like well, everything needs cryptography in a world that agents are doing all the things, or everything needs cryptography or if you're talking about moving money around, and it turns out um money and liquidity and and these kinds of network effects are one of the few long-term defensible things in any business, which is why every business is trying to become a wallet.

And so, if every business is trying to become a wallet and move money around and that's such a core part of their business, then it's that's going to happen on crypto rails. So, you know, we kind of look at it as like well, every business is going to be AI and every business is going to be crypto, and then the technology sort of disappears. To your point around the specific crypto tokens, um I think that the crypto as money thing, we still think is still relatively early. Um and so, that means things like Bitcoin and ETH as as prospective stores of value. Um that means um underlying rails that move these assets around in various forms, and and I think that's things like uh potentially Solana, or, you know, um some of the L2s on ETH, um things like Ethereum wise where you might build sort

of semi-permissioned networks for certain use cases that that um are compatible with ETH and settle ultimately on ETH in in interesting ways. Um or even applications that use the idea of tokens as participatory mechanisms. I think we're just starting to see the beginnings of that. When we think of like hype and and Venice as examples of that. Um but all of those at their core are really about um moving money, capital formation, like it's it's it's entire fintech stack basically. >> Mhm. >> Um re re is another good example. It's another one in our portfolio. Um where it's a reinsurance business. It's a fintech.

>> Yeah. >> Um you know, Cayman Island registered, regulated. It's it's a just a insurance business. It's a phenomenal. If people that don't know reinsurance um reinsurance like Warren Buffett has made billions and billions of dollars on reinsurance. The idea is insurance for insurance companies. >> Yeah. >> And um it's a it's a phenomenal business if you do it right because it's just law of large numbers. It's you know, it's like I'm going to underwrite the insurance companies that do workers compensation in Maryland and Florida and California and like what's the likelihood that all of a sudden there's something like catastrophic that hits all the workers compensation policies in these places.

And so it just ends up being a spreadsheet formula and you can make a bunch of money. And the rough math of it basically boils down to um some leverage multiple on top of the treasury rate. >> That's right. >> And so you can get like five to seven x leverage on treasuries basically the way the regulations work. And so if rates are like 4% you're making like 20%. Um which is pretty phenomenal as a as like an IRR on your business. Um and what's interesting about re is they built a a protocol in the back end that uses the stable coin markets as their capital market function. So like typically in a reinsurance business what you have to do is like go raise a bunch of money from Blackstone or from insurance you know, from pension funds to finance this whole thing.

And what re is doing is saying we'll create a smart contract. Anybody on chain can deposit stables. We'll off board those, finance the business and you get real yield. You get like real 12% or real 14%. This is not like terra luna stuff. It's like there's something productive >> Right. >> happening in the world with this that you get paid. Um and so you look at those kinds of things and you're like that's real. Right? That's that that's what we talked about for a long time but that's actually real. Um but I think a lot of like crypto Twitter is stuck in this um like L1 wars or like meme coins or like that and that's just I think slowly dying.

>> Yeah. >> Um meanwhile I think you have things that are like hype or VVV or re which are real. There's like something productive happening there. There's something interesting happening there. And the tokens and the infrastructure are all actually useful in some fundamental way. And I think we're just starting to see the beginnings of that and so you know there's it's like very the future's here but it's very lumpy. And I think people don't realize that that stuff is real. >> Yeah. So what do you think uh what do you think we got right and what what did we get wrong? Right? Because it feels like you know originally we thought all things would become cryptofied. Right? We had you know the you know the Uber on the blockchain. We had the you know all games would become crypto games basically. You'd own every skin and it

would live on a blockchain. It feels like that maybe was the wrong idea. But the right idea is that capital markets are 100 times bigger a thousand times bigger than anyone in crypto realized. >> Yeah. >> And that all capital markets will move on chain. >> That's right. >> Yeah. >> Yeah. I mean that was um I mean to toot our own horn a little bit I think we were basically right about that. >> Programmable money. >> Programmable money. We didn't do much beyond that. Um we never did um like social stuff or apps or Uber on chain. We never did any of that stuff. We basically just did programmable money. Um and I think we were we were basically right. Um Now that doesn't mean I think that stuff I think that stuff can happen um eventually. But it just goes back to this idea of of well it's because

all of these other things may have elements that benefit from this infrastructure. They need to move stables around for example. >> Mhm. >> Um and this is going to be the the rails that all the stable coins move on. Um or um these tokens allow you to own a piece of the product and the network that you're participating in. So that's what I think is so interesting about like the VVV token mechanics where you sort of get this like you know free usage for the LLM by holding the token and you're getting effectively getting like a share of the upside in the in the protocol. And we talked about that a lot in sort of like '16, '17, '18 era of of participatory capitalism.

>> Right. >> And I think it's actually happening. Um And so >> Say say say say one more line about that. Go go a little deeper into what why that's exciting and what what is the thing that is exciting there? >> Well, the the intuition always was, you know, it somehow feels um maybe unfair is too strong a word, but you sort of have this intuition that's like well, the first hundred or the first thousand Uber drivers really should have made more than 15 bucks an hour. >> Mhm. >> If the thing ends up being worth a hundred billion, like they got the network effect off the ground. They're they're they're the supply side of the supply and demand marketplace and they didn't really get to benefit. And how would you do that? Like do you give those people equity in the thing? How do

you I mean it's just like mechanically speaking, how do you even do that? Right? There's SEC rules around shareholders and taking profit interest cuz you don't want them to like vote on your governance stuff, right? It's like how do you do that? And and tokens actually solve that, right? Like you can own a piece of hype and and they're doing buybacks and and there's effectively economic value that gets created by the product and you could be a heavy user of the product and you can benefit from the overall success of that ecosystem um using tokens and and um the real value there I think is that that that it's it's about capital formation. It's about capital flows. And and so even in that use case, I think it's programmable money. But you're really it's like a it's like a type of an equity. It's not equity in a

traditional sense, but it's a share in the profit of the thing um which is enabled by this infrastructure. And so those profits can flow across those rails in a way that you just couldn't with Uber or or Airbnb. You can with hype. You can with BBB. >> It's so it's so interesting you say that. I think a lot of people think that Uber on the blockchain cuz everyone's heard this idea, right? And people look at it as a thing that didn't work. >> Yeah. >> And you would say it actually is working. >> It is literally working. >> It just turns out it's really hard to build an amazing product. >> Correct. >> That that's what crypto folks maybe got wrong. >> Exactly. >> Is that it's really really really hard for every, you know, for every Uber there's a hundred thousand startups in Silicon Valley that died.

>> That's right. >> So it took it takes a long time to get to a hyper liquid. It looks like Yeah, I mean, you mentioned VVV a couple times like maybe Venice is another breakout thing. >> Yeah. >> It's hard to hard to build a breakout app. >> Yeah, Ree I think is another good example where like you can you can participate. And And you know, I think um to me it's so funny because um if you're on Twitter all day, what you would think is that uh crypto is dying. But it's because everybody's like paying attention to price charts. >> Mhm. >> Um but those are lagging, right? And if you go spend time with founders, uh you actually or you go spend time with the institutions in in New York that are talking about moving all their stuff, you know, tokenizing and moving

all that. You have like such a different perspective of what's happening in the world. And that's where we spend all of our time. It's uh I always laugh. We talk about it internally. It's just we're we're pretty low-key on Twitter and we're pretty low-key in terms of like media in general because I think it's too easy to fall into this trap of thinking that that's a real work. >> Mhm. >> That's not real work. >> Mhm. >> Right? The real work is like spending time with founders. The real work is figuring out how to raise the next round of money. The real work is building a good product. And so we try to spend as much of our time on that stuff as possible. And if you do that, I think you should have a really different perspective. And so I look at things like Venice or Hype

um or Ree and I'm like, "Wow, it's actually working." Like the stuff we were talking about 8 years ago is working. Um all the infrastructure's in place. And so if you have the ability to build a really good product, you now have tools in your toolkit that actually a lot of people don't even understand yet. The idea of using stablecoins as a capital market, the ability to have your your users actually share in the upside of what you're doing, the ability to distribute these products globally. Like um I was just uh I was Q&A from Monad was uh was just tweeting about this. Um and um I think he's totally right is you know the one of the side effects I think that people don't understand about of what's happened with crypto is you now have the ability to build a a financial services company or a fintech

um and not have to start it in the US. Like historically, you basically could you know, if you look at Revolut or you look at any of the fintechs, Ramp or Brex or whatever, they could only really start in like one or two markets. Um and then you had so much regulatory overhead to scaling that business that it was extremely cost prohibitive and it was very, very difficult. >> It's like Revolut was UK and then they're not breaking out of the UK. >> Yeah. >> they try to go to other markets. >> And every now and then you get like a new bank in Brazil, but it's like pretty rare. >> Yeah. >> Um most of them actually happen out of the US. Robinhood and Coinbase, whatever. It's cuz the market is large enough. You have one giant US market.

The regulatory regime is the same. You try to do that in Europe, it's really hard. Or you try to do that in Asia, it's really hard cuz the markets are small. But now with crypto, what you have is actually a sizable enough global market of people holding >> Mhm. >> stables. And they all have um you know, EVM or Sol-based wallets. Um and so I think you have a large enough market that you can build financial products for, get to scale, and then back into competing against companies in the US. Which is a huge advantage for startups. Like for the first time, you don't have to go raise $50 million and get all the licenses. And um uh you know, figure out how you're going to compete in for CAC against like BlackRock or Fidelity.

>> Right. >> Right. Like all of a sudden, you have tens of millions of people that have stables and have wallets that you can reach. And the mechanics around how you acquire those customers are completely different. Um the way you build your business, the infrastructure is completely different. And and you can actually get to scale. You can build a high scale business, um which is a real business. And once you have that like if you look at what what um Jeff is doing, it's it's phenomenal execution. He's like got the ETF going. >> He's got the SEC on his side, right? >> He is doing exactly that playbook. And typically when you see that happen, it's not one and done. It's like that's it's not like, "Oh, Hyperliquid's the only person that's ever going to figure out how to get to scale on a business and then back

into the US and have like a real regulated, credible business." I think that's the first of many, right? So, back to the idea of like I think there's so much opportunity now because all the things we were talking about 8 years ago, the infrastructure is actually ready to go. Um that there's no better time. But but people I I I think a lot of people that's been most of the time on social media are not going to realize that that's happened until it's already happened. I agree. And so 5 years from now all these people will wake up and be like, "Oh, the right time to be investing in crypto tokens that are have real fundamental value was 5 years ago." >> There's actually you talk about spending time with founders. I think there's unbelievable I know it's your job to cuz you have to go meet with the founders

and invest in them but there's just unbelievable even retail alpha in spending time with founders because they'll tell you what's actually happening. Which is the last 18 months was really freaking hard. And now the last couple of months most people's numbers have changed. >> Yeah. Like stuff starting to work. >> Yes. Yeah, stuff is really working. So, what do you um What are you guys most excited for? So, you mentioned Venice, we mentioned hype. Yeah. Are you by the way are you guys invested in >> Oh yeah, we should call that. Oh yeah, we should also call that. Please don't listen to me about that. It's not financial advice. >> Yeah, yeah. Of course. Of course. >> Can we cut that cut that in the front? Yeah, it's just don't listen to me about anything. I'm not I'm not your financial advisor.

>> Yeah, exactly. So, you guys have the So, we should Electric, you have the venture fund and you have a liquid fund. >> Yeah, we do both. Uh, the venture stuff can also do early stage protocols and tokens. Uh, pretty much everything that I used as as an example we have we're investors in. We're we're seed investors in Near, we're seed investors in Reef, we we um uh, have a bunch of Venice. Um Yada yada yada. We have a bunch of ETH, we have a bunch of Bitcoin. >> Do you have hype? >> Uh, we have not announced whether or not we have an hype position, yeah. >> All right, fair enough. Something like Venice, did they raise any venture rounds or was just you buy the token on the open market?

>> Um Uh, can't can't Yeah, can't speak for Eric on whether or not he's raised. Um, but um, you should ask him. But um Uh, we we just bought on the open market sometime ago. >> Yeah. Um >> We saw that because we were seed investors in Near and there's we saw we could see the like Near intense started working recently. We were we we invested in Near in like 2018 so we we've known him for a long time. And so and we've known Eric actually before he was for a long time, too. >> Yeah, from ShapeShift. >> Way early ShapeShift. Yeah, he's been >> It actually on a side note, it makes me be happy to see Eric winning. >> Yeah, he totally deserves to win. He like actually >> And Ilya, too.

>> Ilya, too. >> Yeah. >> Which is what I think also is like that's another good signal, right? Like I think people for a long time it it felt I feel like I'm I'm searching for the right words to say this cuz it's going to sound too judgmental, but it felt like the wrong people were winning. >> Mhm. >> Mhm. >> Um you had these like brilliant technologists and like people who had who had done who had made these leaps 10 years ago for the right reasons. Um for philosophical reasons cuz they wanted to see certain things happen in the world because they believe in um fairness, they believe in in um you know, transparent systems that don't screw people and um you know, all these kinds of things.

Um and a bunch of these people were just were just were just getting punched in the face for years and years, right? I think that's Ilya, I think that's Eric Voorhees, I think I think ETH is going through that right now. Um you know, totally and Solana is going through that right now. Like um but I think what you're starting to see is that the people who are who have actually created real technology and who have actually created things that people use are starting to win. And the people who have not are slowly dying away. Like like I saw some some stuff around like, you know, the final like Litecoin bulls like finally capitulating. And I'm like, okay, this is a sign, right? Like good.

Like that that this is like a real sign that stuff is actually the market is rationalizing. And so I think if you play this out two, three, four years, I think people will look at the top 10 or top 20 or top 30 crypto assets and this happens in every cycle where you're like, really? Like these things are in the top 10 or like these things are in the top 20? And like, what about this other thing that's actually really useful? >> Yeah. >> And that's like, you know, number 100 or something. >> think this could be the cycle where finally we >> it actually normalizes. I think it actually fixes it. >> great. >> Where people are like, oh yeah, these are actually the things that are that are useful. That's not to say there won't be speculation. I mean, there's tremendous speculation on the AI side

for right for example, right? Um so it's not like a uniquely crypto phenomenon. Um and so there will certainly be a handful of things, but I think by and large, like value um is going to converge into the places that are actually creating value, you know, like I I think we're starting to begin to see >> Let's hope. >> Yeah, I think it's going to happen. >> the goal. >> Well, part of this, too, is I think I do think there is like markets are not uh you know that that saying they're not rational in the short term? It's like in the short term they're popularity uh >> contest >> contest and yeah, in the long term it's a yeah, it's a weighing machine or whatever the Warren Buffett quote is.

I think we're in the in the process of that. And so I think the people who have actually created real value over the you know, over the last 5 years um will be vindicated in the next 5 years. It's just you kind of have to suffer through it. But, you know, all the more um reason why I think those people tend to win. I mean, look at somebody like Erik. He's had very clear, consistent principles for his entire adult life, which is why he was early to Bitcoin. That's why he was doing ShapeShift. He's always acted in accordance with his principles, and so he's never had FOMO. He's never had the like >> Yeah. In fact, he was willing to kill his company, ShapeShift, >> yeah, to do it what the right thing was, right? And um And I think when you have that's the

only way to do things across cycles, which is why I think people who are um philosophically minded or or technologically minded or or they have some reason other than the speculation and the money to do the thing end up having longevity, and then those people win. Right? And so that's part of the reason it's it's it's not like um it's not like a karmic thing. It's not like, oh, good people win. I think what happens is that like the people who are extractive and short-term minded and yada yada do their extraction and then leave. And then the people who are left for long enough to create real value are the ones who have something other than money that they're driven by. And over 10 years, eventually people realize that. They're like, oh, they've actually created something really useful.

And then eventually the money shows up. And those two those those two things kind of converge. I mean, look at like OpenAI right? These guys were you know, they've been around forever. DeepMind. These people have been around for like 15 years. This is not like, oh, all of a sudden they showed up 4 years ago." It's like there were people grinding on this stuff for for a decade. >> Yeah. >> Um and they did it because they really believed in it. >> How do you think about um if you are a founder right now building a crypto company, should you have a token or uh raise equity or the you know the the dual structure? >> Yeah, we are we are fans of raising equity and then thinking about how to have a token later. Um >> Even though that then creates two structures?

>> I think it can be done. Um Uh I think there are certain cases where it may make sense to have both. Um I think there are certain cases where you should just um dissolve the equity. Basically have the equity go to zero and have it all in the token. Um and I think um there will be more and more people who are willing to do that. >> Dissolve the equity. >> Correct. >> Yeah. >> Um and I think it makes sense actually rationally speaking because um and the reason I think that makes sense to do the equity first is I think in the early like one of the mistakes I think people made and we've been very consistent in this over the last several years is I don't think you want to raise venture dollars from the retail market.

Like retail doesn't understand what it actually takes to to build something and be patient for 5 years to make it work. That's our job. And a lot of what what the reason we can exist and have a business is that that's that's very difficult, right? To sort of you know anybody who's done a startup knows this and I said this in other contexts. So you know, you one day you go into a seed stage or series A company and you're like, "Oh my gosh, this thing's going to IPO. It's the next Open IO. Open AI is going to be worth $10 billion." And then you go in 2 weeks later and you're like, "Oh yeah, these guys are definitely going bankrupt."

>> Right. >> This thing's definitely not working. >> you repeat that every quarter. >> like literally [laughter] every 2 weeks. >> that when the um when the pump when the pump fund guys were you know, they're they're on a historic run. And then obviously, you know, Noah and crew got humbled by you know, the markets and bear market and stuff like that. And um they've built an amazing business and company and product. And I all I couldn't help but think this is just a startup that shouldn't have have token. >> Yeah, that's right. >> That shouldn't have retail >> Yeah. >> saying that they should do things every week because this is just a startup going through it. >> Yeah, yeah. This is why Stripe doesn't want IPO. This is why OpenAI didn't want IPO. It's just like it's that that external pressure from people who don't

understand, who have not built startups, who apply short-term pressure is a very difficult thing as a founder. And so I think if you're getting a thing off the ground pre-product market fit and while you're post-product market fit and scaling, it makes a lot of sense to have people around the table that give you the money to run the thing that understand that that's what it takes and how long it will take and that though that's that's the natural order of things. But there comes a point at which um I think this idea of participatory capitalism is a real thing. And I think purely, you know, you could say that philosophically like the users deserve to benefit and and actually as a like wealth creation mechanism, owning pieces of things that are working is a really important societal good. Like if you didn't have the public stock markets,

and that's something I worry about with things like SpaceX and OpenAI and Anthropic going public at the scale that they are is like are are is retail just left holding the bag? Um now fortunately we've had Nvidia and Facebook and Google and all these companies that went public that you could have participated in. And so I was just looking I just saw a tweet about the numbers, but it's you know, like the Nasdaq is up like six and a half X over 10 years. That's real returns for people, right? Like even as a venture manager, there're not a lot of funds that did six and a half X over 10 years. It's really good, right? So that as a wealth creation mechanism is really important in society because that's how average people who are good, hard-working people and they like, you know, pay their mortgage every month and

they work their jobs and they take care of their families. Like they deserve to have a good retirement and that's how they're going to do that. Um and and so I think that idea of people having access to wealth and and wealth creation mechanisms is is a really important thing. Now what's interesting is we have that in the United States through the QQQ. A lot of the world can't access that stuff, right? Like if you're in in Vietnam, if you're in uh Lebanon, if you're in >> You can't access the US markets. >> How do you access the US markets? You can't. Um and so I I the the escape valve for that stuff is actually going to be the tokens. And I don't mean tokenized equities because I think that gets into some gnarly sort of >> The whole regulatory side of >> It's very tricky.

Very tricky, right? Um but I think things like hype um or uh near, right? These things are or Solana, like things that take, you know, have actual fees and fee stream, you can model that. Um you know, I think that the thought process for a lot of people in the world is going to be oh, wait a second, I can finally get dollars cuz everybody in the world has to deal with inflation and buying goods relative dollars. And and so the dollar is a store value for for a lot of people in the world. So, they want dollars, which is why stablecoins have such product market fit. But the natural thought after you have stablecoins is wait, what do I do with this? Like it's great I can have it and then and then somebody comes along and says, "Hey, do you want to make 4% on your dollars?"

Like I can give you treasury yield. Um and you know, effectively that flows through to things like Aave and so, you know, that means like everybody in the world that has dollars will just want to make 4% through some money market or treasury or whatever. And then they'll look around and somebody will come along and say somebody like Reeve will say, "Hey, do you want to make like 12%? Like and it's reinsurance over here." And if you're in one of these markets, you're like, "Wait a second. Like 12% in US dollar terms? And I'm getting inflated away relative to dollars." Like if you're in India right now, like historic lows on the rupee versus the dollar. You know, like um uh >> Like you're down 10% because of inflation already. And then you add add 12 like >> you just made like 22% a year in rupee

terms. Like you're crushing. Like what where can you put money if you're in in some of these markets that you're going to make like 20% plus percent a year and your savings are like self-custodied and they're they're away from your like financial system and and they're yours and they're in dollars and like this is pretty killer. And so, I think if you start thinking of this you can go back to '21 with 0% interest rates. Um how did that manifest in the market? Well, when you exist in a a low interest rate regime or a high inflation rate regime your willingness to pay for assets goes up. The way that manifests in terms of equity terms is P/E ratios up.

And so I think actually there's a huge population of the world, literally five or six billion people whose willingness to pay for cash flows is actually greater than the US institutions that really dominate the US equities markets. So as a founder, I think the right question to ask is is this a product that the stablecoin holders of the world will be willing to pay me a higher PE ratio for that same cash flow relative to what I could get on the US equities markets. And I think in many cases the answer will be yes. That actually those markets are willing to pay you a higher PE for that cash flow because they don't have access to alternatives.

>> Oh, that's interesting. >> Right. And so for some period of time I think we'll actually be more rational. Like maybe this normalizes one day. Um but I don't think it normalizes for the next 10 years. Where actually if you have a really really great business, you are better off doing a token launch and getting it in the hands of your users and retail all over the world because their willingness to pay a higher PE ratio is a function of them not having access to all the other stuff that >> Yeah. >> US pension funds have access to. >> Do you have an idea of what what is the catalyst that makes that happen? Because okay, so you know first 10 years of crypto, let's let's say starting from 2015 with ETH, right?

For like 10 years tokens had a premium. Like there was the L1 premium, there was the L2 premium, there was DEXes launching and a year later they traded at $3 billion. Um we are now in a era where tokens are for the first time ever trading at a discount to what they probably should trade at. Many of them. There's still I'm sure some overvalued ones. But um I think that if you were a if you were a founder choosing between token and equity, if you launched a token you would be valued higher than if you had equity. Now it's the opposite. I think if you launch a token you're valued almost lower. Is there a catalyst that changes that?

And maybe it's as simple as you need a couple tokens to really rep and have things catch a bid. Maybe that's hype. Zcash and VVV or something like that. >> I think it's I think it's basically the market doing what it's doing right now, which is re-rating the things that actually have product market fit and are working >> Yeah. >> and looking at the revenues. I mean, that's another piece of infrastructure that didn't exist eight years ago, which is like, how do you actually validate how much money the thing is making? And now you can actually do that on chain. Like, you can see the cash flows and you can see the buybacks and um and so I think hype and Venice and Near and um you know, Zach doesn't have cash flows. I think that's that's sort of in the like Bitcoin ETH camp of is this a is

this a form of store value? Um but I'll put Ree into that camp, right? It's just like there's some interest rate, there's some productive productive thing that's happening. There's value getting created in the world. And the software gets to capture a piece of that. And then it takes that and it cycles that back to the token holders in some form. And that's just that's a spreadsheet that you can that you can model. And I think that's starting to happen. And so what you need is like three, four, five examples of this. So, an analogy here it's always risky to reason by analogy, but I think it's like useful to understand why things happen is like after the internet crash, all these internet stocks, Amazon for example is a classic one people talk about just got crushed.

Um and people didn't properly on a go-forward basis understand the growth and how to value these things. And in my opinion, like probably one of the big catalysts was the Google IPO. Like, Google IPO was in 2005. Um and people look at the numbers and they're like, wait a second, this thing is real. Like, if this isn't like some internet hype thing, like you look at the numbers and you can put a you can put a P/E ratio on that. Um and uh and we know how to value that. And I think that was a really important catalyst. Um and it took another several years on the other side of that for for all the internet stocks to re-rate. Um for these companies, you know, for Amazon to be worth what it was worth post-AWS and for people to say, yeah, maybe Facebook could actually be worth money. Like, I

think people have forgotten, you know, Marc Andreessen wrote that um the the very now famous uh software is eating the world thesis. And I think he wrote it in like '08, maybe. >> Yeah. >> And published it. And it was a controversial thesis. It sounds ridiculous in in retrospect, but even in like 2008, people thought maybe the internet was a fad. Right? Like, cuz cuz you had this overhang from the 2001 crash where people were not like re-re-assessing that assumption and being like, wait a second. Actually, these things should be trading at 25 PE and the growth rates when you're growing at 80% a year with real revenue, actually maybe these things should be trading at like 60 PE."

>> Yeah. >> Um but that took like a decade before everything re-rated. >> Yeah. >> Um >> That's funny to think that that was a controversial piece. >> Yeah. People It was like, "No, no, no, this guy's crazy." Like, "This stuff is never going to >> What's the controversial piece to write today? >> Well, I think this is it's basically what you're talking about, which is actually tokens are useful. Like tokens as a value capture mechanism for people to capture the the fruits of a network's success and pass it back to the users is actually a useful primitive. Um and if done well, that offers access to really good products and and the revenue streams of those products to a whole market of 5 billion people who don't otherwise have access to good financial products.

>> Yeah. >> Um and so I think like you need three, four, five of these things to really work. And And so Hype might be like Google where all of a sudden people are like, "Wait a second. Like, this is kind of working. Why are we valuing this the way that we are? Should we be valuing this a different way?" >> the other good ones? >> And who are the other good ones? And then those get re-rated. >> answer the question. Okay, so we talked about PVB, talked about Ree. >> Yeah. >> Does Ree have a token? >> Ree just announced they're going to do a TGE with a token. >> Um >> We talked about Hype, Vivi, Zeek. Um who who What are What are a couple others that you guys like? >> Um >> Like who are like to either companies with tokens or without tokens, crypto

companies where you think the market may be asleep on them? >> Um I think basically what I would do rather than maybe calling out specific examples of tokens is I would look at basically any fintech or marketplace >> Yeah. >> and say, "Are the users of this thing potentially global from day zero? Are there a bunch of people that understand this in the markets where stablecoins are held?" Um and if that's true, you might want to run the exercise of what would happen if this thing had a token. >> Hm. >> Um and and I think there are many, many such cases where it's either a fintech or it's a marketplace where actually people all over the world would be willing to buy into that cash flow stream because the product is real.

>> Yeah. >> Um and I think you need a couple examples of that. So, for example, let I'll use Re as an example. I think if if Re does well over the next three to four to five years, I don't think it's crazy for a lot of like weird esoteric reinsurance is a kind of a strange thing. Like the average person does not That's not something the average person, you know, experiences day-to-day. Um but I think then founders will look at that and say, "Oh, wait a second. Maybe my um commercial paper thing or my like thing that sits in between all the banks or my, you know, whatever, my private credit >> Sure.

>> tokenization thing my like real estate thing, whatever. These are huge markets. Um uh would benefit from having token and from being on chain and accessing those stablecoin markets and paying 10 or 12 or 14% yield out to those people. Um and all the profits that I make get passed back to the tokens and I have tokens as well, but now actually the multiple I'm going to get on my revenue will actually be higher. That would be the thesis. >> Mhm. >> Um and I think it it we'll we'll know in the next like three to five years if that plays out, but I think if it plays out then then a whole bunch of fintechs and marketplaces say, "Actually, this is just it's it's kind of like an you know, I think all these people will be rational." And so, it's like, "Well, do you IPO or do you launch a token on

chain?" And the rational thing to do as a founder would be to pick the place that gives you a better multiple on the revenue that you have. >> Mhm. It's a good take. Let's talk about the majors. >> Sure. >> Bitcoin, ETH, SOL. >> Yeah. >> We kind of talked about Hyper already. >> Yeah. >> Is Hyper a major is have we we can skip that. Bitcoin, ETH, SOL. >> Yeah. >> What are your Maybe we can skip Bitcoin. I'm curious to hear your take on ETH versus SOL today. Cuz, you know, those were the podcasts that we were doing years ago. >> [clears throat] >> You, me, Haseeb, and Santiago. ETH versus SOL. >> Yeah. >> I'm still very optimistic about both. >> Yeah. You know, I think um it's it's just the the thing with these markets too that I think people don't understand. This is

kind of what's happening with the foundational model companies. Um I think this is true with with let's say SpaceX. Um again, not financial advice. But it it's rare that you just have one thing that wins. There's usually some sort of power law. And so, if the thing that wins, if you think Bitcoin is worth 20 trillion dollars one day, like gold, then like why wouldn't the next best thing be worth 3 trillion or 4 trillion? That's like not at all crazy in my opinion. Um, and and actually I think these markets are still young enough. Like how many people today own Bitcoin or own ETH or own SOL relative to the market of people that will, there is actually very little exposure right now. And so, I don't think these these are at all settled. Um, and you're kind of seeing

that with Zcash, right? I think people are sort of saying like, wait a second, maybe like the early adopters have figured out privacy really matters. Um, and so they should have some Zcash exposure as well. And then the mainstream will figure that out, right? And so, it's just so early I think in the evolution of these markets that I think people are really underestimating kind of what the what the TAMs are and what the what the ceilings are. And I think the other thing people are really underestimating is like I don't think you're going to have I think the L1 wars are kind of over. Like I don't I don't think you're going to get this like oh, there's another like 100 that come in. Um, and especially when you're talking about um, platforms or when you're talking about moneyness in the case of let's say BTC and ETH,

um, it's just like Lindy is a thing and it's going to take a long time for these these things to get displaced. >> Yeah. >> And so, they'll just continue to compound for a long long time. Like I think people are short-term bearish on them, but it's because they don't understand how compounding works and I I think they don't understand how how slowly institutions move. Um, there's a stat that um, Hong a bit waste told me once, so I might be misremembering exactly, but it was roughly, you know, after the gold ETF was launched, um, inflows into the ETF went up every year for about 12 years.

So, like this just it just takes forever for institutions to really like every wealth manager in the world has to like reallocate. And this is going to take a while, right? And so, like people and that's if you look at it on a dollar weighted basis, that's where where money is. Right? Like that's, you know, wealth managers control something like $25 trillion. The institutions of the United States have another $25 trillion. >> Yeah. >> And they're not going to allocate 50 or 100 basis points overnight. It's just it's going to take a couple of years. >> But like the sheer dollar amounts that you're talking about are like a hundred X bigger than what what crypto Twitter has brought to the table thus far. It's maybe a thousand X bigger.

Um and so I think people are just they're they're it's like it's hard. It's in the moment it's tough, right? It's it's sort of these things that they kind of go sideways for a while and then the world, you know, changes and then and then everybody the market realizes it and then everything gets re-rated. >> Yeah. Do you have thoughts on the um where people the brokerage platforms that will win? I don't know if you have skin in this game or if you have if you have a take here like you know, is Coin- Coinbase or Kraken like a crypto-native US exchange the winner? Is it someone like a Robinhood? Is it someone like a Maybe it's, you know, Charles Schwab and E-Trade cuz they already have the boomer distribution. Is it, you know, with the Asian exchanges right now? Bybit, OKX, Binance all pushing into the US. Is it

one of them? >> Yeah. Um yeah, I mean we're we're we're investors in Kraken. Um so hopefully it's Kraken. >> [laughter] >> Arjun I will say Arjun's doing a phenomenal >> Arjun he's a great job. >> phenomenal job. >> Yeah, he's doing a really good job. I agree. Um Jesse Jesse's another good example like Jesse started that that company for the right reasons and sort of held true to their principles for a long time. >> Yeah. >> Um and then yeah, Arjun I think has really stepped it up um to the next level as a business. Um We actually well, I mean they just acquired um one of our portfolio companies Bitnomial to do all the derivatives stuff. >> Oh, nice. >> Um and so um yeah, we're we're sizable shareholders there now. Um cuz that's like a pretty sizable acquisition. But um you know, I think it I think it'll be

relatively fragmented actually. I don't think it's going to be one winner. I think it's going to be several very large winners. Um I mean if you look at the banks in the United States for example, um you know, there's there's like a thousand banks um and and there is a power law there and there's obviously JP is really big, but you have like five to 10 actually very sizable businesses. Yeah. Um and it's because so much of what those businesses become at scale is a set of similar offerings. Like every bank gives you a mortgage and a credit card and a savings account. Every crypto every exchange, not just a crypto exchange, every exchange will give you access to BTC and ETH, will give you access to tokenized equities, and will give you access to some leverage, and will give you access to the equivalent of a money

market account. And like you know, and they'll give you lending against your collateral, you know, collateralized lending. And so the offerings will be the same. And then the question is like which group of people do you really tailor your product offering and your and your customer acquisition channels towards? Like where does your business learn to acquire customers? How do you speak? What is that brand? What do How do you speak to those customers? And you can't have a one-size-fits-all. And so you know, you you you need Amex and you need Capital One and you need Discover Card and you need Ramp. And right, so the markets are so large when you're talking about equities or when you're talking about dollars or when you're talking about these these products that are lending that I think you probably get like 15 or 20 winners and they just all sort

of come out of >> of the market is so much bigger than people realize. >> Yeah, yeah, that's right. >> Yeah. >> And and I think now to you I think the most interesting question there is like incumbents versus startups. >> Mhm. >> You know, can can Schwab win or can Fidelity win? By and large I think the incumbents will not win. Schwab is in a really really tough spot. And it's because it's sort of it's sort of the classic you know, I think it's a Marc Andreessen phrase, so I want to credit him for it, but it's you know, will the incumbents figure out innovation >> Yeah.

>> before the startups figure out distribution? >> Yep. >> And I think in the modern world it's increasingly easy for startups to figure out distribution and acquire all those customers as the world has gotten wired up. >> Agreed. >> And harder for humans to change their organization and change the culture. I think the one exception to that is a founder-led organization. Where when a founder, you know, like the thing a founder has is moral authority. And so um Zuck or Elon, you know, can go into an organization and just say, "We're just not doing that anymore. And by the way, we're going to take a short-term revenue hit. We're just going to like lose half of our revenue for the next 5 years um in order to to reboot the business to get out of this local maximum that we're in, right? If you're if you're like you

think about it like a 3D surface, right? You're you're at some local maximum, but in order to get to that higher point in the search space, you might have to go down and then traverse the space and then go back up, right? >> Yeah. >> But an organization is unwilling to do that. >> Tough to do that if you're a hired CEO. >> It's very very difficult. Like is the board going to give you 5 years to do that? Is are your is your team going to give you 5 years to do that? >> Yeah. >> Um but founders tend to have moral authority. So Fidelity is interesting because it's a it's a family-run operation. Um so I you know, if you take if you take another domain, take like um journalism, it's interesting because um you know, like Bezos bought the Washington Post and he has that founder

mentality. So he's just like, "No, we're just going to do that." Um but you know, you look at who's who's managed to navigate that transition and you know, like Chicago Tribune and and uh LA Times, Seattle Times, all these things died, but the New York Times survived and actually New York New York Times is thriving now. And it's because it's family-controlled, right? And so I think there's something to that. And so the category of things I think in the legacy world that might be able to pull that off or I think are the things where that leader >> Mhm. >> has some sort of moral authority to sort of eat it in the face for 5 years before, you know, you hit the next upswing.

>> Yeah. >> Um and so Fidelity might have a shot. >> Fidelity, Franklin Templeton, the other one? >> Yeah, yeah. That's right. Van Eck, right? Like there there are these businesses where it's like it's the the person running it has moral authority >> Yeah. >> and the organization will therefore you can retool the organization. Um But you know, that's why I mean, you look at like Walmart. You know, Wal- Walmart's had 30 years to try to get to catch up to Amazon and they just can't. >> Yeah. >> Um and it's not because it's like the the problems are unknown or it's like how do you change the the organization? How do you how do you reboot the culture? How do you hire the right people? How do you fire half your people and get a totally different group of you know, people? How do you how do you

change the compensation structure, right? And how do you like all of a sudden a bunch of people that used to make a bunch of money now need to make half the money. And a bunch of people that should make twice the money are probably not the right people. >> Yeah, yeah. >> So, you got to get rid of all these people, find a bunch of people that you pay twice as much. Meanwhile, you got to like somehow retain these people and like cut their comp in half. >> Yeah, yeah. >> How do you do that? >> Yeah. Uh talking about changing organizations. >> Yeah. >> You'll see the pivot I'm about to make. >> [laughter] >> Tell me your views on Ethereum. >> [snorts] >> Um Ethereum, I think um is probably um well, we're we're very optimistic. We still own all of our ETH. Um

and I think they're just going through this transition of um uh basically realizing that they And I think what ETH has that that is very difficult to reproduce is that credible neutrality. >> Yeah. >> And I think if you think that there's going to be some sort of a global financial system um settlement layer um and transaction layer, I think that is the critical thing. That trust and neutrality um is a is a thing that is basically irreproducible.

Bitcoin has it for some reasons, but the technology platform is not really set up to do what what the global financial system needs. It's phenomenal as an asset. ETH has that. Um and I think if you look at what's happening step back just like outside of the crypto world for a second. Like, what's happening in the world? Um you have essentially like this proxy war with with like China and Russia and Iran and the United States. You have tensions in in Asia, Southeast Asia. You have you know, tensions in the Gulf. Um you know, there's a question of like the United States is trying to like have influence over Latin America. There's all this stuff. You know, it's like what happens with oil? You have Russia, Ukraine. All these things are happening.

And um for me, the turning point for ETH actually was when the United States decided to um seize Russian assets >> Mhm. >> um uh in dollar terms and weaponize the the Um and there are two forms of weaponization of the dollar. I think one that the market is willing to accept and one that the market is not willing to accept. The one that the market is willing to accept is sanctions, which is you did something bad, Iran or North Korea, and we as a like collective global, you know, governance body, um, allied with the US, think that you are doing something terrible and so we're going to try to freeze you out of the financial system and we can do that because the financial system runs on dollars.

Um, there is a different version of this, which is we are going to seize your assets. And that starts to feel really scary. Um, when I say it's when the United States did that to Russia. Um, and it's because if you're allied with the US, but you're not basically the UK or Australia, which have like really historical ties for for reasons, if you're Germany, if you're France, if you're India, if you're Turkey, if you're Brazil, you're looking at the world and this is by the way most of the world, you're looking at the world and you're like, okay, I I I I don't think I want to be allied with the Chinese. Like India certainly doesn't. Um, but now I'm worried that if I ally with the US and then like they want me to do something and I don't do it, they're just going to take all my money?

>> Yeah. >> And so what do you really want? What you want is a US dollar denominated system that the US cannot single-handedly decide to boot you from and where the United States cannot just take all your assets. And that's literally what Ethereum is. It's a US dollar denominated system that nobody in the world controls, that anybody can can mutually agree to transact upon, where the United States can't steal your assets. Um, and there are ways to structure dollar dollar synthetic dollar assets that are not sitting in US banks. Um, just like the Eurodollar system. Um, and I think that's like what is that worth? I think it's worth a lot of money. That's a very different thing than Bitcoin.

Um, but I don't see anybody else that can do that. >> Hm. >> Um, and so I think if you're any bank, I think if you're any country, I think if you're any central bank, like this is the only place you can do that. Now, how does that get valued? How do you, you know, does that mean ETH becomes a store of value as the endogenous, you know, um, you know, backing asset for the thing which can be used as collateral. Yada yada. We tend to think that those things are true and we've written about this. >> But for that to happen, don't you need a leader who wants that to happen? And have have hasn't like the EF shown folks and Vitalik has shown folks that that you know, making ETH the asset the priority is not ETH the network, agree.

Great network. But ETH the asset, I feel like they've shown you with their actions that it's not important. >> Well, so I think there's a couple things there. So, um, specifically on the EF, it was I thought it was interesting just this week with with Vitalik's um, tweet where he said he he basically said like ETH is a financial platform and it secures, you know, it's it's credible neutral financial platform. And the most important asset that it secures is ETH. Um, was like the killer line in there. I was like, finally. Like, 10 years later, like, this is this is what we wrote about in 2018. I was like, it's a financial platform. Um, and that's the most important asset. And so, I think actually there's now a tacit acknowledgment that that's that that that is the case.

Then the question is, well, do you need an organization, a central organization, to evangelize that? Um, maybe. I mean, Bitcoin didn't have one and and they they managed to have a bunch of people that were economically aligned to that pulled that off. And I think our our opinion is at this point between, let's say, Bitmain and the ETH Foundation and early ETH holders and people in the ICO and all the VCs that have invested in the space, you know, us and Andreessen and Paradigm and um, Dragonfly and that there's enough people who can evangelize that. And so, I don't think you necessarily need a single person to do it. Um, and I think the fact that you have gotten to the kind of scale that you have you know, you have ETFs, you have you can go talk to anybody on Wall Street. Like, where are they building?

Right? They're everybody's trying to build on ETH. Where's Coinbase building? Where's Robinhood building? Where's SoFi building? Like, you know, I think that that um, all signs point towards like that's where actually underneath it all, now I'm not talking like price action, I'm not talking crypto Twitter energy, underneath it all, all of the activity for that sort of behavior, which is critically geopolitically central bank level important behavior is happening right now in this space. Um, and I think it'll take some time for people to sort of appreciate and under underwrite that and re-reassess that.

Does that happen in a year? I don't know. Does that happen in 5 years? I don't know. But I think probably in 10 years people will look around and be like "Oh wow like that's really important. And I should own a piece of that." >> Yeah, yeah. >> And so, you know, it's I think I think people are Yeah, I said I don't know when it re-rates. Um, but I think at some point people will get their heads around that there is something unique to this thing that nobody else will be able to reproduce. >> Yeah. >> Um, and that and that thing is valuable. >> How do you think uh so the thing that ETH is winning by far is that uh is is both DeFi >> Yep.

>> and um institutions, yep, I'd say. So, um on the DeFi side, the scary thing about DeFi right now is AI and you know you know Anthropic is coming out with Mythos soon and how do you think about is how do we make DeFi safe again? >> Yeah. Um, well, it's interesting because I think DeFi is going to be in the short term scarier but in the long term much more robust and secure than TradFi. >> Mhm. >> And it's because it's open source. And this is the way open source systems work. Um, which is that because they're open source they're easy to attack.

Um, but the more that they get attacked, the more you patch all the holes. And once you patch all the holes, then there's no more holes. Now, if you compare that to like the legacy banking system >> short term pain, long term gain. >> Yeah, I think you have actually build like openness and transparency are painful short term but long term um are actually much more resilient, right? And so, they're less efficient but more resilient. And I think for a financial system where actually you more or less understand the primitives, there's trading and lending and equities, like we kind of understand the the the building blocks that you need and the instruments that you need. Um, building them in an open source way where you can formally verify them and you can find all the bugs and then you can prove that those things are fixed.

Um produces a system that's much more resilient. So, I think if you play this out 5 years, uh I I think DeFi is going to be far more secure than any of the traditional financial systems. >> Mhm. >> Um and I think even the way that people will think about um AI level uh not not just like the hacker risk of something like a mythos, but like think about um you know, voice models are getting really really good. So, like real-time voice generation and synthesizing somebody's voice off of a 1-minute clip of them, um can somebody call the bank and pretend to be you? And can they convince the teller, you know, on the phone to you know, the the rep to like do a thing?

Um and I think like rebuilding all of that infrastructure uh from the perspective of hey, today we know that AI exists. So, how should we do customer support around DeFi? Like, how should Coinbase do it? Or how should Robinhood do it? I think they're actually going to build those systems in the right way. >> Yeah. >> Whereas like it's not clear to me that Schwab is going to be resilient to attack. >> Yeah. >> Right? And so like I think over the next 5 years or so, the code gets audited, the code gets formally verified, the the DeFi open ecosystem is going to move way faster. And so in 5 years, I think these systems are way more secure, and then the dollars will sort of follow.

>> you think we'll figure out a some way to prevent North Korea from hacking these things? >> I think so. >> Yeah. >> Yeah. Um yeah, short answer is yes. Um now, I think that the the biggest challenge in getting to that end state is who's putting the money in today. >> Mhm. >> Right? And and are you being properly compensated for the risk? And I think that there is a very strong argument that you are not being compensated for the risk that you're taking today in these DeFi ecosystems. >> Um uh but you turns out you don't need that that many people to take that risk. >> Yeah. >> You know, a couple billion dollars is enough of a honeypot for North Korea.

>> Yeah. >> Um and then you just put a patch to the system. So, I think it might be one of these things that's like I actually think if you look at DeFi TVL, if you look at transaction volumes, there's actually a lot of things that are trending in the right direction. Um and the systems are actually way stronger than they were in 21 for all sorts of reasons. Um but even so, if you didn't see like parabolic growth for two or three years, as long as there's enough assets in there, I think you'll actually make the systems very, very, very resilient. And then when the assets come, like it'll just go vertical. >> Yeah. All right, that's the uh security optimism that we needed. >> Yeah, yeah.

>> Um Visual, this is great. Anything that we um haven't talked about that you think we should talk about? Or anything that's um as you look out, you've a unique place in the industry, anything that feels very obvious to you that you think maybe crypto Twitter and the general public is not seeing yet? >> Yeah, I just I just think as a I think Yeah, I think probably the biggest thing is kind of it's this recurring theme that we talked about, which is there's a really, really big disconnect between the sentiment on a place like crypto Twitter or in Telegram groups.

Um versus when you go and talk to founders, and they're like, "Yeah, the stuff that was really hard 5 years ago was trivial now." Um or you go talk to people in developing markets, and they're like, "I can finally get dollars, and I want to like put them to work. Like what can I What can I do to put them to work?" Um or you look at the aggregate metrics of the things that are working, like a hype. Um And so, I think people are not The people are too caught up in the sentiment of it, and they're not looking at the fundamentals. But I mean, that's that's frankly that's why like we have a business, right? It's just like that's hard to do.

Um but I think if people actually started looking at fundamentals and looked at like where the founders are and what's getting built and went and talked to, you know, people on Wall Street and went and talked to people in, you know, Indonesia or India, the perception is not It's just There's just so discordant with reality. >> Yeah, yeah. >> It's just like And And you know, perception and reality tend to converge, and it's perception that collapses to reality, usually. Um and so, I think people will figure this out, but I I think it might take another 2 years. Which it's funny, right? It's just It's like the people that draw the lines and triangles on the charts and they're like, "Yeah, it's a four-year cycle, yada yada." Um there is a cycle.

Um and I tend to believe it, but I don't think it's for like technical reasons. I think it's for human psychology reasons. Because that's like approximately the amount of time that it takes for everybody to like have forgotten the pain and the lessons of the last bull cycle. And to like emotionally for humans to like emotionally process everything that's happening takes like two years. And then like at the end of that two years we've like processed the the emotions and you stop you know every that felt bad enough and depressed enough to leave is gone and anybody that's left is they're here for some reason. And then you kind of look around and everybody that like believed in something is just like building. >> Yeah.

>> And then everybody kind of looks around and is like, "Wait a second. This is actually all real now." >> Still here and the products got better and the tech got better. >> And then it just sort of like kicks off again. So I think it's it's not like for technical reasons. I think it's purely like a downstream human psychology thing. >> Yeah. >> That we're seeing playing out yet again. Like it's just the same human psychology every every four years. >> People sometimes question crypto VCs, right? But I think that professional investors tend to make their money in bear markets. Anyone can make money in a bull market, right? You you look at all of our friends, I'm sure of your friends too, making gobs of money in you know with AI and everyone thinks they're genius right now. They're buying Micron and it's up 20% day over

day, right? So >> Yeah. >> Uh but it but it's in the bear markets when the human psychology can get in the way. >> Yeah. >> And um when retail often times pulls out and that's actually the best time to invest. >> Yeah, yeah. >> And that's that's how I feel about the token markets today. >> 100%. Yeah, yeah. It's the difference between trading and investing. Like bull markets are great for trading. Bear markets are great for investing. You've been finding those founders that are going to have a 10-year 10-year vision. Um I yeah, I just I just think the world is going to look so so different in in the next five years and a lot of the things that are going to make it really interesting and different are the things that people are essentially creating right now.

>> Yeah, I agree. >> Beautiful. Thanks, man. >> Good to see you.