Can DePIN Bounce Back? | Carl Vogel & Mike Dudas

Transcript

Ryan is very interested in deepen, but I don't really get it. Um, over the past year, we've seen it do relatively well at some points and then not so well at other points. I can you to me it seems like the main issue is, and this is within all of crypto, is there needs to be a token to pay. Um, but the issue is that that token is fluctuates in price. So, it it can cause some issues in how people are getting paid. Um do you see that as being a roadblock going forward? Um do you think more of them need to start paying in USDC, USDT, etc. Um and second of all, what where do you see the deepen market headed? Um is it still going to be network based or are we going to get more and more um exotic

deepen products? I I mean in fact I think we need to move less exotic into more things that companies want to buy. Um, Deep's had a pretty tough year the past year. Um, I was reflecting back in late 2023, early 2024, Deepen had this, call it 5 to 7x price run. I think that was engineered a lot by investors and liquid funds, but there was no rational reason why all of a sudden these things traded up 5x from where they were. And since then, basically, there's just been a slow decline in price. um generally that has been in excess of where the market has gone. Um I think the reason there's kind of a couple things going on with Deepen right now. One is um this might be a hot

take but deepen has been hijacked in terms of uh investors and let's say founders and teams that are looking to create value for themselves not for the community. And what I mean by that is if you look at the revenues that are a like they just haven't generated that many revenues. If you look at I was actually looking at deep ninja today. It's a great site built by our friends at uh EV3. Um and like none of these teams have more than $10 million of ARR going to the token. And you're like, so we have these protocols valued at hundreds of millions and in some cases billions of dollars and we have like less than $10 million in recurring revenue or any any revenue whatsoever if you just annualize it. Um so I think like the expectations put on deepin have uh are

in extreme excess of the underlying fundamentals. Um secondly is that the revenue is actually not going to the token. I was talking to a major DPIN leader and roughly only 30% of revenue actually goes to the token and I was recently talking to another known DPIN leader like protocol and you know they didn't even know offhand what percent of the revenue went to the token and so basically in my view we actually have a bunch of centralized companies that are using a token for distribution which is by the way a fine business model but it's not actually deepened in any meaningful most of the value flow is not actually going to the token. So I think kind of

lost its way a little bit if I'm just being perfectly honest. Um we've also seen every sort of deepen being developed but very few of them actually focusing on getting demand in um they can but they we can build supply for any sort of network that we want. So I think like that's the context I have. So we're extreme I'm like fundamentally it's one of my most exciting areas to invest in the fact that I worked at Google and SP before in IoT. I have a background in hardware from nuclear submarine design. There's crypto elements. So it's sort of like the perfect place for me to dive in. But we haven't seen as many exciting teams as I thought we were going to over the course of the past 12 months. Um, I think what we have is a lot of terrific engineers and founders, but we haven't

yet figured out how to take these systems and productize them in a way that companies are willing to pay large amounts of money. And so that might be that we're generating data that isn't helpful or maybe it's purely just a a sort of broken sales process that's taking place. Um, so what we really look for now in deepen projects is not just can they build the system, but can they hire the executive team that can actually sell this data with the required SLAs's that's required for larger enterprises actually sign multi-million dollar uh contracts. Um, I'll pause there because that was sort of a lot of context on on deepen and let me know if you want to dive into anything more specific on that. Yeah, what I'd like to add is uh to your question of so I do think in many cases it makes sense to have deep pin uh

networks on crypto rails uh for payments. I do think we may start to see uh more USC payments to your question than payments in the native tokens because the market has basically said uh participants have said mainly because of what Carl was saying there's not really value acrruel to the tokens and most current constructs um andor you know there just isn't demand when people receive them. You receive your Bitcoin as a minor people do sell their Bitcoin but there's like demand for it on the other side. there really isn't that marginal buyer for a deepen token. No smart, you know, financial person is going to look at many of these protocols and say, "I want to buy that from the Hivemap or or um sorry, I don't want to mention specific ones or, you know,

Helium." They're some of the best projects, but there's just historically not been a lot of demand for these tokens. Their trading volume is low because the financial investor doesn't see a reason to purchase that token from the the minor. Okay? So, you're getting them sold. They have sell pressure. there's not a marginal buyer, there's no volume, and the prices don't go anywhere. Uh there are ways to change that by making the token more valuable. Hey, maybe you get uh you more benefits for for staking and but you're going to need fee acrruel. We get the question about buyback and burn. I know Carl doesn't love that as a general purpose model. It really all does boil down to the labs entities, the equity holders that sit on top of these protocols need to start treating them not just as protocols that they can build equity

based businesses on top of, but ones where they actually do value the protocol participants with that sort of web 3 ethos. Uh, and I think this is what Carl was getting at where we're going to actually drive value to the token and give people reason to hold it. Otherwise, we're just going to see no volumes and plummeting prices. Uh and it's not clear that they'll become great venture businesses even if they're interesting uh products and valuable networks for the