Crypto adoption versus price, and the sectors taking crypto mainstream

Transcript

GM good morning welcome to the milk Road show The Daily crypto show that's hotter than a graphic card mining Bitcoin at full blast I'm your host C readhead joining me today is Mike dudus co-founder at VC firm six-man Ventures and previous founder of the block and the coolest Dow in crypto linkx Dow today we're going to talk about the Divergence between crypto prices and crypto adoption diving into three sectors that you need to watch because they are already or at least close to taking crypto mainstream before before we get into it let's take a quick second to hear from today's sponsor discover Gemini The us-based Exchange built for new and advanced Traders as a special welcome gift they are offering new customers $15 in Bitcoin just for

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started all right welcome back Mike thanks for joining us on the show today I'm just going to share screen real quickly for those that are watching on YouTube to see a beautiful chart in my opinion which is the active addresses across all onchain so it's including a bunch of different blockchains and what's interesting about this chart this is using the a160 state of crypto chart is it's been up only since basically March it's like exponential growth all-time highs every single month and what's funny is prices have done nothing but go down since March uh what do you make of this what's going on here what's your what's your quick take as you see this chart yeah I mean we could talk for you know the entirety of the interview about this but just a couple key points that I would highlight uh one is you

you're seeing so real humans using you know more than one address as as we get you know apps like fantasy or F Tech that basically issue you know privy addresses uh you know I've got I've probably doubled or tripled the number of addresses I personally have so right I wouldn't necessarily say that that there's as many net new human users as the you know address increase would imply uh second you we're seeing more kind of like machine driven addresses right so you know AI agents Bots and and things of that nature uh so I I think the reality if you use your intuition if you look at you know basically

individual applications and how many users they truly do have and how much Capital uh is moving or or being locked within those applications the actual number of you know let's just say real you know human users isn't increasing anywhere near in line with that up into the right chart interesting is it increasing or you think it's just staying flat currently uh the general sense that I have is that it's increasing but you know I would say increasing much more like the leftand side of that chart right okay for those that are are listening and can't see this um if we look at March we were well February we were 24 25 million and then in August we were 60 million so it's a

big jump but I guess what you're saying is probably more AI agents or just people using many different wallets which I completely understand I have a ton of wallets um so that makes sense but there's still still some growth in humans just not as much as we all think it might be I exactly and then the last point that I'll make is uh onchain there you know you'll you'll basically there's a lot of passive users coming to the network we'll get into that in deepen uh and so I think the onchain metrics don't actually reflect some of the actual you know folks who are touching uh crypto related products right well let's take this what's your outlook then do you think that this chart starts to increase a lot like what we're seeing over the last few months that it's real humans or what's your expectations uh so so this

chart will absolutely you know continue to Skyrocket again you know as people as the individual so I do think we'll see new individuals one uh but two this will continue to increase even if there's no you know net new human users uh just as you see more uh onchain addresses that are maybe controlled by humans or or programmed and controlled uh in different ways and and more Bots you know participating in uh you know Defi and areas where for example you have you know lower clost lower cost blockchains um and so you know there's fewer deterrence to you know having many transactions some that don't execute some that are canceled Etc you see that on salana for

example okay what um when you think about you know you said this number is going to go up and up and up and you expect more people to come in what are the sectors that are bringing people in or why are people coming on chain I mean obviously there's the specul ation side of things that hasn't done so well for most people in the last little while so we're not bringing in new people for the specul for the speculation side but I think for the first time uh of of a cycle we've had in crypto we actually have real use cases and like real sectors real Industries being built here um that are bringing in people that either don't know that they're using the blockchain um or they're using it they know they're using it but for specific reasons outside of just speculation I would say um what are your thoughts on

that on in terms of the bigger sectors or use cases that you think are are going to drive adoption in crypto yeah absolutely and one thing that I'll say is look there definitely are an increasing number of users you know good metrics to look at are like Phantom wallet has had you know significant downloads in you know middle of 2023 to now um You metamask continues to increase rabby you know there's a bunch of wallets that're seeing you know increases uh so there's no question there are you more people uh you basically interacting with crypto than there were you know many uh years ago okay um I would say that some of the folks who did come a couple years ago maybe aren't as active so for example

the phanom wallet or the metamask might be sitting sort of unused on their phone but again there there are clear trends that there are more users and to your question uh what those folks you know tend to be using are it's a really interesting and and diverse set of applications so you mentioned a couple categories you one being you know deepend so de decentralized physical infrastructure networks things like you know helium where you have like decentralized um mobile networks where people are running hotspots uh often in areas where the major cell networks don't have great coverage uh and therefore those mobile networks are now offloading you know some of their demand to helium's De uh distributed mobile

network uh you have things like Hive mapper a decentralized or distributed mapping uh Network where people are you know driving around with Hive mapper uh instruments on their cars and mapping areas that perhaps Google and apple aren't mapping well or that you developers who want to use the go you Google and apple apis are priced out and are looking for Alternatives that are more available uh and H mapper can provide uh Supply there and is seeing increasing demand those are just you two examples uh the way that consumers though are participating in those networks uh is primarily on the supply side right so they're earning tokens for running nodes you know for for having a high mapper a mapping tool in their car

or a helium hotspot um so the supply side then the the demand side tends to be more like B2B right as I said big mobile carriers big consumers uh developers who want to use mapping data so that's a sector where you know it's introducing folks to the idea of participating in these distributed networks earning tokens uh with unused Capac with excess capacity that they have um or by doing things they already do uh in their day so what works excited about that that's one area uh another is your payments uh or money movement so stable coins and then you know this isn't like new news like you're seeing people talk about this everywhere but you know we're getting into the above

100 billion uh in terms of stable coins issued and you're actually seeing billions of dollars in value of stable coin value move now and you're seeing it uh you know globally so you're seeing it move across borders you're seeing it and not only the way that stable coins were used you know five years ago primarily in like trading as you trading Pairs and centralized exchanges but you're actually seeing them move uh as money uh in corridors you know from you the US to Central and South America and many other corridors uh throughout the world particularly some that are tricky for some centralized uh providers to you know establish good cost-effective

routes uh and you're also seeing uh an increase inre uh in the number of offer amps that are reasonably priced uh in a number of different countries and that's always been a problem is hey how do I get my money from stable coin into the local currency uh so payments is an area that we're excited driven by stable coins and uh you know a third one and I'm just you're very high level right now with the comments but a third one is what I would call broadly like gaming and social and what's really cool there is that we're seeing I would say you know different different social products emerge so if we just start with social you know you have forecaster which I think has at least to my understanding you know more of a uh Western usage uh

and you have a project uh now that's launched called open social which angel investor not a fund investor in and uh you know that has more of a western or an Asian audience uh so it's really cool to see uh this social technology being adopted in different regions uh and with very different styles and to have you know different things actually be on chain you know such as your identity and in some cases uh with open social you know some of the um interactions and financial interactions uh so that's an exciting and growing area another is obviously gaming I I do feel gaming is the one that always I think has been the it's coming soon uh sector we've seen I would say what's

worked over the couple years is frankly the absolute like simplest things work right like fun social games like fantasy where it's just you know crypto personalities and how much they tweet and how much interactions they get you know it's like a card-based game and you I'm competing to get the most points by having by drafting a team of social influencers who um you know get a lot of engagement on Twitter uh but but the point is you know there's an element of speculation in that game uh but but it's also fairly straightforward and simple it's like hey I pick a team the more things they do uh and the more engagement they get the more points I get what we found is those types of games the ones that are really simple I

mean we were investors in steppen it was like move and earn right like buy some nfts hit a lot of steps and earn some tokens for doing so which you know theoretically encourages you know healthier lifestyle behaviors and choices uh those are the types of things that have succeeded to date uh what we haven't seen succeed is either just really just traditional games that you slap a coin on top of or you know games with really complex token economics uh people tend to you you just it's hard to get a broad base of people using you know really complex games with really complex you know crypto economics and by the way you see this um in I would say all of crypto trading uh thematically

particularly over the last six to nine months where you've seen for example an increase in mcoin uh trading you know if you look at the top 30 coins in terms of volume on any given day there's usually like eight 10 12 meme coins in that top 30 by volume and the rest are like primarily l1s or l2s and frankly it's just because those things are just really easy to Brock uh for the average user um and again what we've found so far is uh people default to wanting Simplicity versus complexity uh and the assets that they're inter acting with and in the products that they're interacting with interestingly on the gaming side I know we said every year people like this is the year which this was also true with payments and that's been way longer we've been saying that

than than gaming people have been saying this since Bitcoin was first uh invented so and it took what are we now almost 15 years into into Bitcoin and we're just finally starting to get payments working so I think gaming we what maybe five six years although if I look at the charts of gaming at least of the blockchains we have a mutable which is like looking up and to the right we've got Ronin also looking up to the right and then uh oh I was supposed to have ton but I don't have it here but ton also looks up to the right I just don't have the chart up right now which is sort of gaming but also a bunch of other yeah and look ton you know there's certainly a high number of quote unquote you know fake users and Bots but but they're definitely is a

tremendous amount and the millions of users of actual organic users and again to the point of Simplicity and I'm not saying this is like awesome and Earth shattering but you know the mo the most popular games there right now are just like tap tap tap you know clickers um but the point is you know people use those and I think it gives you at least a wedge to then introduce folks to things with a bit more complexity and a bit more uh interesting but yeah Simplicity certainly has went out in gaming and it's been really difficult for projects to deliver on you know things like metaverses and really comp like it's hard enough to build anything on a blockchain it's hard enough to build a game it's hard enough to build a

virtual world when you're trying to put all all three of those together uh it it's really asking for trouble absolutely I was listening to another VC Chow um talking a couple days ago and um he was saying that the only real use cases that we've created with blockchain are there's sort of two one is um the creation of new markets so kind of spective new markets using you know Meme coins and everything we've done think poly Market Etc and then the other one was just micro payments and when I think about the three things that you said are the big things which is dpin uh payments and in gaming especially the type of gaming you said that is good which is either the tapping or the move to earn all of this is just micro payments right the reason dpin works is because um and

the reason web 2 or just the traditional world can't do it is because we couldn't do microp payments to incentivize people to run the hive mapper uh devices or to do the helium hotspots and so micr payments allows us to do that payments I mean they can be they come from all sizes but again it's just very cheap to move money around the world which we didn't have previously and then gaming like these move to earns and axi infinity and a lot of the games that are going are actually just micro payments so is that really just the big unlock here so far in crypto or like what and not only micro payments but being able to do it programmatically and and set rules is really important but yeah to your point like most card networks like there's a minimum that that's necessary for every given

transaction so it's it shouldn't be a surprise to anybody that you money and value is like the literal primary use case of uh BL you know blockchain applications again across a wide variety of sectors like we just talked about from dpin where you're incentivizing physical networks um you through you know making Supply and and in some cases demand um token related tokens are an incredibly incredibly powerful you know instrument right like we've created an entire new asset class uh a token can have more properties than for example just Equity you know which which may convey ownership and a claim on cash flow and and some voting but um you know there

are many others you can sort of like token gate uh you know when you have tokens like you can actually make different applications composable with one another I don't think Equity necessarily does that as an instrument so the the token really is is the big unlock um you know whether it's Bitcoin as a you know emerging store of value uh whether it's like we just talked about smart contract platforms ethereum salana Etc that enable uh effectively decentralized or distributed finance and all these other types of applications like dpin like distributed social um or even in many cases incentivize social and gaming yeah so so and then obviously

speculation like you just talked about whether it's meme coins whether it's casinos but yeah it doesn't surprise me that those are the areas because like tokens effectively are money have value and have those properties uh and you when we say 15 years is actually not a long time like I come from traditional payments I worked at Google pay I worked at brain tree you know which was a stripe competitor I worked at venmo at PayPal uh the amount of time it takes for you relatively minor cosmetic uxui changes in payments is decades I mean just think of how long it took for tap to pay at the grocery store to actually work in America you know it worked years ago in Asia uh in Europe and other it took 12 15 years to get to work here so

I think we've made a lot of progress the smart contract chains are less than a decade old and so I am pretty excited about where we're at in terms of uh development and in terms of the ideas that have at least been tested and initially validated you where we started this conversation was you know hey what about the prices and where are the users I I think I'm not as excited about how many people have actually discovered how exciting these applications are yet and we have a lot of work to do there and I think you know part of that relates to just a culture of and I still see it you know when I look at Twitter I look at socials or I talk to people I think there's maybe a little bit of an

aversion to still a little bit too much of an engineering culture um which you see with you know over infrastructure funding Etc and not enough of a marketing and let's really tell our story culture uh and I think part of that is that there's some skepticism from last cycle where frankly the biggest marketers the biggest promoters of the technology in in a number of cases turned out to unfortunately be you know frauds and and criminals and so I think we're still sort of healing our way out of that but what I've been impressed by is how many interesting applications have been built over the last 18 months even with that negative external sen right what what do you think then is holding us back from getting this sort of mainstream adoption

is it just ux we got to improve on the is it regulation or is it as you just said we just need more time to heal from the the bad narrative that we've gotten crypto good question I think the ux is at a place where if people cared enough you know like they did back in like the nft craze when the ux was way worse meaning transactions was were far more expensive you really only had you know EA wallets and you know you had to get your own address um it's much easier now so like I'm not going to say the infrastructure is anywhere near finished please please let's keep you know building um you know for scale and and ease of use uh while maintaining security but I think we're doing a much better job of that uh to me the two

biggest things you mentioned um one is I I do think there's still kind of like a negative uh sentiment around crypto and the general populace outside of like Bitcoin like we're seeing really substantial you know Bitcoin in ETF inflows and I think that's found product Market fit and I think that's fantastic same thing with stable coins to you know on a much smaller number but but real numbers uh and millions of real people across the globe so that's a nice start but as you start to get into the quote unquote web three type stuff you know the read write own I think there's there's definitely more of skepticism and many people will just say you know why do I need to use a crypto app what does it add to my life right uh I do think that deep in you know where you

can for example there's a product called grass where you can you download their extension earn tokens for you know o them to basically scrape the web from your computer now I'm not saying you know you should do that or download it I'm just saying you know a couple million people have done that and that's an interesting you know consumer introduction I think as we you do more of that and people you kind of see the benefits of those products but it's just it's gonna it's going to take time the last point I'll make is uh again the tokens to date that are in Market many of them aren't able I don't believe to you know basically bestow the full value that the

founders uh you know would have intended for them and I do think that a lot of that has to do with regulatory uncertainty right so you know the concern that for example if cash flows acre to a token that it's a security and and and hey perhaps this particular token you wasn't registered I think that uh I know for a fact that Founders have been at least in the US uh and in other regions limited by that uncertainty and so you know I'm optimistic that both in the US and elsewhere you know in Europe with MAA and there there's definitely going to be advancements over the next couple years in the regulatory environment but you know I still don't expect us to get to even the early majority in kind of like

retail adoption of crypto applications until you know much closer to 2030 than today yeah I tend to agree I think people won't just come use crypto because it's decentralized or you can custy it like most people in the world just do not care about that or you can get a bit extra yield like most people in the world actually just don't care about yield funds do but like people generally do not I think it's when we can integrate this stuff into what we're already doing on the internet and it just adds to it makes things better like payments um or like deepin right like people are just using uh the hotpots they don't even know it that they're using helium they just have no idea like once it's hidden underneath that's when we go mainstream and it's like people actually just don't even realize they I

think that's right now and I think if you combine that with an economy where there's also fun stuff that you are aware you're doing I've always said like I'm really interested in the you know crypto mullet right it's like you know business in the front party in the back and that could be you things like defi things like um you know micro payments uh or you know AI to AI payments and then I but I do think there's a place for uh you know crypto enabled sports book or a crypto enabled casino that that anybody can play uh I do not think that Meme coins are you know a net negative for the world I think they're fun I think in the way you know similar to how

nfts uh you basically brought people together and could create Community uh the the best meme coins uh can do that uh of course you know like any permissionless Market as we've seen through the history of crypto uh you're also going to have a lot of you know negative uh projects and people enter the space as well and unfortunately they're off to mowest and get the most attention but you know net net I think um we're going to need crypto abstracted away as you said so the people don't know that they're using it but I actually do think we're going to have specific things where we want them to know the token is valuable

I hold it I own it there's a reason to trade it uh if that's not the case then I think we are going to run into problems uh and you get back to the old you know Enterprise blockchain where you know like right crypto is is money is value and I do think that people should know that these whether it's a currency or a token that has another purpose is something that's integral to some of the products that they're using right there's definitely an investable side to crypto and I think a sub sector of people people who invest in this world will know they're investing crypto and they will do that or they'll use defi Etc and then the 90 whatever of the world that doesn't care about investing they'll just use it and they won't really know what they're doing um kind of like how I don't know traditional

stocks yeah that's that's exactly right like with defi eventually I do imagine regulations will change and uh you know just say in 2040 you know your wealth manager uh or whoever you work with in your finances at Morgan Stanley you may actually put a portion of your cash into a quote unquote defi strategy or something that's yielding I'm making up a number % you know more than you might get in a traditional product uh but to your point you know you may not know it but the key is that that person who's advising you does know it and understands where that yield is coming from yeah absolutely so okay as we wrap up here um with this idea in mind that hey we're probably not going mainstream

on these apps until closer to 2030 and I know you in the US by the way and I should be specific you know and I do think in we're seeing in many Asian countries we're seeing in the areas where for example ton is used we're seeing millions of users uh so I I do think it can happen earlier X us okay okay so I should I should just clarify that and I think you're actually seeing a number of different funds shift their focus like the biggest week of the year in terms of like crypto conferences and get togethers is in a week and a half or two weeks in in Singapore for token 249 and breakpoint um and it's just by far you know the focal point relative to any other uh any other region or get

together it's a great point and most of our audien is from the US so it's good for them to hear that and go hey it's actually very different on the other side of the world than it than it is here um but let's go most of our audience is also investors and so they're thinking okay how do I invest in this and I know in your fund you're mainly private so most of our private equity and most of our audience is not doing that but when you just think and this can just be General strategy of how to allocate to this sector or sorry to this this industry based off of like what you're thinking what you're seeing is growing what you're is get being adopted and the time it might take how are you allocating now to something like this is this do you one do you think

we're in a a cycle where we're going to see kind of like what we did back in 2020 2021 and are you trying to invest in deepin liquid tokens or are you kind of staying away from that and going more high level in the l1s or what's your sort of quick yeah great questions so first of all you know none of this is financial advice I'm actually registered investment adviser so uh it's important that that I'm clear about that but just so I'll talk thematically um it's impo it's really difficult I think people some people are starting to question whether you know as the crypto ecosystem has grown the number of tokens the number of participants the types of flows again now that we can get traditional flows through ETFs whether uh we're going to have the same

massively cyclical uh you know call it fouryear Cycles where it's like two years bold two years brutal bear you know that we had uh in the past and I think we're we as a fund are probably leaning towards we're going to continue to have Cycles but they'll possibly like Pro probably be smoother like I would expect that you won't see the entire asset class you know draw down again whe whe what was it like 80% um at least yeah so it would it would surprise me if that continued um you know on a kind of continuous cyclical basis um just based on structurally you know how for example

Bitcoin flows should look how eth flows should look and eventually other tokens so that's one in terms of sectors I think what we want to see is we're more uh more demand for for and dpin you know for example as a category uh I think as thematically as as you know tokens and almost for like mtic or thematic value we're excited about a number of of deepend tokens but if you actually look at the you know usage of those networks and you know how if you were trying to actually financially analyze them you know many tokens still look expensive relative to so you really

have to think about how how is the ultimate marginal net next buyer going to think about it are they going to Value these things on fundamentals or are they going to Value them thematically and I think if you if you believe that they'll be valued thematically there's probably good prices in the market Market if you believe that fundamentals are going to win out um then things may still look expensive including in defi as well where you know many defi tokens you relative to how a traditional Financial business would be valued look expensive but from a sort of thematic and and even mtic uh perspective uh if they're they're exciting to people so um you know we're we're a private fund so I don't have to make these decisions about

you know which liquid tokens to buy uh but you know I do look at some of my peers who who are liquid buyers and uh I think it probably is a it's a compelling time for them to deploy uh what's interesting is when they're loudest about liquid's the right strategy a lot of people were saying that in q1 Q2 was actually the wrong time to deploy uh and often when they're quiet about it uh it maybe is like you know we're talking at the beginning of September and I don't I I think I still think we're midcycle you know and and again just after saying we shouldn't talk about Cycles now I'm saying we're midcycle but I think the point of that is things are going to be longer and smoother so I don't know that

we'll have the blowoff massive tops that we used to have in the past um you might in like alts and tokens with a lot less liquidity but but the majors I think you're going to see less of that than you did in the past yeah I tend to agree so so I would just recommend to people you know don't put your life savings into crypto look at it as again uh look at it as a really nice and interesting uh new asset class that historically over a long period of time has performed well and I I T tend to tell you know my friends my family and people who ask me like don't trade this stuff like you're professional just you pick Technologies and tokens that you're interested in and maybe that you use and uh like plan on

holding them for the long run love that it's fantastic advice very similar to what we teach here at milk road so it's great to hear that from you as well Mike thanks for joining us today it was a great episode great to learn from you and I know you have tons of years of experience in in Tech and in crypto so really appreciate you sharing that with our audience uh for our audience if you are not subscribed yet please subscribe and also comment below uh if you're listening on YouTube or I think on Spotify you can now comment let us know your thoughts what do you think of Mike should we bring him back on but Mike thanks so much I appreciate you and and all the best likewise thank you as always if you liked today's episode please hit subscribe and make sure you

follow us you don't miss out on the next one there's also a link in the description to our free 5 minute daily newsletter where we simplify crypto for you while making you laugh and if you're willing to step up your crypto investing game we're going to also leave a link for milk Road Pro you get access to our portfolio where you can see exactly what we are buying this is your number one resource to help you in invest successfully in crypto one final note this show is for educational purposes only and nothing we say is financial advice investing in crypto or any asset is risky and you should never invest more than you can afford to lose thanks so much for listening in my friends have a wicked awesome day