Crypto Networks Are Monetizable Public Goods | Jake Brukhman

Transcript

all right everyone welcome back to another episode of empire i am joined by my co-host mr santiago santos and mr jake bruckman og and crypto nft pioneer founder and ceo of coin fun launched in 2015 one of the best funds in the entire industry jake has been i think i've known you jake maybe since 2017 or 2018 and the thing about knowing jake is it's really frustrating because you're you're consistently like a solid 18 to 24 months ahead of everybody else and every time i i see you put something out whether it's like 2018 investing in nfts or like 2019 starting to go kind of all in on on things like d5 it's like

you are consistently uh what feels like so early two different trends and and just like so spot on with different things uh the multi-chain future i think i remember you guys investing in um uh i forget what it was maybe polka dot back in the day just very early to the multi-chain thesis so anyways jake welcome to empire my friend well that's an amazing introduction thank you so much for having me uh jason santiago yeah of course there are so many things we could talk about here um but we are going to spend this episode focusing on uh are is crypto a public good are crypto networks public goods and here's kind of the outline of what i want to do uh one is just like first introduce public goods private goods common goods uh why it's important to talk about this

topic define these these topics the second is um really how do like public goods and private goods and common goods apply to technology today talk about open source code and then figure out how this applies to crypto today and the reason out of all the topics that we could talk about the reason i think this is so important is uh at a time when kind of these like uh these ideals that govern america are kind of it feels like they're almost like stalling out we have this tool that opens a new door for uh different kinds of participation different kinds of accountability this like a democracy native to the internet and if you know where to look within crypto right now there's all this creativity and experimentation and governance happening from like these small groups

like constitution dow to these massive protocols and i think what uh what we will discover is that crypto enables coordination towards what labor and cooperative movements have struggled to achieve like putting ownership of value into the hands of those who created it so jake i want to start very broad here before we go deeper which is like why do you why is this an important topic to discuss why is public goods and private goods and common goods why is it important to to think about that in the lens of crypto because um we as investors and researchers in the blockchain technology space were constantly trying to understand what is this technology that we're

dealing with and it's like that famous cartoon where you know people are in a room and they're touching different parts of the elephant and they're blind and everyone thinks the elephant is like something different right um and you know there are people who have looked at blockchain and they said oh blockchain it's a you know efficiency technology for banks like the most likely use case of blockchain is to facilitate settlement in banking right and then there's like other people who've looked at it and said no no it's actually like a lot more disruptive than that you can build or you can rebuild the entirety of like all financial services you know as smart contracts remove a lot of intermediaries

and actually serve all of finance and then some other people said no you guys are crazy blockchain is all about taking pictures of cats and making them scarce and then like trading them as collectibles right um and so like as a researcher one of my goals is to just understand like what in general is this technology doing what is it like poised to do and what are going to be some of the biggest um use cases of it and one you know one theme that keeps re-emerging as we actually build protocols as we get defy out there is we get you know nft exchanges out there as we get amms as we get other crypto networks

is that like what is embodied in a crypto network is a fundamentally different way of organizing humans and so the question is why like what are the differences like how is it good how is it bad how is it different um and the next question is like what does that mean for the future like like if this is a new way of organization like how are people likely to use this at scale or will it ever get to scale and one of the things that we one of the like if you ask me right like one of the clearly quote like disruptive things about um how crypto networks

organize is that they present um a way that goods and services can first of all be owned and second of all be governed by the users of those things in other words it starts to look a little bit like public goods maybe like you can think of that maybe as like non-profits uh in the traditional world would be the analog um or you can look at it as just you know products and services that should be available to all humans on earth and the way that like we understand today in the traditional world how those goods are implemented how they brought

to mar they're brought to market is essentially through like government right government is the thing that can facilitate um things that are meant for the public good but what blockchain technology is showing us as is the case in like you know if we study the governance of like the bitcoin network the ethereum network various d5 protocols dows you know so forth is that you now have enough digital technology that implementation through government isn't the only possible implementation anymore right and this has like an analog in kind of like the cryptocurrency view of

blockchain as well like what we you know what bitcoin people have said for years is hey you know nation states had a monopoly on money but in going to bitcoin that monopoly is dissipated like anyone can you know now put in eight lines of code as a solid smart contract or or use bitcoin or whatever it is and they can they can use a currency that is public open borderless permissionless forkable and to some extent governable depending on which one you're talking about and now this is a new way of implementing

a public good if that makes sense great man so okay so that's a really interesting place to start i think to set up the conversation here as we dig into it can you define public goods versus private goods versus common goods yes well there's a there's a very like technical definition from economics so let me start there and then maybe we can talk a little bit about like the um just a more practical definition so there's these two properties of goods that economists define in in search of the answer there which is excludability and rivalry so we say that um a public good is one that is non-excludable and

non-rival risk excludability means that like you can um you can sort of prevent certain people from using the service but but you can't uh or but you only provide the service to a certain subgroup of people right so for example enjoying the sun would be non-excludable i can't really charge you for enjoying the sun and then prevent you from enjoying the sun if you don't pay me but i can't do that if i'm a publisher of a magazine and you're a customer who's seeking a subscription right so that's excludability and rivalry refers sort of to like the abundance of that of that thing

um again the sun you know while it's not well it doesn't have infinite energy it still has so much energy that it will probably be more energy than everyone on earth will ever need like forever right uh forever that matters um whereas internet bandwidth has the property that if like a lot of people are using the thing there might not be enough bandwidth for you right and so they're in this like rivalrous relationship so public good is one that is non-excludable everyone can use it and non-non-rival risks it is basically like really abundant a common good

um [Music] is one that is i believe non-excludable but potentially rivalrous and so one interesting question to address here like in our context is like for example is a blockchain by those types of definitions is it a common good or a public uh good and the answer seems to be that it's actually well it kind of depends which aspect of the of the blockchain you're talking about but i want to take a very like general view and say um participating in a blockchain just means like can i connect to that network can i interact with that network can i send transactions in that network can i run a node in that network

and in that sense blockchains seem to be non-excludable like we don't charge people for belonging to a blockchain network and then exclude people you know that don't pay or something like that anyone can by definition by the definition of this network being open anyone can like run a node anyone can put in a transaction whether it's valid or invalid now it is true that you have to pay though for that transaction to be processed in the sense of like if i want to send you some some bitcoin you know i got to pay a transaction to you if i don't if i want to execute an ethereum smart contract i got to pay you a transaction fee um but that's what makes blockchain networks actually kind of rival risk

right like we've seen this before if you know if there's a lot of transactions going into ethereum and we sort of reach um you know kind of carrying capacity of whatever ethereum is capable of today in terms of throughput then um the next person who puts in a transaction it might just take a long time for it to get through or he might have to like or she pay you know pay a higher fee and that's i think what what makes blockchains rivalrous in that sense and so i think that makes blockchain a common good and i think a private good would then be uh i believe by implication something that is both include excludable and rivalrous

um and maybe that's something like a good in an amazon warehouse you know like i'm ordering um pots for plants on amazon these days and you know if i don't pay for one i'm not going to receive it and also if i buy all of them you know the next customer is not going to get the next one okay so those are like the very technical definitions of public common private good um and then in a practical sense it just or maybe even just like a colloquial sense like what does it mean to have a public good well it means it's a it's a different way of delivering um a product or service

it's a way of delivering this product or service that doesn't require a profit margin i'm not saying it doesn't necessarily it can't be profitable this is a key sort of distinction in in the blockchain space here which we can get into but it doesn't have a profit margin like when we think of traditional capitalist goods being delivered to the market we think of a company provide like like building that product or service redistributing it charging for it and their goal is to create a profit margin you know to make a return for their investors for their shareholders and so forth but in a but in a public or common good

we don't require that margin it's this is for the the good of the people um and the other practical sense that we think about public goods um as of what regime public goods and operate in uh is that is is governance right so in in corporations we have generally like ceo managing partners a board you know even a public board in a public corporation and those are the people who um make sure that the shareholders are getting a return but in a public or common good we're just trying to have a like a

measure of governance that assures that the distribution of this good is fair right and that's usually presumably done by the government or it's done by uh people who have volunteered you know to to have that capacity so those are the two like practical uh ways in which we understand these guys no i think that's a very good overview i guess like turning it more specifically to crypto i think a lot of the discussion that you've seen over time is is everything that be that is being created in what i probably you could think of as like infrastructure is that going to be a common good is value actually going to

accrue to some of these protocols or not i'm curious to get your take on how you think of the different the different pieces of the stack that are being built in web3 and where do you where do you see value accruing and where do you see value perhaps not accruing what other people might think it will yeah great great question um well so i think that the ability to create let's say common goods in crypto you know does not like not every technological innovation needs to replace all the previous technological innovations sometimes a technological innovation becomes a tool in your toolkit and we see this like in

in crypto broadly in the following sense we have certain uh projects that are extremely decentralized networks and we have other projects that are very much private centralized companies that use the value propositions of blockchains or cryptocurrency in some way right and it's not that like oh we discovered decentralization and then everything turned decentralized that experiment was run in 2017 the year when jason and i met during the ico boom right and you know the trend was like everything has to be decentralized so so the ability to create

a common good doesn't have to supersede like every other model that we have we can create private goods we can create public goods we can create common goods it is a tool what's really interesting to me and i want to be clear that this is like this is philosophy i think we we still are yet to see um we need to see more evidence in the market of this but what's really cool is that traditionally implemented public goods very much don't create a return this is because they have this like zero margin thing but public goods created using crypto networks

have an opportunity to be to create a return even though they are zero margin and the way that they that might look is for example let's take let's take a concrete example maybe like ens right so ens is um um it's a network that uh manages you know ethereum domains and it's a set of smart contracts and there is a governance system in ens like if you are an ens token holder you can vote on proposals about the network and you can also delegate your tokens to someone who will vote on your behalf and

as a matter of fact i personally am a delegate on ems ens as a network is not really a for-profit network like it does charge you money um for um let's say registering a domain but i would argue that the network operates at cost so if it's operating at cost how does this net how can this network create a return well the answer is that because this network is a public good or let's say common good and because it is governable by by its uh by the people who are in that network we use that network that governance value might be reflected in the token asset

and so if you're just a user of the network you have this great value proposition of being able to use you know this service at cost which is going to be the lowest price that you can possibly get for this service in the market it will certainly be lower than centralized providers who have this you know higher profit margin and yet you might be you know as a governor of this protocol you might get um a return if you govern it correctly and so that's like highly in my opinion that's highly disruptive to how products and services have been implemented in the past what

do you guys think yeah i think um i think generally if you look at web 2 a lot of value has been accruing at the very top um and there's a whole stack that it provides a ton of value but there has there has been really been a way to monetize that just writ large there hasn't been a way to monetize open source effectively and compensate contributors um and i think when i try to explain crypto to people that perhaps may not are caught up in this bitcoin e like you know blockchain not crypto i say wait a minute but like open source is really powerful and you have a way now to more equitably

and efficiently programmatically reward contributors in any open source system and i think a lot of public good infrastructure has come out of open source development and now the novelty here is that you can perhaps embed a more precise mechanism a new way to monetize these contributions of these open source networks and and then i think the state in which we're in right now and crypto is like our governance tokens going to accrue value is all the value going to a crew at the bottom kind of l1 layer kind of fat protocol thesis that the placeholder guys

initially kind of coined or are we going to see perhaps value be distributed in a different way i think a lot of people are caught up in in analogies which make it easier for the brain to understand certain things but always inherently miss a lot of the novelties of new pieces of technology and i think it's just open to be it's important to be open-minded and candidly i think no one really kind of knows um whether where i think it's more of a relative question of where will value as an investor which you are you're constantly thinking where is where's my dollar better served investing an l1 that captures meb in a d5 protocol that provides core pieces of

financial infrastructure or in a you know aggregator whether it be an exchange or a wallet or something else and i think that's the more difficult question because also it's quite early and so we don't really know um but you know at the end of the day it is a lot of it is an attention game um and so yeah open questions i don't think there's a perfect answer i'm curious if you have a different view no no so i think um so i think you talked about a few things there so one thing you talked about was open source so i totally agree open source is a great example of this you know repositories and like the

groups of people around repositories who who build up the software um are a special case of a public good it's like they're creating the software they're putting in a lot of their time effort um coding ability talent etc you know to create this code base and people have different motivations for doing that but the point is that the result is is a non-pro you know it often has a non-proprietary license it's open to forking to modification it's certainly open to like use perhaps even commercial use but there's no clear business model on open source and and this has been a problem right because there's been

some very um important pieces of software that maintain you know just huge amounts of our technology stack like in the world right that have been open source i mean think about like i don't know ssl or something like that right or or just different frameworks for building websites um and and many other things right that that large corporations and big tech companies use that are critical to their operations but they never pay for the software the software is like never licensed in this for-profit way so how how does that work i mean it seems to be

completely contrary to to capitalism and the answer seems to be that well first of all in many of these cases you have uh kind of private sponsors that donate money to these projects so you've seen things like sun buying uh the java programming language right um and you know you have maybe other like non-monetary compensation that contributors might accept so they might accept for the fact uh like the fact that they worked at a very famous repo might actually help them get a job you know you know in another context so there's a sort of indirect reputational value um to doing that but when you when you go over to

the sort of crypto model or the model that we have seen in crypto then you turn that architecture like the i like to call it the operating system of how of how you produce these goods you turn that completely on its head because now you can do things like say um you know what if you're a contributor to this repository and your um pull request is accepted then you can get some tokens and when you get some tokens you're allowed to vote on which pull request is accepted next and if you you know if you've worked on this for a long time and you've made many pull requests you're going to have more voting power because you're going

to have more tokens and as well you should right because if you look at like linux there's very clearly a small number of people who are extremely knowledgeable about how linux is implemented linus torvalds and arguably linus torvalds should have more um you know commit power than other people who are just joining the project because he's been working on it for 30 years or whatever right and so this is almost a hand and glove you know sort of fit for can we make open source sustainable and there's of course as you guys know there's many projects in the space uh including radical and git coin and others right who are working on

on that problem the i think for the yeah go ahead go ahead no i was just going to address the the second thing that you mentioned which was like value capture which is also like an incredibly interesting topic and um yeah i actually i met joel monegro back in the summer of 2016 a couple of weeks before he published uh fat protocols um and and really appreciate sort of like his his work there but i also i also later published a post called fat protocols are not an investment thesis which was sort of a bunch of counterpoints to why value that we will see does not necessarily always have to migrate

to the bottom of the stack so there's a very like there's a general sense in which joel is very right about fat protocols and there are a lot of like very specific senses in which we've seen monetization happen in crypto not at the you know the base layer and and you know we see a lot of sass these days in uh in crypto for example and those things do not they're generally like their value isn't captured at the ethereum base layer it's captured higher in the stack um yeah i think um it's important to kind of dispel some things like it's open source like but it does carry a cost similar to perhaps maintaining a common good

historically it's been governments that through taxation enforced this idea of policing patrolling and providing a good that otherwise be kind of depleted because like the ocean or parks and therefore you tax individuals and then the government is that central authority that takes on that responsibility and people recognize that and then they maintain these public goods if you will but they do carry a cost and sometimes that's where people don't see you know providing i guess like when you think about and extend that to crypto networks which are economic like crypt economic and political in some sense even the bitcoin

at the ethereum network miners are expending these resources and it does carry a cost and in return they get a reward that i think here is i think the the key novelty here is that it is a non-political system in the traditional sense that it instead relies on programmatic very predictable piece of code that is a block commission and that is why people decide to coordinate as you said earlier and decide to expend a resource that has a cost in return for capturing some value now a lot of that is a social construct

and we can i don't know we don't necessarily argue about that but i think that's the key kind of piece of novelty which is you're ultimately coordinating a certain level of um resources attention energy whatever whatever that is in exchange for maintaining a a network which could be the same as the analogy could be the same as a park or an ocean now of course these networks exist outside the traditional systems that we've historically used uh that really instead rely on like you know taxing people and and the perceived level of violence if you don't do that

and that i think is something that is super powerful when we combine that in a digital age and context yeah absolutely jake can i can i ask a question about this okay so you're arguing that these crypto networks are common good or common goods and when i think about other common goods it's like it's like mines and fisheries and like forests are the common examples but what then maybe the pushback that a lot of people have is like okay well you have uh tragedy of the commons right where like short-term self-interest of of one person might or like of a small group of people leads to like this tragedy for all and so that the common example is like uh uh like grazing land or something like that

or like forests well uh it's a common good but then if like one person like over forests uh it leads to like deforestation for all right and so like what is the example here or the analogy to draw with like common goods these like public resources which ultimately potentially lead to like tragedy the commons where do you see that existing in crypto today and how does that make you think about how things like these crypto networks should actually how they should play out well it's sort of like maybe the analogy would be like um if you just had a very naive like ens where anyone can at any time register a domain and then keep it for

as long as they wanted you know then we would like very rapidly run it like like send the value of this network to zero right why because you would you would like launch the network someone commit would come in he would they would register like all the domains or maybe like a small number of people register all the domains hoping to get rich and then the result would be like no one would get rich because the network wouldn't grow because no one could register a domain and so it's like i guess that would be like kind of a freeloader problem analogy there but that's not how actually ens works right ens um creates a bunch of economic incentives and disincentives and frictions

to make sure that people don't do that like for example you know if you wanted to try to register everything at ens it would cost you a pretty penny it would probably cost you more ether than you'd be able to get your your hands on and so what you're seeing there is that the um like um the smart contract system i guess that underpins ens is creating solutions to that problem right and the analogy in the in the traditional world might be that like okay you have this like nice park right the classical analogy where everyone brings their animal or their cow or whatever to graze on the grass

but in the traditional context the solution to that problem is is uh the government coming in and saying guys this is a public park but you know what you're only allowed to bring your car your cow here for for an hour or every day or something like that creating these limitations and so in both of these cases we're looking at sort of the same problem but what we're changing is the implementation of the solution and that's what i think is so interesting because there's a lot of advantages to having a smart contract based or digital solution or the ability to create many solutions that are digital what are the advantages well you know if if solutions are software then you can

do everything with them that you can do with software you can iterate them quickly you can have a team working on them you can have multiple versions of solutions compete for whoever you know solves the problem the best um you can um potentially roll out solutions more quickly right like there's a there's efficiencies to going this digital route that we didn't have before but the but the setup is the same like i also spent a lot of time you know reading up on uh kind of anti theses for for crypto there's a lot of people these days that

identify you know as like quote-unquote crypto skeptics or or people just publishing articles like you know fairly and and rightly questioning whether um you know these constructs like smart contracts and cryptocurrencies you know are actually useful con constructs whether they're valuable whether they actually solve the problem problems that they claim to solve or or whether they're just sort of a money-making scheme or you know materials for money launderers and so forth let me give you sort of an example in a lot of these critiques um you know people say like you know if we

go full crypto we're going to create neoliberalism and neuroliberalism you know doesn't work and and blah blah blah and here's all this research why and like when they when they do that they sort of base their understanding of the world on the following there are private corporations and those private corp corporations or maybe even like public corporations um whether they're private or public doesn't matter because what a salient is that they're all generally run by small numbers of people at the top whether it be the public board or the private owner and these corporations act in a way that they first of all want to maximize shareholder profit at the cost of

absolutely everything else um and they also grow without bound and try to become monopolies and then on the other side of this equation is the government which is sort of the only technology that is um available to keep those corporations in check and to prevent them from getting out of hand and to make sure that the public good is preserved and so on and so forth and if you have that model of the world then when some crypto person comes to you and says hey everything should be neoliberal markets should be free corporations and crypto projects should not be fettered by regulation

and everything should be financialized right we should have we should tokenize everything and those tokens should trade on secondary markets you know to a person with that operating system that sounds like a terrible terrible idea because what that sounds like is you know we want to give the evil corporations like all the power and then by doing that the corporations will abuse like the public good but what our discussion about like blockchain-based common goods or public goods is about is not that like we want to create neoliberalism like per se but that we're actually changing that operating system

right like what we're doing is we're saying there's actually an exit to this dichotomy between the evil corporation and the you know the government intermediate and what happens is that we change that operating system by by realigning incentives right so like in the in the original model it's like the corporation has incentive around itself and its shareholders and then the government has incentive around the public good but in our model products and services can be owned by the public and so the provision

of public goods is facilitated in the public interest right and maybe maybe okay let maybe like let's make let's make that a little bit more concrete um so what is what is a digital public good that we think about these days okay what about chat right like you guys and i we live in a world where you know basic digital communication is sort of a fact of life you know when i was growing up i didn't have a computer i just like talked to my teacher at school and my friends on the bus and whatever but but these days i talk to you know 17 countries in the course of a few hours during the day this is all facilitated by the internet

it's facilitated by chat by video communication protocols right and yet when we think about like messaging or chat in our current operating system this is provided by facebook this is provided by telegram this is provided by a centralized corporate intermediary who at the end of the day like doesn't have a zero profit margin doesn't want a zero profit margin it wants a non-zero profit margin and intermediaries like facebook they're perfectly happy to like read all of our messages they're perfectly happy to monetize those things we're perfectly happy to hand them over to government agencies

but if chat were if the the good of chat or messaging was provided by a decentralized network then you go to a new model where there isn't an intermediary that is seeking a margin or profit right and therefore the problems of like you know privacy that you have with facebook the problem of modernization you know in some sense goes goes away but then like why is this how how can this how can this thing be sustainable well again maybe maybe it's the it's the case that the people who use this chat are also

giving it governance value which is reflected in you know some kind of governance token of this network do you ever think we'll reach that inflection because you ask most peop most people today would probably say look yeah privacy is important in the same way that like flood insurance is most people would agree with it but then don't really take action and would much rather not pay for it meaning they would much rather use a free application like facebook or instagram or whatsapp in exchange for giving up some sort of trade-off whether it be their privacy or whatnot and i do wonder and maybe this was like

maybe a good case study of this was binance smart chain where a lot of users migrated and very quickly pancake swap which was an amm similar to uniswap became more popular more widely used by number of users than uniswap like overnight and you're left wondering if a very small subset of crypto users are willing to trade security in exchange for interacting with a less secure protocol because it's cheaper to interact with this then i don't think it's a binary question of i think it's more of is this going to matter for sufficiently large population that it makes these networks sustainable

it's sort of what i i'm curious to get your perspective well i think you hit the nail on the head today it's much easier to go to facebook to go to centralized provider etc and it's actually very hard to go into a decentralized network it requires getting a wallet getting ether all of the frictions that we and crypto are so familiar with and are working through but the but the real question you're asking santiago is like is there a forcing function that slowly over time is raising the cost of the traditional thing and like lowering the cost of the crypto thing and like i think the answer is yes and i think what that forcing function is uh well there's probably a bunch of them

but like a few that we could talk about are um well some obvious ones would just be that like peer-to-peer technology is getting is getting easier to use over time it's getting cheaper it's reaching like feature parity it's reaching like ux parity but that's kind of a that's not as interesting of an argument the more the much more interesting argument is that let's say governments are becoming like more and more technologically advanced right take take a look at china and as they become more technologically advanced they become more invasive and they become more like authoritarian and as that process continues then the cost of

of using a centralized thing becomes higher and higher and higher because those centralized things are usually like the way that governments like surveil people right um so so the answer question is like if that forcing function gets to a point where governments become so invasive um you know that they um just make the cost of using these technologies so high for users and users will switch to alternatives jake i want to pivot from talking about crypto as a public good to crypto funding public goods i'm not sure if you thought too much about that but it does feel like

maybe the one of the perfect end states of this is enabling some sort of coordination of these labor movements and cooperative movements and to be able to really like fund these big public goods projects that i feel like the government hasn't been able to actually been able to fund for the you know maybe since like the mid 1900s the big projects of the 50s and 60s and 70s uh and and maybe this is just uh lack of conviction in the government these days but it does feel like something like solving climate change and these kind of things like it does feel like uh or implementing nuclear energy it does feel like uh crypto public goods funding will create these

uh we will solve these big issues and that it won't come from from a government solution but that could just also be the uh me living my small crypto bubble so i'm curious to get your take on that well so yeah let's talk about like government funding for science maybe or something that but before we get there here's like a much more here's like a non-government example of public goods funding right so for example you might be aware that recently we've been making great advancements in the world of neural networks we've been creating these large neural networks that are now doing like they rival what humans can do you now have dolly too

you give it some text it magically materializes a picture of whatever you're talking about we have gpt-3 you can now implement a customer service bot and it's almost like people won't even know the difference between a human it's almost like passing the turing test right now um but all of these neural network models which are all they're called foundation models they're all very very big like like um i believe gpt3 cost something like 15 million dollars to train that model i believe dolly was something like hundreds of thousands of millions of dollars to train that model but all these models are controlled by private corporations right like open ai

google uh facebook amazon and so forth um there's a movement of founders right now who are saying wait a minute like why should open ai determine like what text prompts i can put into their thing why is it only big companies that have access to the data sets that create these models and by the way the data set is like a huge component in how good the model will perform right so if you have great data sets you're going to have great models um you know and and in this context like we could take some of this crypto technology we've been talking about and imagine a world

where you don't need the sponsorship of a giant corporation who has all these like liabilities and interests um and also tends to behave you know in these like proprietary closed source kind of ways we no longer need those kinds of entities in order to create these models we can now do it through crowdfunding and there are groups in the market right now that are doing exactly that like they put together teams of scientists who are creating analogs of dolly gpt3 and things like that extending those models to you know to different mediums um but using crypto they could be they could be like funded in a in a totally crowdsourced manner so you

imagine like a kickstarter where you know different groups of scientists sort of pitch you like hey we're going to create like dolly but instead of just pictures it's going to be able to produce videos like based on your on your text description isn't that cool and there's many different kinds of applications for that like for example you you know you might want to be storyboarding a tv commercial and that kind of tool might really help you in in doing that or you know probably many other use cases we can think about um and so a group of crowdfunders would like fund this model they would get tokens the proceeds from the token sale would be used essentially

for the data set for the compute and then once the model is uh trained it could be launched possibly on a decentralized network as well um and then the token holders would like get first dibs or the tokens can be used to redeem uh you know computation uh in that model to get the outputs and so on right so that creates like a fundamentally different world where the openness of these models will really accelerate like uh all the technological progress around these models and i think that that's like really really interesting um

does that does that make sense it does it does yeah so i get how ethereum and crypto creates more efficient uh donations and things like that but do you think that we move from a from a system from from individual and like one-time donations that are primarily funded by wealthy folks to like these new mechanisms that where we make long-term commitments to fund public goods uh that happen from folks who aren't just like the mega wealthy and it's more of on uh on like a recurring basis instead of these like these big one-time donations is that is that the new system that gets set up or absolutely i think well again because of efficiency right like i it's now okay to

donate 25 cents you know to a cause right so the barrier to entry for things like donating for things like governing the outputs of these processes like it really goes down like oh listen when you talk about like efficiency it sounds really boring but let me give you kind of an example of why actually these types of efficiencies are so impactful when i was graduating high school back in the early 2000s it probably cost about a million dollars to start a tech startup it's like you know you know you needed a physical office you needed computers you needed recruiters you needed to hire

uh you know people to do your hr you needed to hire people to do benefits you need a lawyer like like that process 20 or so years ago was like way more expensive than it is today because in like 1999 2000 2001 there weren't that many tech startups the cost of those processes over 20 years have gone down to like literally like nothing right like it's you can register your company on legal zoom you can get gusto for benefits you have all kinds of sas software that you know i don't know does peer review and on your team and facilitates like all the processes that

the tech startup needs to go through and the result of the price of starting a startup going down so dramatically what has been the result of that process well the result is that there is now thousands of startups that come onto the market every month in the united states and there's i don't i don't know the exact numbers off the top first you know tens of thousands every year and the fact that we can create startups at this rate means that we like find an uber or a facebook or an airbnb you know or or the next big successful company much faster

than when those startups could you know needed a million dollars to get started doesn't mean though doesn't that mean they'll necessarily be profitable but yeah jake this has been a fascinating discussion i do want to end it with uh just a fire round of questions um that we do um of course so uh how many hours of sleep do you get wow um i would say i would say like seven or eight i think wow we'll have to ask you when you're back on the pod because i hear you're having a a kid soon so that may dramatically go down um thing that excites you the most right now a theme uh sector uh in in

crypto web three yeah well last weekend i i finished biology srinivasans the network state so this is like very much the point of our discussion of common and public goods and i think you know check it out it's the networkstate.com i think what biology does well is he he like verbalizes um you know why a lot of us and crypto understand um you know the broad frontier of innovation of blockchains to be which is our whole discussion this is a way of organizing people this is a way of creating public goods public governance and what biology is talking about is like hey can we use this technology to um to innovate on like governance itself in

other words create like digital nations and i think it's a fascinating fascinating discussion it sounds completely futuristic but i actually think in the next 10 years we'll we'll almost certainly see it yeah what's been the hardest thing as an investor in the space particularly someone like you has been early in a lot of things uh great question um you know everything is constantly changing in a nascent space and that means and i mean everything i mean the the opportunities i mean the technologies are obsoleting one another i mean um the structures of how deals are done um the regulatory environment as we're now starting to feel pretty viscerally

in the united states um you know just everything and so the as a crypto investor like like your your kind of overall goal is to like how do i make sense of all this stuff and translate it into like a long-term investment and i think that's that's super super challenging would you rather invest in a very talented team in a not so big market or in a massive market with a not so talented team the first thing um because i i think um when like when you take small markets and and like for example like translate them into a crypto domain you tend to create new markets you tend to create more value like like here's a here's like a

dumb example like which i love to use for for nfts think about fonts fonts is not a sexy market you don't see a lot of vcs investing in fonts and yet fonts are something that are used on like every single web page that you ever like pull up on your phone or on your computer and every font generally speaking is licensed and today there's this almost like quasi monopoly where like google gets a lot of fun licensing out right now imagine what we could do to that market if we first of all used a decentralized marketplace where font creators could reach their audiences directly they could cut out those middlemen and second of all use nfts as a way of tokenizing not just the licenses to fonts but the

revenue streams to funds right um i think we would take that market 10x 20x 30x uh if we could populate something like that so i i think i would always err on like great team who has an amazing vision in the market that's kind of like not obvious to people yeah but particularly when you layer on these new types of business models and uniquely enabled by kind of web 3 nfts if you will uh yeah you're someone that is pretty smart on the dial space what are the biggest challenges um that you're seeing with dao's today what a great question um i'm a huge fan of the of the dow space and at the same time i have this like parental rage

like at it because it's so um yeah it's like the the infrastructure of dao's is extremely nascent very naive um doesn't work together well you know like for example you know if you're running a dow you need like on-chain tools to you know to hold your funds to settle your transactions you need off-chain tools for like i don't know snapshot or like sentiment analysis you need communication tools um like discord or telegram or something else you need security tools you need third-party sas like like to actually run it down means that you're actually running an organization and we have a lot of tools in the traditional world to run

organizations and we have a very nascent set of tools and daos to run downs even if those tools worked well it would still be like extraordinarily hard for example to take your whole community and like upgrade them to a new set of tools and so we're sort of missing um a lot of we're sort of missing kind of like an operating system that makes all of that work well so if you're like on linux and you have apt-get you can upgrade your tools very quickly but if you're running a down you don't have anything like that right so you know this is one of the reasons i'm

super interested and have been for a long time an investor in orbit um and what they're doing in terms of uh you know creating an operating system for web3 technologies my last two questions the first one is what what do you see as the largest nft market art you know real estate tokenized insurance contracts gaming like curious in the next like five ten years well yeah so so today like the three main use cases are digital art which is a minority use case now um collectibles which i believe is still the majority use case and in-game assets which is kind of like growing

um our general thesis is that nfts are not limited to those verticals their their nfts are general financial technology for non-fungible goods and so they're going to extend to a lot of other like digital content so movies music fonts icons you know things like that um blog posts are being tokenized this is the kind of stuff that i'm i get really excited about because this is one of those spaces where like we haven't tokenized something like this before we have they haven't been liquid before they haven't traded on uh public markets before and yet there's like billions of these things so i like i like wonder if like the tokenization of all blogs in the

world might actually be like one of the biggest ipos of all time like if not the biggest but then i also think about real estate and so you know today we're very fixated on nfts as digital rep representations of digital things but it's very clear that nfts can also be extended and people are extending them to physical things like the title of your house the deed uh the deed to your car whatever it is right um sorry i got those backwards detour house title um right and and like when i think about real estate i mean holy crap that's like tens of trillions of dollars now the other component of your question is like which of these come first i mean

i definitely think like digital things are much of lower hanging fruit but for example like things like music those areas are going to be like much harder to disrupt than like tokenizing blog posts which nobody has ever even tried before blog posts are like greenfield and music has a lot of like incumbents so those differences would matter too yeah my last question jason might have uh one but is what is something that you wish you knew for for a lot of the folks that listened that are either starting their company or starting to invest in in their early on their careers what is something that you wish you knew that you know today that you wish you kind of knew when you were getting started well i think the company that i started

in block in crypto which is coin fund um was formed very organically right it was formed out of people who came together with a common interest in crypto um everyone who you know found like helped me like build this company um you know we're there because they love crypto wanted to be there you know we didn't we didn't have huge pedigree at some point we were you know first-time managers trying to raise money for the first time and it's really hard especially really hard in a new asset class and today we're a company of over 30 people um new york uh miami boston other places um

you know we we've been able to raise money from successfully from uh institutional investors uh we we're an ria so a regulated entity in the united states with the sec right so we you know we've come sort of a long way as a company and if i were to do it all again i wish i could have formed that team like much earlier than we organically did like if i had started with the notion of you know like let's build an amazing team for this um we could have maybe move faster great well i'll cheat one last because we always like to get by the rope we always like to give either a book or a movie a recommendation especially at

summer time people go to the beach what have you they'd like to read or watch movies so jake maybe um you could uh give us one last tidbit of wisdom for our listeners a book or a series movie that you have recently watched or read that you recommend yeah i mean it's important to take a break from crypto every once in a while i'll tell you how i um what i do sort of as a hobby i so i live in miami there's a lot of spanish speakers here and i actually studied spanish in high school and i started to like learn spanish again now i'm actually like pretty good at spanish i can um understand most things that i read in a newspaper without a dictionary and stuff

like that it's still hard to understand what people speak fast but in in sort of in service of that one um interesting netflix show which is spanish language that i watch recently is called somos and it's a kind of a mexican drama dealing with a town in mexico and and kind of like looking into some of the issues of like the cartel violence that that happens there i thought it was the more authentic version of narcos if you will yeah exactly exactly um and then and then the other um the other thing that i've been watching recently because i love nathan fielder uh of nathan for you is the rehearsal uh and and if you watch the first episode of that it deals with this bar

which is located in williamsburg which is you know the neighborhood where i come from nice well jake stick around because we're going to do a recording this in spanish [Music] [Laughter] thanks for coming on the show man this has been a very fascinating discussion i think it's one of the topics that don't get talked about a lot but in circles that i met like in investor circles and some of the more kind of deep thinkers in the space it is something that is kind of not talked about enough but i think it's super important if you're a founder if you're an investor if you're just an observer of the of these news kind of political economic systems and so thanks

for coming on and sharing your wisdom i think it's going to be an episode that we constantly look back on to reflect on and also to inform how we think about the evolution of the space which is still very nascent and and of course you're someone that has been super early in a lot of these things nfts wept through generally and so i'm thinking about dowse and so we'll definitely have to uh have you on uh maybe after you know a couple couple months after you you become a dad and and you know you took a break uh we'd love to have you on to continue the conversation but it's been really fascinating so thanks for making for making the time yeah absolutely and thank you so much for having me and and being like interested in this topic because i think it's such an important one and it's one that like

most people and you know out there in the public they don't really like talk about or there's not a lot of people who like present you know public goods as as like something that you do in crypto to most mainstream people so thank you so much yeah appreciate it jake this is great [Music] you