Empire Debates: L2 Wars, FriendTech, Crypto Regs, Digital Art Movement

Transcript

while we've seen a washout you know a trough of disillusionment broadly in the nft space we see this pocket of really fine digital artists having pockets of success and we see what we're seeing on the ground day to day is that Global museums are leaning in to where the nft community has left slack so some of the biggest buyers right now of crypto punks of really amazing like fine digital art from like Rafiq and Mike and and others have been Global museums like that is when you think about that like that's mind-blowing the fact that like the people taking up slack right now are you know the M pluses and the momas and the

pompidos and and like really like substantial cultural institutions cultural Gatekeepers hey everyone welcome to a new show uh we don't have a name for it yet but uh Santiago and Ryan are close friends and uh we recorded two of the most listened to podcasts I've ever done with them so we thought it's worth coming together and seeing if we could do a show together what's going on guys how you doing bud hey Tom yeah great to be here and let's let's dive in let's Riff on this Let's Do It um Santa you want to give your quick overview I don't know who I am these days I guess uh you know a long time in the space uh obviously uh I've

now turned my attention to education after I left parify you know verify we were one of the first kind of funds doing just uh individual strategy which is defy uh before it was a thing and kind of uh before that was just Angel Investing in the space and I love that kind of DNA of just being really close with teams and sometimes in crypto it is a very emerging after class and so having the flexibility Ryan used well you you just manage your own Capital we both been through the we've done the fund and now we've both now managed kind of our own capital and and I really enjoy that because um you know crypto is sometimes you know it's difficult as an Institutional Investor to do certain things like buy

nfts or buy or get into yield farming if you will or do some of these strategies and it's just a very emerging asset class and so um I'm still very actively investing and and about one of the key priorities for me is just raising the bar for the level of discourse you know be what I like to describe is I think in crypto it serves you well to be highly curious but also highly skeptical you constantly have to question things and and I think uh yeah that's kind of hopefully what we try to do here is just Elevate that bar and raise and have a honest open discussion of the things that are happening in crypto and things were about all three of us are seeing because we get to see so much um on the investing side and just generally yeah I think that's a

really great point and something that um in in the decade that I've I've been in crypto uh has I've tried to make a defining feature of of my process of thinking through things from from first principles of you know getting excited and getting conviction around completely novel uh ideas that you want to see for the intellectual curiosity of it you know whether it's like ethereum or or maker Dao or in recent years with with nfts and player and gaming with axi and and other things you know the best investments that that I've made over the

years have always been something where what compelled me to do it was the intellectual curiosity of just wanting to pay to see the river um and and see the story unfold uh and and thinking through uh with an independent mind uh from first principles perspective uh of like what could be uh if you use these important Primitives uh that you know Cryptid native values offer us um is something that has been incredibly rewarding um and my life's passion yeah I like your point on the intellectual side Ryan I I think I was thinking about this the other day after a couple years investing in the space it gets pretty easy to

just take the boring route like you know do all the deals every fund is in not really care um it's easy it's easy money it's easy you know tweets stuff like that but it's just so intellectually boring and excruciating to not have an opinion or review um and I think that's hard to stay non-consensus over a long period of time so definitely like that we've seen all these emerging Trends over time that don't look like uh like the last one right you know you saw um Capital formation Trend with icos and 17 and then uh and then from there D5 summer and this idea of like uh of decentralized debt uh and amms being

able to to offer yielding opportunities and you know from there we see you know we see plater and gaming emerge which was I think the first like non-speculative use case and digital scarcity for for digital artists emerge uh with nfts and and those are like those are always really really different um you know throughout throughout it we've seen a Common Thread of um of infrastructure and value accruing to the infrastructure layer um but I find myself like you know to your point somewhat um exhausted like like for example like how many layer two proposals are there right now or like hybrid layer two layer

one you know natively integrated with ethereum modular some level of thinking non-zero knowledge like how many are are there out there right now like it's certainly in the hundreds um and sort of trying to sift through that is is somewhat exhausting versus trying to find like the next real Trend in the space whether that's social or whether that's um you know something else that we have that we're not even thinking about yet it's a good point I feel like after ACC there's uh kind of General fatigue or criticism in the market of like how much infrastructure is enough in terms of the deployment of like the number of dollars have mostly gone to infrastructure um and to your point Tom I mean

if you were to look back over the last you know 10 plus years that's where the money the real returns have been made You could argue um and so there was a natural tendency I think for people to keep deploying the next infrastructure project um and so the question is like at what point do you do you actually focus on apps um you know we are seeing obviously base is fairly interesting if you think about the number of users that coinbase has and it being a very kind of a hold handing experience for so many people that haven't been ready to venture into this world and then you have an ecosystem of apps like friendtech uh if you not you know or or

the like where they get access to these applications um but historically I mean I think most funds out there would rather deploy and continue to deploying infrastructure um so I I think other technological kind of revolutions went through this phase as well but you have to wonder at some point we have to deliver beautiful products perhaps that people want to use to really you know make this all worthwhile and I think we'll get there just no matter what that is going to be to your point around gaming you know we've all three here believe in the category a lot of people are not dismissive of how played earned was like a thing that was a the stupidest thing out there and a lot of these things you know people are critical of

but I I'm constantly reminded that a lot of things in their first instantiation look really stupid but then it's a second third that with certain tweaks that actually you know really are how how things kind of involve and so I think uh yeah just a general comment on like infrastructure and and applications like I I don't think there's nothing you can do I think the market will do what the market does and just push it to an extreme of continue to fund more ltus and more l1s and you know it's just you just kind of have to let the chaos rain and you know it'll kind of sort itself out in the long run and in all these categories inevitably you know less than five percent Will Survive and that's

just the natural ebb and flow of of venture markets yeah well I mean frontec is a good example though right like they started their own L2 spun out of coinbase coinbase is like the most legit and trusted centralized brand of crypto in the world I think we're one of the most and you know the app is I wouldn't say overly legit but it's it definitely speaks to uptake of of the app itself I don't know do we want to discuss like frentech because like that's a change from infrastructure to the app level that we're kind of discussing do you do you see that as like the next big app that onboards you know significant numbers of users

into the space because that's really one of the things that I'm so concerned about uh is that like hey like it's kind of the same group of us that it's always been like trading these coins back and forth to each other what is the thing that's going to onboard like a real significant uptick in in like real world users do you do you see this as uh as as like the big breakthrough or what are your thoughts no no definitely not I mean I haven't signed up for it but I think from a number for a number of reasons I don't think it's right um like mainstream app first mainstream app I may be wrong but it's not like the email of this category I think uh you know I recently talked to the base team

and one of the things that they're one of the applications that is deploying is kind of this restaurant reward program which to me feels like totally on the back end something that you embed yourself in a flow that is you know so many people are like how many people day to day are thinking about speculating on the value of their friends like no it's one of the things that once people show you like oh some people might gravitate and be like yeah cool I'm gonna do that but then they lose interest and I think you're seeing that very quickly in trends even just now but when you think about much bigger categories okay everyone's going dining out and if you embed that with the incremental Improvement of saying hey you're going to get these points you're going to get nfts at these

restaurants like oh that's pretty cool and so you have an application that looks and feels very much like an open table butt width and this added component of points in the gamification and the incentives and I feel like that to me it's it's happening it's I forget the name of the team that's going to do this but I'd much bet on on that type of application which is incremental I get it versus frantic which is just very neat it's no different than D5 and there's to your point earlier there's there's a very discreet small number of people that just think about that and we're going to see the full hype right we're gonna see celebrities and some sports folks come

in there but I struggle to see that as as like the killer app yeah I'm willing to be proven wrong I just don't believe in in compensating in that aspect the only thing that I like though is like my thesis for bass is very simple I think you guys probably have a similar one right like coinbase has 100 million plus users a zillion dollars like an easy route to get that capital and that user base on chain through base is fantastic and friendtech is up the alley of a consumer level app uh which is similar to the the retail users that coinbase has so I think on the social user base fit it's nice but I'm with you in that I think the app should have been

waited they should have wait a month to launch the app like it should have been launched with full functionality like pictures videos the whole nine yards it shouldn't have been as janky and I think the bonding curve is messed up because you quickly price the entire Mass Market out after you get a couple dozen users and there's no fractionalized shares or keys that they're calling them and I don't know I think it's hard so I'm with you I don't think it's the end game but I I struggle to see like why they I think they just should have waited and thought through the bonding curve and the features a little bit more before launching I'll take the other side of this debate in that I'm not that excited about bass because for me

at the infrastructure layer Financial incentivization sort of is the key killer use case and so without without a token you're just going to have greater apathy you're not going to have stickiness in your community you know there's no like buy-in there to base they're just like your your brand Affinity to coinbase which isn't isn't that strong um and then further with you know with friend um or friend.tech my issue is you know we're trying to build apps that that onboard people you know just hunchaga's point it they the first successful use cases will be really

specific apps that like solve a specific problem and are are generally useful and then they will generalize to like the generalized social platform we won't start with this like Facebook magically appears on chain in in anything the the last thing that that kind of like I find peculiar is that instead of the incentivization being at the base layer in in base it's abstracted away and in this gamified function in friend.tech and that feels really inauthentic for like connecting on a social layer that you're you know it's ultimately this like recursive function of trying to to

spin up money between each other and there's lots of like you know there's lots of attack factors there and I really I really have to say like you know there's a point where the community probably needs to start to have a more Discerning Eye to the things that Paradigm is putting out there you know uh it's a like it's a pretty consistent track record and I think Nick tomato is the only guy really like publicly calling it out you know FTX and then blur blur was a you know a pirate attack on artist royalties which which really like detracted from high quality Fine Art going on chain and has been that

negative for the space and I'm wondering if friend Tech isn't going to be the exact same thing where it's another black eye that sets our whole Community back by you know months if not years and makes us look like you know the the money grubbing grifters that calcanus and various other folks outside of crypto are trying to paint us which is not the case right there's so many examples of of things that are amazing and really genuinely changing the world and so I don't I disagree fundamentally with with like where incentives were abstracted to and uh and you know and obviously as a result I'm not super excited about this but I over time I

think crypto social will will be a thing there's a lot there to unpack but um and of course I'll get the blur in a second because I wasn't a customer blur but and I'm curious like you to get your thoughts on on this point that has has it dissuade artists from more artists from coming on chain but we'll get to that later I want to touch on a point that you mentioned around tokens um and look bass doesn't have a token yet the coinbase team has been very explicit that they but I will say like you know I I believe in in what I think we all can agree on that the value accrual the token is a necessary component of of the space without it is sort of like a glorified database and the token because a lot of people like calcasie reporting

say why do you have a token and why does it need to be traded constantly you're just it's a casino it's like no wait a minute it represents the ability to distribute value in an open source context to contributors full stop without a token none of this works and it allows you to incentivize and program things to for the coordination of these trustless systems although distributed and decentralized two different things but you need to have a token in order to do that at some part of the layer stack okay fine you so we agree on that um but I don't think it is necessary when I think about mainstream adoption the normal the Normie out there forget about the people that are like thinking about hey this is a speculation

and that's a whole part of this space which I think is not wrong most people in crypto would have shied away from just saying look speculation is is is is real and it's necessary for any technological innovation it fuels growth and whatever but the normal user when he goes to a restaurant is interacting on Twitter or these applications is not thinking about value in in the way that crypto delivers it so whether you have a token or not I don't think is a necessary prerequisite to attract users um out of the gate so I would I would and this is why I'm more bullish on base is what I'm trying to get at which is I think that they'll be very competitive in onboarding people because there will

be cool apps there because Tom to your point they just they have the distribution and so now I think you're gonna get tokens higher up the stack whether it's friend Tech or this restaurant app or all the D5 apps that are now deploying on base and that incremental incentive once the user comes to crypto is going to be like oh wow this is great but I think it it's a paradigm shift into thinking which needs to be just because we have a token that's not enough to attract the billions of users out there it's like what are you that's not the faster better cheaper criteria that you need to have in the product at a product level we just need to make onboarding easier we need to make the

the flow easier The Experience easier and then yeah if you have a if you have a token well that's the ad kind of the X Plus y the Y element that you don't have in what two but for so long in this space it's just been like hey there's a token there's value accrual you're going to participate in I don't think that's enough I think it's important for early Community but I don't think it's enough for me to go mainstream what do you think is the thing that they have sorry go ahead Tom no no no it's okay I one thing I'll just just to agree with both of you a little bit like Ryan you mentioned that there's a milliona ones l2s Sandy you mentioned that you don't really need the token or you might need the token to attract users I think bass

is super interesting from the consumer adoption standpoint because you don't have to worry about you know going to a new Cosmos chain going to another eth L2 bridging to you know xyzl1 like those steps are just so confusing for people and I think if people can access an app just out of the gate like we all want like we all want this but then again we're all funding you know new l1s into l2s all the time like it doesn't make any sense like if we're able to Steward an L2 like base that has this great consumer appeal it's super easy to onboard like that's the thesis like let's just go with that let's just focus on the apps built there yeah

it's no different than the smartphone when you buy a smartphone it comes pre-loaded with certain apps whether you like those apps or not you can then go to the App Store and certainly there's restrictions in what Apple allows to be on that app store as we all know but at least that's I think the way I see this moment being so important for crypto because right now for a normal user getting on boarded is is like okay what do I do in this like vast ocean of things like it's daunting right um whereas I think coinbase will do that hand-holding experience where it's like hey this is the curated set of apps for the normal kind of set of coinbase

users and that's that's great I think and then over time they get more you know familiar with how to you know work the system and kind of operate in this new paradigm world and then to your point right they discover oh wait a minute I'm using an app right now that has not giving me many rewards there's an alternative decks or you know social media platform out here that gives me a better rewards has better features yada yada yada like there's no there's a plethora of apps out there uh you know I I not that we need to go on a tangent of air drops and how unsuccessful I think that we'll we'll look back on some of these airdrop

programs be like wow that was incredibly expensive customer acquisition with terrible retention and that's just gonna be it's gonna be pretty bad because if you look at the retention numbers it's it's not you know throwing airdrops to people is not enough to have them stick around yeah what do you think that base has that say you can't find in the polygon ecosystem for example like polygon it really surprises me it's quite a it's quite a conundrum in you know in the space right now where they continue to execute really well there's you know now on the order of hundreds of games there the apps for for like onboarding and

bridging are are about as good a uis you're going to see in the space um there is sort of like relatively decentralized ownership there's a really strong Community there they went and shipped um ZK evm with with my my brother uh Jordy balina here here across the street from us um and you know zkevm unfortunately still has like hundreds of daily active users you know which begs the question of like do people care about zero knowledge privacy um you know from a user perspective no I ecosystems well I I think polygon got the biz Dev

right I think they in a sea of technical people they hired and executed on sales marketing and Biz Dev in a way nobody else did like they Inked major Partnerships they were out here selling the chain they acquired I mean remember Matic originally acquired polygon and then polygon acquired was it Hermes was that was the ZK attack yeah so they have a phenomenal track record of not only selling their own product to Brands and users but acquiring the tech that they need which is also at the end of the day sort of like sale so I think that sets polygon apart sure but nobody would call that a uh like a financial success based on their early certainly not based on their early rounds which were you know were pretty pretty like

fully priced you know if if base had a token right now it'd be somewhere in the DECA billionaire valuation range and yeah and I'm kind of like still at this thing of like what do they have the polygon doesn't is it just that they have a centralized owner effectively and it's like they have the trust are they just gonna give them money back to the banks and like forget about the brand I mean Ryan let me ask you a question when people in America if you were a survey and another group stations where they're at they are synonymous with crypto whether we like it or not I mean it's they that's just the the brand recognition that they command amongst outside crypto people it's coinbase right you think of they're

synonymous and I think it will look pretty silly in five ten years time that the whole issue of the space which is something that I've thought about a lot is that when we comment on the success of things we are referencing for the most part a token price which is not really the most important thing unfortunately it's the thing that we hold on to the most because it surprises the problem with that is it's early stage it's it's Venture that that is in full price discovery mode even Bitcoin ethereum on our full prices for remote and so the wild swings are slightly distracting because a polygon get the last one out of buck per token it now goes to 30. but they've signed all this BD deals and they have all these

corporates onboarded but like unfortunately most people like oh it's dead like this project is going to zero and like it's so I think for for most Market commentators and investors it's it's just an unfortunate situation but I mean this is the state we're at but you know so many times we we comment on things like play to earn and all these different things I think price ultimately markets are efficient especially I think in crypto I do believe that there's efficiency in Market to tell you if things are working or not but I I think there's a lot of emphasis on on that and so maybe maybe like look there's been some apps like uniswell that didn't have a token for such a long time but they are they just dominated and they continue to dominate

um I think there's a natural evolution of when you want it on a token hey everyone we'll get back to Empire in just a minute but before we do that I want to let you know that we have permissionless coming up permissionless is Big conference that block works and Bank lists put on together it is the biggest the best D5 conference in crypto this year it is in Austin Texas September 11th through 13th if you've been in crypto for a while you know that bear Market conferences are the best kind of conferences we have a phenomenal lineup of speakers a lot of the guests that you hear on Empire are both going to be speaking there you will have the opportunity to meet them there and a lot of the topics that we cover on Empire ZK attack roll ups account abstraction Mev

app chain thesis a lot of that kind of stuff that will all be discussed at permissionless this year so because you are a listener of Empire you get a special discount that's right Santi and I negotiated with our marketing team you get 30 off if you go to blockworks.com forward slash permissionless Empire 30 is going to get you 30 off your ticket today when I'm recording this that's about 300 off your ticket so type in Empire 30 when buying your permissionless ticket you get about 300 bucks off click the link at the bottom of this episode it's in the show notes do it quickly because prices go up all the time and if you are going to permissionless hit me up let me know shoot me a DM on Twitter I would love to meet up with you there I don't think

anybody cares about base being centralized I don't think 99 of people care I don't even think the people in crypto really care I think eventually if they get fraud proofs down and people could like eventually roll back or like argue on chain if something goes wrong sure but for coinbase's brand I don't think there ever in a million years going to cause an issue that would lead people to have to do that so even in the edge case I don't think it care so I don't know I'm pretty bullish on it because I think it's just consumer adoption and I think they will launch a token I just think coinbase corporate is never going to say that for the next five years given the regulatory landscape yeah I don't I don't know like I'm here for crypto native values and

like you know lowering the genie coefficient and uh decentralize decentralizing power and wealth among among Network actors to make things community-led and not uh centralized so for me it's a it's a bit of a bastardization of of what we're trying to do here um but right now why can't you make money on it let me ask you a question Ryan were you like that back when back when Facebook announced Libra let's just go pro or con were you did you see that as similar like this is terrible this is just going to co-opt a lot of the values and people are going to think it's scripted but it's not or Facebook launching metaverse like do you think that those two things are negative for

this yes not only did I think it was negative Facebook called us in at the time because they were you know they wanted to to collab with polychain on on the subject and I told them that to their face at their campus that this was like totally against crypto native values they responded with like all these metrics of how Facebook's power was continuing to dominate the world and I responded with the same thing that you and I talked about a few podcasts ago that um social network effects are dual power law both on the way up and the way down um and so like when they turn the curve they'll they'll also know and so yes

they're still on the dual power law going on the way up but but it's not as defensible as they think that they think they have um yeah Tom what do you think of something like Libra and or like the metaverse I mean we have that it's called PayPal I'm with Ryan I think Libra was a desperate attempt to try and save their business and lean into some clout I don't think it was ever in the realm of decentralization or crypto um and I mean it failed pretty miserably right I mean look well I will take I'll take the opposite here because I I I'm very aware of that it is not crypto right it is for a variety of reasons it's not a perfect but I will say one thing it is from a

practical standpoint I think of is it going to move the needle even centralized Central Bank digital currency I think they're all positive in the sense that you stand My Hope Is that in my thesis is once people get conditioned in using these things digital native money and tokens and understand that then their imaginations open up and and say okay what else can we do here and I think for base in particular or if you get air dropped you know Libra what was supposed to be and you're like okay I think it's a higher probability to convince and convert that user that now has starts to forcibly for better for

worse has to understand how to use this technology and it opens up this sort of Pandora's Box so many users and so you hook them then and there and the whole print I think a lot of the thinking in crypto has been very binary in is is it it's either crypto or not and I think it's a spectrum and a sequence of things for for early adopters I get it but over time I think you know um I would argue that taking a more practical mindset of there is a progress and a journey that people need to take to get to really understand the power of this technology now it might be a quick aha moment right I know you're so close to artists like artists really get it

very quickly because they're like oh you're telling me I don't have to go to gallery and sell my stuff through Sotheby's which charge me an arm and a leg say no more it's actually been the thing that I explained to people the most this digital scarcity through ART is nfts have been beautiful because you can explain and crystallize this technology and the people that that are in this industry get it very quickly but but for so many others I think it's going to be a work your way up um which is hey I have this thing Libra or the central bank to get our currency wait a minute what's going on in this other pocket that I hear Rumblings on oh oh okay well it's pretty cool like I want to get I want to interact with that and my whole thing with with crypto is

is think about Montesquieu like three layers of power and there's checks and balances I think crypto is that Force tool which is you're not going to blow up governments you're not going to blow up Wall Street as we know it but the ability to to quit the system it introduces more competitiveness to political economic Financial systems across the world because for a variety of reasons and that increased competition is really good it just creates a better system and actors within all the systems Legacy and new start acting better because they know that if they are excessively greedy people are going to leave whether it's they're going to leave their Venezuela to go to Colombia

or they're going to leave Argentina and so I think that's my view of crypto it's not that we're going to blow up the world and record and you know rebuild new systems it's more so you introduce more competitiveness in existing systems and that's really positive I think yeah I I like your your view to kind of summarize here is that there will be two you know value and information super highways one that is like compliant and probably easier to use and that will fit you know a mixture of these corporate things like like base but also Central Bank currencies and and things like that and then there will be a bad Lance where like Bitcoin exists and like the fully decentralized like crypto native values

exist I think my point is ah I only want to spend my time energy and capital in the Badlands because that is the most intellectually interesting as well as most profitable area to to invest in agree both from 100 agreed you know time Capital as well as as Financial capital is kind of my the way that I look at it so like all this other stuff like bridging web 2 and and like yeah you know but so right I I agree with you that the most interesting things happen in the Badlands like you get the builders who could literally build new things without any appeasement of what's been built or a boss or a

bureaucracy or a company like I totally understand that the only uh route Santi I would agree with you on is the profit perspective becomes really lopsided to the base world if they are able to actually onboard the amount of users that they want to then the apps built on base because then the Badlands becomes interesting but much user or much lower on every metric versus a base Eco that is successful and I'm not saying it will be very successful I'm just saying you know most of people on base are not going to bridge over to the bad Lads right just by definition if they're the mass Market of the US for the globe well I mean I think it's in the world right you

incentivize the movement over they'll get there right yeah yeah I I and that's that's a good point Ryan I think fundamentally you have to believe that what is most exciting to me in this placement always has been is the possibility to constantly layer new incentive models and mechanisms to and they really move people to to drive and drive certain actions it's been difficult because you're for so long it's a very small subset of users that are using these systems so running experiments on a low end that is neither large or sufficiently Diversified is tricky Magnum opponent airdrops so

you so but I think over time and imagine a world where a based on board say 20 30 40 50 million people and they're all using these apps I would argue that there is a subset of one I think all the projects that are now obviously deploying like all the D5 Protocols are deploying deploying on base and there's and so that's positive for the space in and of itself um because hey by the way there's like 50 active users on defy on any given day but now you have more now with that I I recognize that it's happening on base not to get into a tangent of value accrual like fat protocol thesis or app

thesis or wherever you think but I do think that it's hard for me to imagine a world where over time something that has a ton of usage usually accrues some meaningful value and so I would think that if you have 50 orders of magnitude of users it's gonna certainly benefit coinbase but it will also benefit all the apps that you know are struggling for breadcrumbs of attention that are happening in every other chain um and so naturally if if if there's an incentive to Bridge Over I think we got to talk about you know not not maybe here but over time the bridging experience usually not going to want to think about that they're just going to

use all these apps and however that gets settled in the back end is going to be a thing that you know no one thinks about and and protocol loyalty is not even going to be the thing for me one thing I want to hit on because like we're talking about two different worlds here of like the Badlands versus like this more business-esque Wall Street government approved world I think the real thing for me is just being okay with like at The Edge versus like high compute right like you can both like the breakdown between a user in the future they could run a data availability sampling node on their phone for Celestia right they can also run the next version of a web 3 app on their

phone but the reality is the the hard compute the big nodes um the builders in ethereum that's always going to be centralized the ZK stuff is always going to have centralized compute because the fraud proof the verification is just way too big right now so I think we need to break this into stuff that the user can run at The Edge versus the stuff run in a centralized Manner and I think as long as the edge has control to fight or argue with the larger nodes I think we're fine so I don't know that's the decentralization centralization Spectrum I think about a lot and it's far from fleshed out but I think that's kind of the world we end up in by the way uh Ryan are you on friend Tech I'm not I'm not yeah I mean I've got it and a bunch

of the team has played around with it but like you know uh like I stopped when it asked me to connect my Twitter I'm like yeah yeah now uh this is in a service area that I don't want to open up so yeah ultimately I want to try to lead by example by doing like the right thing and being in in things that are are pushing the space forward in a positive frame of mind and I'm not sure that this is going to be seen in the long term as possible the same way that very clearly blur was not positive the the one thing not to stand it but the one thing I did like was their work around in the App Store just the ability to install like shortcut right on your phone from Safari you can access it like that was a fantastic way to get around Apple's 30

tax and Apple's app store which I thought was phenomenal yeah that'll definitely be good for now yeah yeah and it sounds like it's super easy to uh to to get funds on on it right it is easy yeah yeah so something good will come up with this experiment for sure bridging and just uh this hack all right we have to move on Orion's Gonna Fly here and shoot me what are we going to next let's do it uh well let's talk about like the movement in ETFs and what that means for capital allocators in the space and so you know obviously we're on the cusp of both

you know both Bitcoin and ether ETFs being readily available within the next six months I would argue that we're probably a year out from coherent regulation in the US anyways and so like the Cambrian explosion is about about to begin because markets are leading indicators but just talking about the ETFs for a second the second or so that's great you know it means that like there's going to be a lot of demand side pressure because a lot of Institutions that would like to hold one or two percent for you know for uh um treasury Management in in mature crypto like Bitcoin and Eve can do so um and do so very easily and at the low cost level the interesting thing there

is what happens to the plethora of uh Venture funds that are essentially just charging 220 to hold your Ethan your Bitcoin and maybe like a basket of like some other things but but but there um like I read a stat the other day that somewhere that approximately half of the 800 and 800 odd crypto funds that existed at the peak in 2021 have gone out of business does this mean that it halves again uh or more and what do you guys think about that as capital allocators and how do you then propose you know novel creative fee structures for your LPS I'll I have

some thoughts on the ETF and then maybe more stronger views on the large fun side I'll go for the more interesting one which is the larger fun side I think larger funds that are just alkane to Ether Bitcoin um our toast I always I've always thought that um I I also just don't think there's appetite in the market to effectively allocate billions of dollars from one single fund into the space right now I think their game is Just overlapping management fees and I don't think it's out performance on the carry side at all um which look if that's their game that's fine to each their own but that's such an I just an elegant way to live like I said it's boring to me it's it's just like you're not you're more you're

more interested in investor relations than you are in you know project relations right and it's just not interesting um I have views instead of the 20 is just a ridiculous way to conduct yourself philosophically do not disagree with you guys I don't think that they go lost at least not immediately and I just look at traditional hedge funds and large asset allocators that have just stopped playing the 20 game and optimize the two percent game because they realize hey you know we could just scale this up by an order of magnitude and just play the two percent game um and so I look uh you could even argue well

I'm I don't think I don't think they go away like look look at grayscale I mean grayscale church I would argue grayscale goes bust for sure um well they'll probably convert to an ETF but no I mean they convert to an ETF in their and their cash flows get cut by three quarters or more right because they got the ETFs got to have maybe 25 bips of fees 15 bits of fees um tops and and so they become a much much smaller entity uh I I want to ask though this because like this is an interesting thought experiment like to play Devil's Advocate on my own view here because we're all in agreement if there is no place for large funds like Mega funds does that mean that as an

industry we haven't grown to or we're not growing to a level where we have that Capital allocated projects or does that mean that the projects themselves are doing Capital formation directly to retail and their users it's not necessary like I'm hoping it's yeah I mean which is it I very much hope it's the the latter and we and we're able to just like crowdfund the vast majority of of interesting innovation in this space and which will be much more intellectually interesting and what I think we're seeing a cross Venture Beyond crypto is that um the era of the mega fund is over you know Venture is a craft game the right size for a for a a venture vehicle is

between 100 and 300 million dollars and uh and beyond that um you know somebody show me a fund on planet Earth in a history of venture that raised over a billion dollars of initial LP Capital that returned above three moic doesn't exist there's a reason why Benchmark is the most successful Venture fund across vintages because they've stuck and disciplined to they've they've I think it's like 150 or 350. everyone is the exact same number three and that's it um but you're right uh look I mean I think a lot of people gave sequoia um for leaving but I think it's to your point Tom I mean they're they're I don't I think they're smart and they

they've said that the opportunity set is not here for us to yeah chunks of capital and so I respect that I mean I there's a lot of things that I don't agree with like like you know but but that at least I think is is an honest assessment of where the industry is in terms of how much Capital you can deploy yeah the one of my favorite structures that rolled out was and I'm not an investor in it and I don't know how they're doing right now which was Hydra Dow which is just one large pool of capital at the top and it rolls down into specific sub-dos and the sub-dows are all led by I'm pretty sure it was Founders in their respective field so they like have unique experience they know exactly what the landscape is like they can specialize they don't have to

worry about D5 they're doing in front they have to worry about gaming if they're doing ZK and they can crush it and then that rolls back up and that was always my favorite um way to do it but from you know as we all know creating a venture fund around that scenario with like current laws and Landscapes is pretty hard um but yeah is a failed experiment right for now Ryan I think we will get some thousand Adventure now but all they were were front running experiments where people were participating them with a nominal amount of money and then front running the out of the deal flow which is like but the other thing I want to go as far as saying most Dallas Arts has failed experiments it people realize Ron Dows and governance and like no like

you you can't have a flat organizational structure guys wake up like you need to have some hierarchy yeah with no with no one being paid it Dow Dows are probably in an industry with terrible acronyms and misnomers the Dow may be the worst one because I don't know a single one that's actually decentralized well in any way autonomous or particularly well organized the thing that was the thing that the reason why I like the special edition on subdas versus the large investment does is because 98 99 of the people do not show up to vote and the ones who do vote only half of them are reading the icdocs like it just doesn't scale with investment club like approach of people voting it just doesn't work we've changed we've completely changed

our fee structure um you know we're we're like a friends and family thing anyway so we don't like our feet our fees are way below Market to begin with but we've completely changed our fee structure to be like based on the yielding outperformance of eth rather than than just like raw return because like who's gonna just give you money to like hold Heath like that's you know that ship is sale so now you got to do something actually right it's interesting I I think that fee structure is Gene like is the correct one here because are you outperforming the underlying like dear hurdle is eth plus staking yield like which is it's gonna be pretty hard to operate like it's it's hard to offer for me

which by the way most funds historically have not I mean it's in the league it's hard it is an elite bar but what what percent of Investments though that I'm curious about is like you got they don't outperform ease like probably nine out of ten do not perform me so like over five oh at least a year period the the interesting thing I'm actually curious I don't know this for a fact that the ETF how does the ETF factor in staking rewards from like proof of State like for like e H so this is the funny thing is I haven't seen a St ETF which is the that's the winning ETF right well there is the yield on it so three IQ is a poor cow and they're doing it's like a rig

right it's like a yeah that's huge I mean people don't appreciate like the venture-like growth profile of something like ethereum of General compute as more apps get built plus the staking yield like like the market has not seen this type of product uh out there and it may remind me just early days of reads of just how widely popular they were in the market um but of course real estate growth prospects are much lower than than technology yeah I mean if you go back a decade um and look at like Tech Mega caps uh to now like kind of your your Apple Google

um Amazon uh so you know fangs so to speak uh over the course of the decade uh an intelligent basket of those of those um companies returned about a 10x and like you know how many Venture funds returned 10x such that somebody could have you know in consumer and and web 2 someone could have just you know owned a basket of those uh of those Mega techs and probably outperformed you know the vast majority of of funds especially the mega funds that charge the 330 instead of the 220 and and are raising billions of dollars we could be entering a decade where we see the same thing with Eve

um where like at here here at kind of 1600 plus a three and a half percent yield you know there's no like clear line of path for uh for a venture capitalist to like obviously outperform eth over the next like five year period right eth has got an easy 10x in it during that time you gotta go and put some wins and some DPI on on the table in order to to outperform that that is a like I said an elite bar to get over at this point and now that it's commodified you know you can't just rely on family offices giving you money to to hold the Ethan you get 20 upside right that game that that ship is sailed

yeah I one of the things that's interesting I think that's why the Venture rounds have been as difficult as they have been right you know yeah the other thing is just the fee battle like the eth so we have Bitcoin we have a Bitcoin Futures product my personal take is the next one is an e Futures product then a spot and grayscale converts at some point but I mean essentially the eth products can offer like they're compete the eth Futures products are now competing the the war on fees is already down to like 20 or 30 bips and it's obviously going to go lower but that'll eventually flip positive but I don't I mean they don't have to stake the entire lot of their eth to be Net Zero and fees right like they only need to stake five or ten

percent of the Holdings to cover you know whatever their fee is to flat out at zero without taking all the risk of staking their eth but the point is that when you go to Wall Street and you're offering to Ryan to your point eat exposure with no fee or potentially a gain I mean that becomes incredible but then we start to get into a scenario where the yield goes down uh definitely I mean programmable money is ultimately a a race to perfect competition where economic profit May persist but or sorry accounting profit May persist but economic profit will be will be obviated away

and I think we see that in you know in staking we've seen that in D5 we've seen that in so many things we we move down that curve really quickly in this space yeah I say more about that because I don't think people appreciate that Nuance you're saying like there's a lot of consumer welfare like consumer sorry not consumer benefit that gets created and that Trend the value translates to the consumer the end user but that doesn't accrue to these historical Gatekeepers that have captured this value because there's friction in the system they have to keep yeah if you look at if you look at say different types of yielding opportunities throughout the history of the space so like let's take mining as the the particular example you know it's a race to perfect competition at a at a

relatively accelerated field or or or Pace right like mining took a little bit longer but like defy which is now you know like vanilla defy if you don't have uh like Automation and a bunch of of of of software tools uh protecting you you know you're getting lower than fed funds rate right um like it has it it has moved from defy summer where you're getting you know High double digit triple even triple digit yields to now where you're below feds fed funds rate or you know mining where you're I remember early days of mining we were like we're calculating profit per week because you had to turn over your your rigs so fast but you're

making so much money that it didn't it didn't really matter if you know by the time 2015 hit it was you know six eight percent yield but capex businesses our space moves towards this this equilibrium of of near perfect competition where there could be a small profit so for example like ETFs will make money on the lending and yielding and and they'll re-hypothecate the the capital that they have um to to have a business model but you see this like this very aggressive movement towards perfect competition across the space in all areas um which I mean that's similar with Mev I mean like every time we see an Mev player see a debate out in public like most of the

time every argument is look you know that people are going to bid these bundles to do the Arbitrage up to 99 of their profit and they're going to give that all the way back to stakers or the protocol or something like that like it's a similar debate in the Mev world right now for sure I mean early 21 was a party every day in Mev and now it is a slog right it's a slog um so I I mean that's just a characteristic of the speed of our business yeah I did a podcast recently with um Hal press uh uh Scott Galloway and a couple other people and one of the most interesting points I heard from Hal was that despite an ETF

being somewhat inevitable it really changes the aura of Acceptance in crypto totally outside of the Flows In general so sure the flows will be nice but when everybody is able to buy it it ushers in this acceptance and everybody is okay working for crypto company everybody's okay pushing for new regulations everyone's okay holding the tokens I thought that was a you know a kind of a Nuance point that I thought was kind of interesting for what it's worth curious if you guys agree I mean I am of the opinion that we are months not years away from coherent regulation around widespread participation in crypto and uh uh and because markets are leading indicators

the Market's going to respond to that already when it's on the horizon um and you know if if nothing else I think gensler's gone next November because Trump is clearly taking the White House and and against those you know Democrat Pockets so so that's out the door and somebody else is going to come in um and you know since Trump made so much money on his nfts uh um I assume he's got a little bit better perception of crypto at this point yeah I would agree with that I I think uh we are it's interesting Brian you and I both live in Europe and a lot of people don't appreciate but the sentiment in Europe which a lot of people criticize for not for being Tech backwards looking is is farther like uh

you know it's it's much more positive particularly among more in French old family offices that look I mean I think at this point every allocator of capital is is known about the space they've already been educated on the space like we they've gone through multiple cycles and to me it was a bit of a shock because you would have thought gosh the amount of value destruction across Celsius FTX Voyager Terra you're like people like we've set ourselves back not a couple years like like five like a decade uh and uh to my surprise that's not the case and I think more even mainstream media like Bloomberg or crypto like they they actually the quality of reporting has gone up um and and they make the distinction between what is centralized blow-ups and

actual crypto and and the promise that it holds so I'm actually quite uh to your point right now I do agree like we we are closer and historically I think even in the UK like gold ETFs got approved there first and then they got approved in the U.S ultimately I think it's going to happen that way and and you know markets are highly efficient as soon as you see that in the amount of opportunities being left on the table it pushes it will push the US to adopt the more coherent regulation I think you know it's just going to take this coming election cycle to um to run its course and and after that I think we're going to have clear visibility I mean I was I was in your guys's camp that I thought we were going to get super clear

regulation and then this morning there's like the treasury or something in the US I haven't had time to dig into it releases a document that like every knows a safe holder is a broker right and like like those are the types of regs that are being proposed here that are like pretty dangerous to crypto and to see them still coming out kind of makes you think like are we actually moving forward as as fast as we think I will two things one I will make a point that especially around election years there is no shortage of politicians that want to come out ahead by putting it like inflammatory headline catching grabbing stuff but it is important to track the

developments that are happening in the courts because the courts are ultimately the ones that tell you the interpretation and this and how these things are going to be adopted so I think it's overwhelming I want to say we're wrong but the sentiment I think is quickly turning in Congress that particularly with a ripple case you need clear rules and regulations they're not going to be perfect ever Meek is not perfect but at least having a starting point so that you avoid the current status quo where it's regulation by enforcement um it is a vast Improvement to unlocking everything not just Founders but also Capital allocators um I think to Ryan's point I think the

ETF really solidifies that which is this is an industry an asset class that is here to stay whether you like it or not oh we don't care but it there's there's money here there's Innovation and and that's going to happen so you know I I agree with you Tom and sometimes like I paid so much attention on these headlines I'm like God but um I have faith and I think in the US like the courts have to my surprise positively really just taking peel back like um and just like been more favorable to crypto like their interpretation of the law Securities laws which need updating but at least even in the current outdated framework they've uh they've been quite positive towards crypto so

yeah yeah to me is is I I have faith in the uh decentralization of wealth and power that create that crypto has caused right ethereum ethereum spawned somewhere in the tens of thousands of millionaires and those people are making political it's the number one piece of technology in the history of the world that has created the most amount of Diversified institutions and those people are writing checks to politicians and and telling them that they are single issue voters that care about this matter and I I have to believe that you know core to American values is that the money talks especially in politics and we're getting that the one thing I will

say the one thing I will say guys is I look at Uber as a prime example of something that like crypto got so much pushback because it bumped into the tax like the taxi Lobby groups that were very vocal against it and they got shut down they went into cities they just plowed ahead and ultimately they succeeded why because it was a goddamn better product than a taxi like you just cannot fight the consumer and this is where if this doesn't work in the next two three years is because we failed on that point of delivering that because a lot of people still when you go talk to them or say

show me like a good product out there that is not just like friend Tech money rap to your point grifting activity and it's always the hardest the softer point out of every discussion that you will have on crypto it is it is unfortunate but it's a state of how early we are um and unlike other movements of technology so you can't move fast and break things like their needs good photography has been in the works for so much and so you have to be more meticulous in deploying these things in cautious and so in my mind it needs to be more social more like not just money no no I I like your mistake I like your Uber example that that is a really good one the one thing I'd say is like I didn't realize how

much I appreciated the US's Judicial System until this year like I straight up did not really put that much time or thought into it until this year like like between and I didn't really you know it caught me off guard I think last summer when the SEC started suing everybody they could everybody that was like remotely even connected to crypto good or bad and I was like well you know how that do we just deal with this until we hopefully get a new chair or you know commissioner purse gets a couple of you know two friends to help them decide on more cases and you know with the pushback on the Ripple case with coinbase you know really pushing in I think Kraken should have pushed more but I think it was a business decision and now with the SEC and grayscale I'm those

are like three of the main cases I'm tracking and honestly I'm not a lawyer but I think they're pretty positive like if you go and listen to the grayscale oral arguments you know versus the SEC like you know go listen to them and let me know who you think won we're at the hour mark But I know uh Ryan one of the things that uh you're really close on is this high-end art and yeah I think it's we should round it up I always want to leave an episode with like positivity because we're in a bear Market people are always very dismissive it's the end and nft is no different like a lot of nfds are kind of going through like and a lot of collections have gone crushed You could argue that those were crappy art and should have never accrued the value that they did but you've been

Super Active there's a whole pocket of the nft world that I think is getting a lot of traction but not enough attention you're really close to that so maybe we just closed over that because uh and in common in Europe and Ryan say hello late you were up last night how oh I mean I just slept an hour I was not only up all night I was so amped and amped up that I couldn't even sleep but uh and just to contextualize so we were fortunate enough to win the um the monument by Sam Spratt you know the monument really is a crossover between a lot of what I'm loving about fine digital art uh on chain um you know so it's an extraordinary digital painting that took thousands of

hours and a year he worked on it every day for a year um it has an incredible amount of detail it's 70 000 pixels we will display it in museums on massive massive screens so that people can interact with it and that's the other part is that it's a it's a crypto game so you could buy an Edition that Edition gave you the right to make an observation on on the work and so it engaged a community right it you know people got really excited about it because they could participate in the art creation as well and the kind feels more like like theirs as well they have some small part in this and these are the things that that we really enjoy um about this you know this generation

of digital artists using crypto Primitives to to create a new class of collectors and really engage their Community we see this with people we see this with Rafi Canada um you know uh our our piece from from Rafiq is up at the moment right now and has broken every record that the moment has for average time in front of a work you know in front of Starry Night in front of water lilies in front of every work ever it reminds us that you know this remarkable digital art is one of the things that will bring people back to museums and people are really

getting excited about digital art and The Crucible moment for digital art the like knee of the curve has been the creation of digital scarcity right before crypto you know if if a digital artist like Rafiq or people saw the piece someone could copy it and you know know who there was basically no way has the copy so so it doesn't have any collectibility you know nfts conveyed that element of collectibility which and digital scarcity which allowed digital artists to find artistic and Financial Freedom and I find that really really inspiring you know before people sold every days for 69 million at Christie's the highest he ever got for an everyday

was a hundred and ten dollars um and it shows like it you need that collectibility element to it and so while we've seen a washout uh you know a trough of disillusionment broadly in the nft space we see this pocket of really fine digital artists having pockets of success and we see what we're seeing on the ground day to day is that Global museums are leaning in to where the nft community has left slack so some of the biggest buyers right now of crypto punks of really amazing like fine digital art from like Rafiq and Mike and and others have been Global museums like that is when you think about that like that it's

mind-blowing the fact that like the people taking up slack right now are you know the M pluses and the momas and the pompidos and and like really like substantial cultural institutions cultural Gatekeepers um whether we want to admit it or not um and so I just find that like this this space to be really interesting I lean into these artists that are using crypto Primitives and we're collaborating with a bunch of artists you'll see over the next few months a bunch of different projects that that kind of like really use crypto in an interesting way to change the trajectory of the art over time and engage a community in that way um and the monument ultimately I think will you know be seen in history as the

turning point in that that this was the first time that an artist really leveraged crypto Primitives to add a new narrative to an incredible story along with being just great art um and so we're excited about it and we're excited about this movement and and I think it's going to catalyze an interesting comeback at least for this pocket of nfts Ryan how do you what's the what are the two groups there though like so you have the one group where you're hoping that like the world sees this the best collectors the museums but like then there's the crypto side of this which you want to interact with a game I don't know as much about it but yeah could you maybe just could you share more of the two different groups because it's two very different worlds there coalescing

around one piece of art yeah so there's you know what we kind of refer to as the capital a art World um and this is you know the auction houses the the museums the you know the financiers um the the collectors of of what we often refer to as traditional art um but is more you know more commonly referred to in that world as contemporary art and they rightfully you know take a skeptical eye to things I think throughout art history that's been the case people were really you know really skeptical about abstract expressionism about photography every New Movement is met with poo poo from from the art world it's just kind of the nature of the

Beast um and then we have you know the crypto Community who uh you know who has engaged with a certain um kind of like Community element of art so like obviously pfps had a certain moment um and one of one digital art has had some like elements of success but it's been really sort of isolated to a handful of artists you know people Rafiq anadel now Sam Sprat um uh a few others and the the capital a art world has no interest whatsoever in like the collection stuff the like Social Clubs of you know of like board apes or whatever there is a little bit there is

more respect for crypto punks as an isolated art project because of its originality but other than that no what I think they are starting to wake up to is that digital art has and belongs uh rightfully within our Canon and up until now digital artists have not had the rightful place in our Canon you know there is no digital artist who really has been like globally celebrated on the level of like a Jeff Coons or a Damien Hurst or you know or or any contemporary master and I think we're starting to see a sea change in that and that is that is culturally important you know I

think it'll also be financially important right like you know people who own Rafiq anadols are going to do very well over the years because he's going to be seen as one of the defining artists of this generation but more importantly it's culturally important that digital art is Art and that's kind of what we're trying to do here yeah I mean one thing that I mean you're the expert here Ryan but one thing that I always thought was kind of interesting was like the great artists are celebrated years after they're dead it seems like the great artist in the nft world are being celebrated while they're alive um I don't know which is a reference there yeah yeah I I mean there's a

for a lot of the Skeptics and critics of the art world and and a lot of times they criticize what is happening in digital art and saying that's not real art or whatnot but they don't have a full appreciation of how different art movements happen over time to your point Ryan but at Picasso I think went through an evolution of like not being very popular and during his lifetime he painted so many different things and never got traction um and he was very much a Salesman and like you know he did these clubs and like you know history repeats itself and I think um for what I've found is you know people that really understand or have studied art throughout history have a finer appreciation for digital art and its place to your point line it's

cultural relevance and as a movement in and of itself and it's really the more collectors that look have made money and be like hey I want to buy like a demon hers because you know that's what you do you want to or raccoons because you know it's flashy and you put it on display and people will recognize it that camp is perhaps a little more skeptical but over time it's always that like those people end up buying it two three four in ten years time 20 years time um and that's okay that's normally yeah you know no I mean uh 100 the um the art world moves slower than it should and our space sometimes moves faster than it should but one of the great things that like crypto native Primitives have brought to digital

artists is that you know they can tap a global market for the first time right like if you have a Picasso on your wall the chances that somebody is going to pass by it love it enough to make you an offer and you're going to accept that offer very very remote right but the art that you hold on chain is essentially like available for sale at at any time and and artists conceptually should get royalties I think that's a topic for another for another Pawn but um you know we have a way of of of potentially like changing the the business model and and again Distributing more of the value to the artist so it's a great movement for the

artists and that's why the that's why great artists are leaning into it and and you can find really amazing artists making great digital art and nfts um in this moment and that's what we're that's what we're so excited about Ryan just one last question here I mean could you maybe share your views on the whole royalty debate in the art world because like open C blur like a lot there's oh my God this is for another podcast controversial and I gotta I gotta sharper my ax uh all right we'll start doing hard at

blur and that's so I respect all attempts at Innovation um but at the same time um yeah we'll unpack that in a future episode stay tuned I didn't know about the pre-existing Twitter let the record show that I am very much Pro the inefficiency in the Creator should be fairly compensated I'll leave it at that but there's Nuance in this discussion we should pick it up in next I'm actually romantic to be educated and really like think through this in an open-minded fashion from first principles I I'm like I've actually am very confident that you'll um you'll have influence on the way that I see it and I'm I'm excited to go through that this is fine guys until

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