How To Navigate The Volatile Crypto Markets

Transcript

GM welcome to another episode of the rollup today we have the pleasure of speaking with Ox shot Chief investment officer of malstrom fund which is Arthur Hayes the notorious founder of bitm family office Arthur and oot work closely at malstrom and today we dive into the investment thesis of ballrom the time Horizons and some industry Trends as they're un folding in the market today hope you enjoyed today's podcast before we get into it a word from our sponsors mantel is a layer to blockchain with one of the biggest onchain treasuries in all of crypto and they have a 100 day campaign called

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the LRT space and this frax L2 joins the existing Suite of frax products including fra Swap and frax lend you can see FRX fairy the bridge to go from any chain arbitrum optimism or main net into the fraxel main net Bridge your tokens and bring your FRA assets into the fractal ecosystem join today to get the best out of frax you are still early join today take part in our Expedition into the singularity GM GM guys welcome back to the roll up uh today we are chatting with oot from malstrom uh

malstrom is uh the family office for bitmex uh former CEO uh Arthur Hayes founder of bitmex the uh the notorious uh Perpetual exchange with 100x leverage um if you're an OG you remember and now uh and now malstrom and uh oot is running malstrom so absolute pleasure to uh to chat man I'm glad that we can make this happen morning good to be here yes it's good to have you I think uh you know there's plenty of things uh that have uh kind of you know taken wind over the last uh you know few weeks and months so I'm excited to dig into it but actually before you joined uh I was looking at like what is going on with

Tron right now do you have any idea like why it's catching so much wind uh no to be honest no not really I think uh yeah I've been in Asia for five years the Tron ecosystem has a dedicated user base that I don't encounter I don't know who they are um but I know they're around here in Asia so no no answers there more questions for me as well it's strange man I guess just his Excellency um that has been able to build an Empire and like a loyal user base I think just out of like real user traction you know they've been able to find like some stable coin product Market fit honestly I don't know anything about their their defi ecosystem I imagine you know like from

what I've heard they have kind of the normal defi components but beyond that it seems like they've just kind of found like a regional fit and a product Market fit um and then every once in a while like because they're pretty steady as it goes when everything else tends to recede they end up just kind of like cutting through the noise yeah yeah I know I think so I think you know crypto Finance reflects old school Finance where it's it's all about whales um so as long as there's a a tight network of whales who speak to each other it's it's not that difficult for a project to kind of keep its loyal base together and and I think you know I I come from the Western World um you know what what are what is kind of like the have you seen

any any very common threads or is there a Divergence would you say or a convergence between Asia and the Western World and its perception of crypto these days yeah yeah I mean perception kind of depends who you asked of you know Regulators now we're seeing kind of things flip the other way there was a point where Singapore Hong Kong Etc were opening up in terms of uh regulations um South Korea has always kind of been there now you're seeing kind of a little bit of a pivot in in the US at least um but well you know there's a lot of uncertainty there as well um and in Asia you've seen a little bit of a reversal but even within Asia there's some disparities so Singapore after FTX you

know kind of started closing up to crypto Hong Kong saw an opportunity and now has been opening up so it it sort of depends where within Asia Asia is pretty massive and each country you know is the size of a US state or more sometimes and and the biggest one obviously China isn't really right now crypto is still who knows it's been banned a million times and unbanned is uh so no one really knows what's going on there but um yeah massive difference for sure in terms of the trajectory I'd say the biggest the trend though that you can really point to is in the west there is um at least in the US there is some consistent trajectory and Trend and in uh certain Asian markets uh let's say

excluding South Korea it it kind of flip-flops just depending on you know what the the local autocratic government feels that time of day okay kind of a fragmentation yeah okay maybe we'll we'll get into that a little bit more into the Pod but it's your first time here man so again yeah thank you for thank you for making the time um and like you said you're in Hong Kong now but it didn't start out that way and since this is your first time on the channel I'd love to kind of get your backstory you know how did you meet Arthur um and then ultimately like you know what what has been your journey through crypto and how how did you end up where you are now yeah for sure so I um I graduated from undergrad in 2013 and um you know that time my friend who

who's now Crypt BC but neither of us were back then um he sent me an article from it was either Salon or slate I don't recall which one about Bitcoin it was summer of 2013 I remember just reading about it and there was whole section on the Silk Road and I I'm from Austin Texas originally remember thinking wow this might be one of Austin's most successful startups the Silk Road um and was uh was Ross from Austin he was either from Austin or based in Austin one of the two okay and um I just thought wow that's really cool and uh and my buddy who sent it to me who's also from Austin um and uh sort of spoke to me I just thought wow this like fits a certain libertarian um set of ideas I've come closer to um that I was

exposed to in college and uh then I I just thought okay look my net worth is negative at the moment um you know got student loans but it I'm making an income now I'd like to diversify my my um my portfolio Beyond just the traditional assets and I thought I'll take a position in Bitcoin so I started buying in um towards the end of 2013 beginning of 2024 beginning of 2014 and um I got caught in the you know there was a crash I think uh Bitcoin was at something like $1,100 and then it crashed to the 200s 300S for a couple of years and I remember sort of just writing it off thinking okay fun experiment uh but whatever I I I don't really understand what I bought I just

um thought it was a cool concept and then um in 201617 I started reading about ethereum and that's and and just reading about the ideas before just aping into the the coin um and that's that's when I really got uh I guess enlightened to the possibilities um that you can kind of like keeps stacking on to blockchain technology and it's it starts with just the distributed Ledger all the other stuff on top of it gets way more exciting the leaps are are um are manyfold each time um and I started buying into ethereum around then around 17 and um again same thing you know there was the white paper um Bubble in 1718 a lot of I put in money into

projects where there was no governance you know team was garbage just nonsense but I I also I kept my Holdings and and and kept doubling down Bitcoin and ethereum glad I did that learned a lot um at that time I was working at a private Equity shop um you know my day job it was really good training learned a lot but you know mind numbingly boring to uh just to invest in these old school businesses growth is like four five% a year um there's not that much to be done uh as an investor you can't really help that much um it's it's very formulaic as well uh did that up until 2019 and then the cognitive dissonance just got too big between what I was getting interested in

on the side and um what I was doing for my my mainstream full-time job and so I started looking for jobs online and um I wanted to combine my interest crypto and BC I'd also spend a little bit time in Asia but that wasn't like a high priority at the moment at that time um then found a job listing that was um bitm Ventures that was about early 2019 I remember it said on the listing uh that they weren't going to take candidates who weren't already based in Hong Kong uh I was in Chicago at that time and I thought okay whatever I'll just apply and um got a response after maybe three months I guess I couldn't find someone that they wanted and then um got the job in the interview process

that's the first time I met Arthur and uh we we happened to have gone to the same undergrad but but a few years apart um and uh then I moved out to Hong Kong in 2019 to to start working at bitmax that's when I first started working with Arthur um so then yeah from there from 19 to 2022 I climbed my way up that was the head of uh I became head of Corp Dev at bitmex eventually worked more closely with Arthur and the the CFO who's now the current CEO of bitmex and then in 2022 Arthur and I started formulating the idea behind melstrom and how we could um kind of take the next evolution of bitx Ventures which we sunsetted in 2022 and bring it to you know kind of like the the state of of crypto today so that's that's how it all got started

very very cool and maybe we won't spend too much time on this we we'll you know keep the rest of this conversation pretty focused to malstrom but what what is the state of bitmex nowadays um through kind of go undergoing its changes you know through the cycles um with Arthur kind of stepping away a bit like what what what is kind of like yeah the state of bitmex nowadays yeah so you know I left bitmex in 2022 so it's been a minute about two years but um you know as as I was on my way out um bitm you know was the OG they kind of didn't quite invent the Perpetual swap product but basically commercialized it for the first time in the crypto industry and um when I joined it was still in its Heyday

uh at that point it was I don't remember the numbers now but it was majority of the world's volume in terms of crypto terms of dollars notional at least um for for a while so from 14 to 19 that was kind of the case 2020 um situation a little bit and there was this that that's when Arthur had stepped away around that time frame but he was he was already transitioning before that kind of knew that the the founding team that takes it from from day one to day two is not the same team that's gonna take it from day two to day 10 um so he had already been transitioning well before that but the transition started to happen in 2020 and um and then the bitm story kind of like changed from incredible growth to sort of um I guess

combating new um Market entrance who basically copy pasted the product which you know that's that's totally reasonable it's that not a not a knock on them um binance FTX at the time mon these guys started popping up with the same product and um and then uh it ended up being you know bitx focused on being this uh derivatives exchange for prosumer type Traders uh what started happening in 2020 around the time of Co and defi summer was that retail started coming in retail doesn't really want to deal with a professional swap product without first figuring out how do we even get this coin so they needed you know spot offerings which bitm didn't have and

that that ended up being uh really beneficial for the likes of FTX and and binance the other guys who started um taking a you know Biden into bit's market share and um and then you know that that transition you can see it happening every month from 2020 to for the next like year and a half or so and and I'd say since then you know FTX is now gone um which yeah makes makes sense we they were based on Hong Kong as well we kind of tangentially knew a lot of the folks that that wasn't that surprisingly went that direction um but um yeah say since I've left from what I understand bitx is kind of like in in this uh more focused mode now just focusing on um it's prosumer Traders and

and not trying to like overly diversify in the other products as well and you were like you said you were there in the Heyday like do you have any War stories about like I've heard crazy things about the bitmax office sharks and an aquarium and is any of that real like what do you have yeah like any War Stories or just like yeah I mean it was it was a wild time in 2019 when I joined we were hiring some some really high-profile people you know the former CEO seite level people uh from Trad fight in Asia and um the the office was incredible it was in this building uh that was kind of like a a marquee tier one building in in

the space um in in the actual the neighborhood called Central in uh in Hong Kong and um I think at one point there was an article that went out around the time I joined that bitmex was renting the most expensive uh real estate in Hong Kong which kind of implies the world um which you know that that blows my mind um that that that um it was that a business could go from startup in 2014 to being so profitable that it could uh rent a space like that and and I think it it helped morale quite a bit it created a an environment where you know during covid a lot of folks who were work from home people wanted to come to the office or dying to because it was such a fun place to be there's an electric atmosphere um there

there were a lot of really cool just like aspects to the office you mentioned you know there was just there was an aquarium built in with with sharks in it and um you know it it sounds like this like uh this super villain kind of thing but it was actually kind of like a charitable Endeavor to take care of these sharks um and then you know kind of put them back in the aquarium uh when when they grew up a bit and uh it was it was almost sort of like a fostering program and um there was an amazing bar that overlooked uh most of um Victoria Peak which is kind of this iconic peak in in Hong Kong that's that's been associated with with good times in Hong Kong for about a century so yeah fun fun memories of that for sure vertex Edge is now live on say

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cross chain messages there's often times fillers and solvers who have balances left on different chains that they need to rebalance and reset their positions this is where evercar comes in ever is pioneering a collaborative approach to the chain abstraction future and they are willing to work with inoperability Partners solvers and other providers in the space to build a interoperable and chain abstraction future check out ever clear .org and welcome back to the L up that's awesome absolutely awesome man and I one more question on this tangent which is like H how do you think how do you think the company like you said going from a startup in 2014 to

very very profitable in in 2019 2020 um why do you think what do you think led to like the culture like how do you think it was it was so successful in breeding this culture that again people working from home they wanted to come in why do you think it was so successful in creating that culture I think it started from the top down um there was the the SE suite at bitm in the early days they were extremely humble um and you know anyone who spent time with or met Arthur and and other folks in the bitx SE Suite in person can attest to they never feel like they're talking to someone who's Untouchable or Out Of Reach you know

there was kind of this like you know I'm not trying to throw shade but you know there was this like FTX Bahamas thing this Allure only the selected get invited you know this is like some Elite thing everyone was dying to be there and trying to you know kind of Fanboy fan girl groups climb their way into the the scene bitm never had any anything like that at all anyone who's ever been to a conference knows you can just show up to an Arthur Haz party you can give him a high five it's it's mad chill that's how the company was run as well there was never this like little cabal of like you know three people who run the show and everyone's dependent on how the mood of one dude it was it was a very humble and equal atmosphere where everyone felt

included you had customer service reps through CFO you know just chilling every day uh socially and uh work-wise collaborating there was there was this egalitarianism that just instilled in this yeah uh this culture in everyone where I matter and what I do matters and I think that that was the basis of what went well from 2014 through 2020 it's epic yeah it's really cool and egalitarian almost more of like a meritocracy rather than like this elitist like if you if you're not in the polyq like we don't want to talk like vibe that FTX might have had uh very much not the case at bitmax so very cool that's what went well for sure yeah um

all right so let let's talk a little bit more about malstrom um and you know you you were part of bitmex Ventures which wasn't really The Core Business of bitmex but like very you know very close um and so maybe talk us through like the transition of of bitmax Ventures into malstrom how did you and Arthur you know what what were some of those early conversations like that ultimately led to to the thesis that Mom has yeah so bitm Ventures was very much a corporate VC arm you know just like uh in the in the the world of Finance Labs or okex Ventures whatever there was often a uh strategic angle required for every deal so you know yes will this make Financial

money that was the you know kind of the main criteria but you know secondarily will this add some other value that isn't maybe Financial or monetary at least in the short run for bitmex that later bitx can harvest in three five 10 years um it was a little bit more of a you know traditional strategic corporate VC model uh in 2022 summer when I was chatting with Arthur hadn't worked with him that closely at that point in time um you know just kind of like in in larger settings I hadn't done a lot of one ones with him I pitched him on this idea of uh you know bitmex Ventures is a little bit outdated for um then this

next phase uh what if we were to build take the same resources um staff Capital Etc and try to build something that really no one else has the ability to do in the world which is a 100-year portfolio so this idea let's let's look at stuff that like you have two things that that very few people have which is um you know like the assets of a billionaire as well as time it's a very young billionaire um we could look at assets that right now are very underpriced um extremely early at that time you know AI was not quite a buzzword yet um things in life sciences things like water rights even just

unique offbeat assets that are just too difficult for most investors to even fathom touching at the moment and obviously crypto is being at the Cornerstone of that that's what I pushed him on he was like that's a really cool concept let's just do what we do well and focus on crypto um so you scaled the whole Vision back and um and and I'm glad we took that path because it's it's gone quite well with melstrom um we focused on investing in early stage crypto businesses um we typically Target very early stage so like seed series a maybe just depends on valuation kind of depends on what investors are are calling series a at the moment um at the

time but uh we typically aim for 1% ownership and um we like to help companies grow alongside um you know our investment activity given that Arthur was a a Founder who who's built a company himself um we like to impart that knowledge on Founders and help them grow not and not just like kind of take a backseat so that's sort of the broad mandate and things have evolved a little bit since then yeah and it and it gives Founders a valuable opportunity to get access to that very lucrative knowledge and and experience um and I think it it it does it makes a ton of sense and it speaks volumes you know you you come from this traditional private Equity background where you said it was very formulaic that kind of stuck with me as

when you said that because now you're in this like you're in this like VC world that's like artistic like you said like off the beaten path you're much much you have a lot more creative autonomy when you're constructing this portfolio like like to the to the extent of almost like an artist where you know you're you're you know painting this picture that is a vibrant picture over the next hundred years um and so you know on malstrom's website you kind of have these three core pillars uh entropy which I I want to spend some time talking about entropy and like what that me in this context and then trustless decentralization and uh new models for internet monetization so with kind of

leaving aside the second and the third one I just want to ask you about entropy and like what does that mean in Context for this Venture portfolio yeah I mean it's a it's a philosophical concept right the the three in order kind of like starts most philosophical and Broad and and goes um more narrow and concrete um like the concept behind entropy is just that we're we're entering a world where there are fewer Gatekeepers and that impacts everything from geopolitics Finance information flows even culture right we're seeing for example we're seeing the world of um these K's as we call them in Asia I don't know I I believe that's now become a crypto term globally but influencers right uh now becoming Gatekeepers of culture even and

they're getting smaller and smaller every passing decade in China um and some of these markets where people have been uh economies have been built and grown up at a time when uh social media was a thing now you've got these micro influencers who literally will have like a few hundred followers who pay them and then maybe another couple thousand followers and they they're building a life around that you're seeing that probably going to happen in the west as well um in the US and I think that's just like an example of how we're entering a more a a world with more individual nodes uh rather than highly concentrated um pockets of power Capital influence Etc entropy just reflects that do you

think that's a oneway street like do you think we're in like an a monochromatic ever uh like ever increasing level of entropy um which kind of like gives way to this constant unbundling or do you think we at times it es and flows we we get this unbundling um like higher entropy but then we get kind of like the lower entropy like rebundling and things tend to consolidate again depending on maybe certain factors natural or Market do you think it's monochromatic and we just constantly unbundle or do you think we will kind of go through these Cycles yeah I I think it it is sort of like uh it's one of those things where it's a spiral right

so it things will look like they're moving One Direction they kind of pull back but there's still a general Trend still in the long run trending in a certain direction and um you kind of seen that for the past few thousand years of human history uh that while things rhyme and okay yeah you see a pullback generally there is a direction for most things and it's yeah basically entropy yeah I I tend to agree I think I think we do see like these yeah and then constant unbundling decentralization based on economic and Natural Factors maybe there's like a spike of low entropy rebundling kind consolidation to like lower risk or or I don't know more more known and then

people start to Branch out to The Fringe again um and we decentralize and debundled unbundle because I I tend to relate this entropy decentralization sort of patterns to like the modularity narrative which was pretty popular there for six months or so um so I'm curious if you have any any opinions on like some of these like like modularity as an example and then I I also want to ask you about narratives and and trends that you think might might stand the test of time these Timeless ones that might last 50 to 100 years yeah yeah I mean if you look at like web 2 right initially um it it felt like this is a decentralizing

force back in or even earlier than that web one really when you were using the internet in like 1995 6 s and it was impossible to find discret part pieces of information um it was kind of fun you felt like you were exploring some new planet and um you would uh you'd have to bookmark things because it was impossible to find things again um that's even like e-commerce websites it was just a there was more of a it felt like this is likely going to decentralize the world and if you had um Tak in uh a snapshot in 1998 internet and you know kind of like try to build a trajectory off of that you probably make some pretty incorrect assumptions for

the next decade right because in the end it ended up be becoming basically about four or five companies but you're probably right in the next 50 years so it's sort of just depends on your Horizon and I think the same is true in in crypto where you know things move a lot more quickly in crypto you got narratives that last like you said six months to 36 months and um you've got forces initially look at Bitcoin uh you talk to people who initially got into it in 8 n 10 um they kind of envision okay crypto is going to look a certain way it's going to become increasingly decentralized every passing year and then you see very centralizing forces all of a sudden build businesses um and then some of those collaps and then it

goes to decentralizing again right now we're kind of in a phase where uh some Sexes went down a couple years ago and uh Dex volume is at close to all-time highs um in terms of uh relative to sex and uh that that will likely see a pullback again it's kind of just like this process as you say and um it's it's really hard to make investment decisions if you don't know what your horizon is so if your horizon is just a couple of years then yeah you're going to look at okay what trend am I seeing for the next couple years versus five to seven years and and melom is built in the way because we don't have LPS um we can look at multiple Horizons at once and kind of

like in our minds have our portfolio Construction in a way that has different streams so we've got the 10year horizon we' got the fiveyear and we got the two-year and different deals um you know kind of fit in different buckets and so when you're when you're kind of like making these these forecasts and you mentioned that there were like some centralizing factors I you know we're seeing Black Rock and and vanck and like these ETF issuers start to kind of like grab up a lot of the Bitcoin that's that's on the open market us and and El Salvador like countries and putting it in their treasuries as well is just gurgling up like all of this all of this Bitcoin you know do you do you think that poses a

systemic risk to bitcoin longevity 20 50 100 years forecasting out like what what do you think are kind of the knock on effects of of the centralizing forces on the on the Bitcoin Supply well I think what what works well with Bitcoin is that it's um it's basically a very simple piece of tech that relies heavily on Game Theory in Psychology so if you are a country uh and you know that one of the world's richest most powerful countries might be um adding this to the treasury then that initiates this process now there's you know some 180 other countries out there who are like well why would I not want to front run this and um smaller leaner

SL more autocratic countries can move more quickly on that and um you know so that just just as an example you know if uh if the US is let's say Trump wins and you know it's going to take some time for the us if at all if it's if it's even going to happen during Trump's Reign which who knows but if it's if uh the direction of travel looks like eventually there's going to be some kind of strategic stockpile that doesn't get sold um then yeah other country would start doing it between when the election is announced and and Trump takes office and then the the year The Many Years it'll take after that for something like that to actually come FR so I think uh there are in terms of like at least um

centralizing forces there are these counterbalancing um decentralizing forces built into to how um it was designed so yeah I think while it's might be a short-term risk longterm I don't see that um kind of factor playing into its potential you know demise it's like a it's like nuclear weapons like once one country has them all the countries want them and then the there's this strategic Alliance that's formed and and it changes the landscape of how these countries interact with one another uh to see which one's going to deploy and and how how that that economy is deployed it's kind of up to one from

what I'm hearing and I think it to just extend this like nuclear weapon analogy like it's kind of up to one country to sort of determine and then we'll see if country like other countries follow suit with with similar technology yeah I mean you see it even with like funds it start it started with just individual people right back the decade ago or so now you're seeing with funds you kind of need some crypto exposure it's sort of Pension funds and family offices folks that would never touch this thing even two years ago are now getting exposure seeing it more U increasingly disclos them more balance sheets um in public you know income statements and balance sheets uh that that are public reporting um for for companies that are publicly

listed and uh it's just yeah it's just like spiraling out into this thing where you can't not have exposure and eventually that will extend to to large some of the largest and most strategic holders like you said governments yeah I'm curious how that how that'll change the the dynamic of things and like you said the game theory and the psychology of holders and and and then active participants in the ecosystem uh that are looking to you know maybe maybe use Bitcoin and like use bitco coin on bitcoin rails or if you know these actors that have large stock piles are going to transact with one another rather than than using the chain it might reflect uh the initial adoption of of gold right back in the

day where uh it wasn't immediately clear that gold was was going to be the the store of value you know many centuries and Millennia ago um salt at one point was was one of its main competitors and uh different spices um but it yeah it sort of in the end for for reasons that are unique to to properties of gold it ended up making sense for that to kind of become the global standard at some point so um the process to get there was messy it was not like a clear thing ah you know yellow Shiny Rock is is the most valuable thing on planet Earth that that sort of came about over time um and I I imagine the journey for Bitcoin will

look similar H how are you guys viewing the the Bitcoin ecosystem around the asset uh Bitcoin l2s I I've seen Arthur make some you know claims about uh some of these Bitcoin nfts and so you know when you're yeah H H how how are you thinking about uh the Bitcoin ecosystem uh besides PTC yeah I think you know that that became like a VC meme maybe in the last you know six to 12 months this you know everything that happened on an uh ethereum based and smart contract based defi it's all going to get ported over to bit uh Bitcoin and we tapping into the liquidity of Bitcoin it's there's a lot of Bitcoin sitting idle I think there's probably some truth to that yeah um if there is some truth

then that means we need exposure because we're we're an asset manager and so our our job is to not miss anything you know it's it's much better to uh do 10 deals that go to zero uh than miss one that goes to a billion so we're we're going to get exposure to everything and that's how um a lot of VCS operate so you know when when there's a VC meme it doesn't necessarily mean that BCS are you know firmly in um agreement with one another that this is going to win it's more like this might win now we need exposure and we take similar mindset but I think yeah the the basic concepts are true there's a lot of money that's being underutilized sitting in in the the Bitcoin World there a lot of

infrastructure that's missing that now um because of certain upgrades that are that are planned or have already happened um it's possible to build so so give it a shot I think ordinals is a good example of how that can be fun and and we're you know kind of uh Co heading a project with one of our PCO oil um to to kind of show what the capabilities of of ordinals are and um bring some of the fun and Degen this back to bitcoin um called AirHead and uh I think yeah like uh on the defi side you know setting aside the nft world um there's there's a lot that's going to be replicated on on bitcoin and uh we're starting to look at and back uh players in that space as

well from the L2 space to to you know yield on bitcoin Etc very cool and you guys have uh I saw on your website you guys have this Bitcoin developers grants program uh and Stark net actually has like this this uh $1 million research grant for research on making a stark verifier on on bitcoin uh I'm curious like do you have an opinion on on opcat and how you see that progressing yeah I mean so bitm uh was one of the you know larger um Bitcoin ecosystem granters back in the day and this is just kind of continuing that tradition um so just you know I mentioned the Airhead ordinal project um

100% of what melstrom makes from that is going towards that Grant so that that's why we those two things came out at the same time so we're we're not actually making any money on the Airhead thing um it's we'll see on opcat uh in your second question I think um it's a lot of things that has to align a lot of uncertainty something like it eventually will probably come to fruition but at the moment yeah it looks like there are some barriers and uh we're not making any bets any we're not betting in any business models that rely too heavily on that coming together really I so so we did an entire uh educational series on the rollup called Bitcoin and Beyond we

tried to talk to as many Bitcoin l2s as we could I TR I asked all of them you know I don't want to name names but Bas because people are weird about you know their political affiliations but all of them said that they support it and so yeah maybe that's pretty obvious Bitcoin l2s want it it it helps their technology and their security models but who who and I I actually have started recently asking them like okay you support it cool makes sense but can you even articulate an opposition agreement to it I can't like who opposes op cat and what what's the argument against it these days I would think if I were an OG minor and you know I've been stuff

has worked don't Tinker with it right it's like if someone goes into um your you got a massive Vault of of gold and and you're one of the men in Venice and now someone's like hey I want to re-engineer your Vault uh let's not do that right it's like why I I don't have a huge incentive to to innovate here maybe some of you other guys who want to create value and and create new business models and you want to make you want to create your massive Vault of uh of gold you guys can can do stuff but not not with mine so I think there some of that it's it's a variation on nimbyism kind of um that like yeah don't don't innovate with stuff that has already been working quite well for me I believe that's

that's where where most of the opposition is but I can't yeah I couldn't articulate like why from a technical standpoint don't do this don't Advance our space um at least our category within our space because I don't think there is a strong one yeah H okay well I'm gonna keep searching until yeah because it it seems like it seems like complacency um if it ain't broke don't fix it but you know this is going to become a problem in the next I don't know some people say two having Cycles uh is when the security budget's going to like become a real problem for miners so yeah they'll be for then then they'll be forced to act right at that point in time yeah and it'll be yeah with less planning it kind of sort of resembles uh

government shutdown sort of thing right at some point you're just forced to do something and then you kind of get it done so it might look something like that yeah very reactionary there's there's plenty of incumbents that that do act that way cartey is your home for app specific rollups at the Forefront of developing new tools and platforms that enhance the capabilities of blockchain Technology Cy enables applications that are flexible and built to scale build on a full Linux environment and use traditional software libraries but in blockchain development go to

cy. that's cares .io to learn more about building your own app chain today coent is solving the longterm data availability problem where a lot of the data availability providers today in the modu space when you post data to them they actually only hold that data for about 12 to 16 days and then it's basically they can go into archive note or often times it's just kind of put away into the abyss and what coent trying to do is build this long-term data availability solution which can plug into some of these modular data availability providers and provide this longer term Perpetual data solution so what we try to think of this as is when

you post transaction data onto Celestial or Veil or any of these mod da Solutions or even ethereum coala is able to provide a long-term data storage and data availability platform for that data after the time period blockchains are Billboards not databases and you know we need these providers in the space to be able to kind of hold on to the longterm data that is provided from these providers and these blockchain State this is where coent comes in they just had a nice Rebrand check them out on Twitter as well as the website thank you for being here hope you enjoy the rest of the show cool man well you also mentioned kind of like a VC strategy and so you know we we've got tons of listeners all across the docket like you

know developers use this as their their research to into a particular technical you know design but VC's also look at this podcast and you know use it for due diligence and so I'm curious you know you mentioned kind of like this to the Rogue term is basically spray and prey but basically have allocation and exposure across like all of these all of the potential winners even if most of them go to zero it's fine because you won't miss out on the one you know and and then I've also heard like you know don't diversify just you know find due diligence do research conviction and go deep into the ones that you do have that that confidence around so how do you weigh some you know

some of these different philosophies what has proven successful for you guys and and ultimately how how do you you know what what's kind of your CR criteria when you're looking at something and you and you're like H you know maybe this has like the risk of going to zero but you know we don't want to miss out it could be a winner what you know what goes through your mind on making those decisions yeah yeah I think I generally agree that funds need to be focused and kill it in a space that you understand deeply um because you'll be better placed to make bets in a category that you really understand or you're really uniquely n well networked in or you have some strategic value um and that is a

differentiator so in a world where if every fund just looks like a an ETF of the space then yeah it's not really going to work right you're not going to make um returns that that anyone else couldn't just easily make that being said your investment fund also has to reflect the maturity of the industry itself and um at the moment you know there's there are a lot of categories in crypto that have popped up where if you said you know no I'm only focused on interoperability so I'm not going to touch you know stable coins but you have you know an opportunity to to invest in one because there you know let's say a couple years ago there there weren't that many um investment funds

then you'd be doing your investors a disservice to stick to this ideological point and not participate in a good quality deal um that kind of is might maybe outside of the category that you want to focus on so uh I'd say crypto VC's you know back in the day they could just kind of buy a bunch of Bitcoin and that was enough um then there was a phase where okay uh we're kind of in now where most Crypt VCS are kind of just like index funds they're all sort of in the same you see the same names in every deal and um not that differentiated but increasingly here and there there's pockets of funds that are more focused and um that in another couple years that'll be the norm it won't be enough to to just be a

generalist fund the the real money is and and uh you know above average returns is is going to be um in the hands of those who who can really dive deep also as the size of the industry uh you just gets bigger there was a time where it was just too small the space to even focus too much on one one category we still kind of there but um that's that's changing quickly so I'd say you know um for us we we kind of were we were a a much leaner team we still are a lean team um we're we're sort of it operating there was this phase before Mark andrion started you know Andre Horwitz um and well after he was done with his his uh operating Ventures um there's like a decade where he was just

writing these 200k checks in seed in series A deals um I think Arthur is in a similar kind of phase where we're sort of like bootstrapping a fund um and writing these Super Angel quote unquote type checks in uh a variety of of fields and just kind of learning and and and understanding uh what our Niche is going to be on the fly so we take a a category of time um when we first got started so is November of 2022 uh if you look at some of the first maybe six months of deals that we did they were all focused around the staking space uh staking infrastructure it was staking uh as it pertains to Consumer applications it was

um a major stable coin project um well I shouldn't call it that it's really synthetic dollar that um relies on the sort sort of staking uh narrative as well there was that was just our thing and uh we went deep and then you know after that we kind of pivoted once we we felt like we had kind of capped out and uh been taking one theme at a time now it seems a little bit bigger and we're we're expanding you kind of probably see in our portfolio page it is chronological so you'll see like ah there was a focus originally that's now become a little broader um and um that that is kind of basically a reflection of the fact that now we we do want to get exposure in all these different spaces and we'll double down when we find a category that's really exciting I

see entropy in everything you guys do now like everything you describe I'm like yeah Fair it's true yeah um cool man well as we kind of wrap up you know this has been this has been fascinating great conversation like maybe we do like a little bit of Rapid Fire you know fun here like little game where you know you mentioned kind of the these different time Horizons and then a few different categories and so I'd love to kind of get your perspective on how sustainable some of these categories are you know yeah if you could you know just rip like let's go one two five 10 50 and a 100 year maybe that's too many just let's just go let's just go 25 1050 100

251 50 100 so five categories like which one do you think it you know is a two-year you know it'll it'll be well it'll go well for the next two years but then it'll it'll die off in two years which category do you think is going to survive for five which one's going to be around for 10 for 50 then which category is going to survive for 100 years yeah well I think it it it kind of just go down the stack right like starting with a 100 years store of value simplest concept will last centuries gold lasted thousands of years you know Bitcoin we'll see at least a century um you're kind of working your way up smart contracts right that that concept like there might be Evolutions that it might

look different in the future but I think that's that's a multi-decade bet that that's sort of like the basis of how uh people transact in the future and then working your way up um from there a category we're excited about for the next like let's say 5 10 years is the intense space um that's like we we'll see what that does for uh interoperability but I think it could be gamechanging we're we've started to do a few deals in that category um and next couple years things like uh you know D as it stands now D is gonna look very different um especially as uh some of the the notional dollars in the space dramatically increase um but um most of the consumer face def applications of

today are not really business models that are going to last more than two to five years in their current form aad I think I think this has been great man um yeah I mean I guess one one last thing if you want um feel free to like you know maybe speak to any Founders or Builders you know that that might be listening to the podcast and and you know who who are you guys looking to fund uh you know and and if they fit that bill if they think they fit that bill you know they'll they'll Reach Out yeah um I think you know for us Founders that we uh like to work with usually have few traits and one they they don't they're not trying to build you know um a business model that is tried and true

in one uh part of crypto and just copy it over to another uh that tends to be an area where we might here and there write a check because it's there's upside opportunity but it's not those are not the projects where we're going to double down and be your Ally and tweet about you every day and and uh back you as a uh a GameChanger for Humanity um those are the kinds of deals we prefer to to invest in a good example uh would be Athena right that's one that we feel like genuinely could it's an experiment like like everything in our space our entire space is a is an experiment but it genuinely could move the needle on how um money Works in

humanity some version of it the next evolution of it could uh that's the kind of stuff we really like to back um the other thing I'd say is we we do a lot of extensive background checks on Founders and integrity is the most important thing that we look at in a Founder it's more important than intellect uh their ability to you know Marshall resources it really is integrity so those are two things I'd say if you're a Founder that's hit us up if you fit the bill on those two fronts very well said I mean you can can teach you can teach a lot you can teach intellect you can teach engineering you can teach resource allocation you can't really teach philosophical values and morality so um yeah that that's pretty innate aot I

mean absolutely Banger podcast thank you so much for coming on man where can people find you and uh and you know maybe apply or learn some more yeah you can find us on um Maelstrom fund on Twitter and myself at akat HK so connect awesome man thanks all right thanks see you