Investing in an On-Chain World | Permissionless

Transcript

all right guys uh thanks so much for doing this really really excited for this panel um so as we just talked about i actually want to start with marking conditions um and maybe just like set the stage a little bit so obviously there's been an enormous implosion in the form of ust and the luna ecosystem so that was about 50 billion dollars of uh enterprise value depending on how you wanted to find it wiped uh and obviously the rest of the crypto markets have kind of slid so what i'd love to kind of start to dig into here is how are you guys assessing kind of current market conditions maybe it's from a trading and a liquidity standpoint maybe it's from just a vc fundraising and uh valuation kind of standpoint but what's your kind of on-the-ground sense of what's going on right now maybe haseeb i can pick on you

to kick us off yeah so um right now it's pretty clear that we've entered into i feel like the collapse of ust had a lot of ramifications for d5 for stable coins than for the broader market environment um this whole year crypto has been sliding mostly due to macro and just the fed raising interest rates and the collapse of ust feels like it's going to have a lot more knock-on effects for how people view d5 going forward there's been a lot of credulity about how many of the things that we're doing in d-fire sustainable and something that we've been talking about for a very long time when it comes to yield farming where the yields come from you know anybody who ever asked the question where do yields come from we now know

the answer it comes from risk that's where yields come from right so if you were in anchor getting 20 um you didn't even get a year of 20 before you were blown out um and now it's trading at 20 cents so like you you you get what you pay for it when it comes to yield um i think what it's going to result in longer term is that one there's going to be a lot more pressure to create sustainable models in d5 it's obviously going to cause a lot more carefulness and caution around investing if you if you look back to six months ago you saw a total frenzy with respect to investors in basically believing anything that entrepreneurs would tell them and having um a lot less uh due diligence and a lot less care going into underwriting some

of these new things that people are creating and i think that's that's shifting now it's happening already in traditional markets it's happening as well in crypto so i think it's going to take us a few months to figure out what the new normal is um but longer term you know i'm very bullish on d5 i think d5 is going to do fine but the the more speculative and frenzied elements of it are going to get uh eroded yeah um what haseeb said around similar patterns we've seen in traditional markets um cannot be overstated so i run a venture firm called volt capital so i'll take the venture side of this we're long long-standing players we take a

long-term view and um when you look at what was going on in the crypto market it was not dissimilar than what was going on in traditional markets there was a euphoria there was frothiness the valuations that pre-seed companies and seed companies were raising at i mean you were taking on pre-seed risk at series a series b prices okay and now there's a safety margin that wasn't there before because the prices the founders were raising at assumed perfection okay it assumed you would hire the perfect team you would execute perfectly and that you would perfectly find product market fit and it's not there anymore

and so there's this huge reset and this correction is incredibly healthy for not only traditional markets growth markets but also crypto and then there's a you know there's panic and and some you know fair weather investors fairweather founders that jumped in to turn a quick dollar at you know peak obviously if we can so we're getting spooked but and you know are wondering like is it going to be as bad as 20 you know end of 2017 all the way to 2020 and it's like yeah well if it's as bad as you know that last winter i mean ftx might come out of it open c uniswap and then um if you're looking more broadly at you know if it's going to be similar to like a 2008 recession and remember

that's when bitcoin was invented so the bottom of the bear market is when we see the real substantive innovative building happening and so we're more optimistic than ever so guys help me understand something uh you know because on the one hand i hear what you're saying and i completely agree right it's the cleansing fire right where the froth is left and the tourists leave and the real building happens and everything but one thing that might be a little bit different this time as compared to last time is just a sheer raw amount of venture capital that has poured into crypto over the course of the last right year or so i mean the numbers are really really staggering so on the one hand i hear i mean you can clearly feel that there's pain in the marketplace valuations are already starting to reset the labor

market has started to change locally within crypto probably more broadly in tech as well but there's still an enormous amount of uh dry powder right that's sitting on the sideline waiting to be deployed so how does that dynamic work right because you have the froth that's getting worked out of the ecosystem but at the same time there's still a huge amount of capital that needs to find a home so how do you guys kind of see that dynamic playing out over the course of next year so you always want to be thinking at the margin right like what is going to be the marginal effect of lower prices and or you know kind of muted euphoria um there were a lot of investors you know we we might invest into a seed round of a company and they would be like 5x oversubscribed and generally if you're

5x overscribed that means that you're you're going to raise the price right like it's not going to clear at 5x over subscribe um and so the price would raise and the price would raise to you you maybe you know you'd get andreessen or dragonfly or one of these you know polychain somebody like that uh to lead you around um and then you'd fill the rest of it with like you know a family office or a hedge fund or just some random non-strategic investor um it's the it's the non-strategic people who are at the margin exiting the market right it's the folks who bought in at you know the 100 million seed rounds and realized like wow we're down on everything in our portfolio there's there's absolutely no way that we're going to make money on even our seed investments which usually are the best risk return

that those people are exiting the market right softbank is exiting the market um some of these folks who are playing in crypto who thought that crypto was just a guaranteed way to make money um they're down massively and they're like look i'm not playing this game anymore um now there's a lot of crypto specific capital earmarked specifically for crypto that capital is not going away um it may slow down because people realize that like hey when i go raise my next fund it may not be a billion or two billion dollars maybe it's going to be roughly less than that maybe the returns from my current fund aren't going to look as great what that is going to do is it's it it's going to take some latency until we see this vintage of funds run out of dry powder so you're absolutely right if you compare it to traditional

venture just normal equity investing um right now people are already seeing you know when i talk to venture capitalists who are doing regular tech investing they're already seeing massive slowdowns valuations come way down uh the the competitiveness and the speed of deals is getting way slower in crypto it's happening but nowhere near as much as is happening in regular markets but if you give it three to six months we will catch up because this vintage of funds will start running low on dry powder and that's when you'll see the full reset with respect to a capital raising environment yeah what about from a kind of a market structure standpoint maybe afghani can kind of pick on you here a little bit you know one thing that happened right after ust broke was that a bunch of other pegs in crypto kind of started to get tested right there was a big there

were a bunch of there's kind of a flow of uh redemptions in tether right and the peg kind of slipped like 98 cents the east peg uh in the lido pool that kind of uh also has wobbled a little bit and i don't think it's fully recovered so like almost from a liquidity standpoint a market structure standpoint what would kind of the aftermath of the ust explosion look like from your perspective yeah we've seen quite quite a few tests last week so yeah what you mentioned with tesser was take these pools on the curve and i think we'll see even more tests when it comes to well tvl in general and this this metric has been i think kind of abused in general on the investment side of things and i think we'll see bose's metric not matter in that much

but also being challenged as a lot of liquidity would actually leave a lot of protocols and that's kind of what we are preparing for on our side with the market structure from the market structure perspective we expect that well both institutional and retail people will basically pull out of a lot of pools at the same time because there will be much less interest on the trading side it will be even like less interesting to provide liquidity in those pools and so it can well it's not going to be a death spiral but it will impact it can impact it quite significantly so we do expect quite a quite a big drop in tbl overall and have you guys seen i mean you know

one one other thing having just seen multiple kind of market cycles in crypto and cbo kind of indirectly talking about this is you know what happened and actually chris dixon in his speech for those of you caught this morning kind of brought this up too there are these cycles of crypto whereas the price goes up it attracts a bunch of talent it goes out and then some people stay and it kind of you get a lower base level sort of each time um i'd be curious to get y'all's perspective about kind of institutional interests right or thoughts or commentary in the wake of this big explosion because obviously crypto had already already kind of been rolling over right tech broadly been rolling over crypto been rolling over but now we kind of see this big explosion in the form of ust so i'd be curious to all from an institutional

kind of standpoint are they kind of looking at this saying oh wow see i knew that this was not legitimate this was risky rickety and it was all house of cards or um are they saying hey this actually could be a buying opportunity because maybe this wasn't um this is an indicative of the whole system maybe james i can pick on you yeah on this institutional side most of our is this song most of our folks are uh retail but um i think what's interesting interesting is for the institutional site this is probably the first time that they've experienced a a crash of this sort last cycle they were not here um you know maybe one frame to look at it is on a comparative basis i mean typically crypto has viewed as the risk asset so if it nukes 80 90 is considered disaster but in the public markets like

the leading tech companies in the us have nuked 80 90 which was never the case before so i think perhaps on that lens maybe it puts crypto on a more even footing like these are all risk assets they are all at the mercy of like interest rates in central banking regulations so um they are typically have a longer time horizon and a longer attention span so i think this i think hopefully for the more enlightened players is viewed as an opportunity to accumulate um during last cycle uh the running joke was institutions will be here in six to nine months and then in every six to nine months we would shift the scale we'd say again oh you know in the next six to nine months and uh the fact of the matter is is you know this most recent go around they're

here and it wasn't like you know the c-suite woke up one day and thought oh we should get exposure to stable coins or oh we should get exposure to bitcoin right i mean they've been tracking this thing since 2014. um and and it's been on the desk of every you know i mean just from like a federal perspective like every three to four letter agency you can think of and of course from an institutional perspective like you're looking at the fidelities you're looking at top you know fortune 50 corporates that have been tracking um the cycles and episodic nature of the market they diversified knowing exactly what they were getting into and you can't um you know really you know once that genie is out of the bottle you really can't put it back in um

it's a testament of faith an indicator of faith because regardless of market cycles they trust that the entrepreneur like the entrepreneurial talent is here there's enough regulatory clarity which will start tightening at the heels of this bear market which isn't anything that we haven't seen before um and that this technology is here to stay and so similarly just how institutions don't you know leave public markets when the s p is down they're going to stay the ones who decided diversify are here to stay i'm you know one one other thing that's actually very healthy about these kind of market cycles in general is you know there's that warren buffett saying which

is that it's only when the tide go out you know can you see who's swimming naked uh and i think there were definitely some naked swimmers in crypto um and you know it's it's a very healthy thing because there are definitely seeds of things that are working but maybe because there's so much money there's so much capital and there's just so much excitement it's not obvious right until everything turns over and then in bear markets typically we fix what was broken during the bull market we improve upon it and that kind of innovation leads to the next big thing so i guess like open-ended question you know all of you in your respective spaces of crypto what were you all kind of looking at that you're saying oh i know this looks like it's working but i feel like it's kind of broken and maybe this is where we

should focus our attention and energy when we have some cloud cover from this bear to improve upon you know for the next kind of bull cycle well the thing about crypto generally is that um crypto enables permissionless innovation meaning that anybody is free to build anything they want and there are no bailouts right nobody saves you if your thing is breaking or if it's about to blow up tough [ __ ] everyone who holds it is going to lose money and that's exactly what happened to tara and so what you see in the successive generations of crypto is that the stuff that's older is more battle tested right it's lived through more cycles it's survived more attacks and the things that are newer generally you know they're sort of

younger they're kind of in their first flush they don't make as negative assumptions about what might go wrong um and so you see it very much in that if you look at makerdale just been sitting there doing maker down stuff for the last like three years nobody noticed it everybody was like oh maker is the most boring thing in the world it's the only asset that was up in the last week right because it just sat there and worked and it did its job because makers survived march of 2020 and they learned from that experience that we need to harden this protocol in every possible way to make it survive and in the long run the selection pressure of crypto i mean this this what uh economists often call creative destruction right this idea that the things that aren't sort of

evolutionarily fit they die off they fail right the restaurant that can't keep customers in the door it fails the restaurant and it goes away and the restaurants that do manage to attract customers they survive and they thrive and they exist for a very long time um in the world of crypto if your protocol cannot survive the market fluctuations people trying to attack it pegs breaking oracle's going down all that stuff will eventually happen to you and if your protocol can't survive it then it won't be around in three years and so it's something that gets reinforced at the end of every cycle is that there are a lot of things that can fly high when markets are good numbers are going up and you're not really getting tested but when everything in a space is getting tested you've seen an enormous amount of

you know we just in everything that we now call d5 2.0 right i mean i think luna you could you could possibly put it into the d5200 category um so many of those protocols have gotten tested in ways that they were not expecting and they've gotten punished whereas d5 1.0 i mean who's heard of anything happening to maker or ave or compound they're just sitting there doing their thing and um that we will eventually see what within the d5 2.0 cohort will survive and sort of enter that more stalwart category but it takes time and um so there's a lot of stuff in this cycle that we try to stay away from that we thought wasn't going to have the same longevity if i can add on i mean from nansen's perspective and you know what we're

trying to build is a a really great experience where you can get in and and a we're democratizing access to data and giving people you know the information printed you know that's accessible to them and i think i think the ux uh will evolve even further than it has in the past and i think you know everyone saw the protect button probably on anchor and how many people clicked that right and like it's just you know insurance i think will change the game as well and can we actually build things that you know regular people can get into and feel comfortable about and i think that's what we want to show is um both you know opportunities that people can get into discovering things and you know doing due diligence and

making sure that you know you have those tools in your toolkit that i think normal funds have but i think we want to make sure that like every person in this space can actually use those those tools personally one one trend i'd be curious to get all of your perspectives on maybe this is when we can parlay here move into the on-chain uh investing part of this discussion uh but you know one message that is being ham getting hammered time and time again is we're building infrastructure here right so kind of maybe v1 of infrastructure was these great companies like the coin bases and the ftx these great kind of centralized exchanges and now it seems like there's a push to build things on chain right an enormous amount of uh talent uh

capital human capital is kind of moving towards building these new financial instruments primarily um on chain so maybe we can just define like what does that mean building a product on chain how would that differ from it's kind of more analog counterpart maybe james you had a great explanation when we talked about this if you want to talk about it it is super exciting to build on chain because every time there's a major technology shift you you change infrastructure like from on-prem to cloud computing the kind of applications you can build is fundamentally different the dominant like innovative structure in finance or i guess from a from a structured products perspective in the last 30 years is etfs right everyone's been very familiar it's like so big it's etf bubble and arkhamvest very famous for the etfs um and

there's almost none of that both his product and infrastructure available today on crypto so a moon we basically set out to build infrastructures so you can create those kind of products index products purely on chain what is the benefit of replicating that on chain it would be it wouldn't be very exciting if all you did was replicate the same set of like rules but it's just a different infrastructure you got to kind of find the native thing that makes it possible that takes advantage of the new technology a key benefit of building a basket or index product on chain is that the owner of those products actually own the underlying assets if you own the russo 2000 like etf product you can't really just press a button and get 2 000 shares

of all the underlying stuff with on-chain index products you can you literally press redeem and you can get all the underlying products that's extremely interesting it's it's like you actually hold the asset not just someone else holding a wrapper of something else the way these products work is also very interesting like if blackrock disappeared as wonderful as blackrock is like those products are not going to work anymore but when you construct a index on chain the rules are just smart contracts those are duplicated on every block in the future for ethereum or solano whichever chain you build it on the benefit of that is even if our team the initial people who build the recipe disappears that smart contract lives on forever just like a uni swap v2 contract lives

on forever if the website goes down because we forgot to pay our bills someone can spin up a new website a new front end so it like is it like is immortal which is kind of cool in the world you don't hear that associated with software you know imagine an aws instance that's immortal that's kind of all the really cool characteristics about like on-chain products and it's very exciting to build there are cons as well so optimistically exactly what he exactly what james just said um and in addition there's less bureaucratic overhead right because there isn't that friction of getting um traditional financial uh stakeholders to buy in right from a regulatory perspective getting all

the licensing you may need the you know better half of a year spent getting all the traffic entities that you need to sign off sign off right when you do it on chain you can expedite that process and you can speed up time to launch the op the other side of that though is the technical friction okay so you are going to be sacrificing some efficiency and it's just a more challenging technical problem and the great thing though about that is that it inspires a lot of tinkerers and technically forward folks to to build and work on those kinds of kinds of problems so um you know you you pick it's a a lot of these systems are going to exist in parallel and so you pick the

trade-offs that you want for the system that you intend to build yeah the other oh sorry uh yeah i mean this indexing idea was well index and theme was yeah very interesting for us as well at intermediate for a couple of years already it's it's been amazing how not used it is in in crypt in general compared to traditional markets and i think that the main the main reason is like majority of people who invest in the cryptos they they basically think they can outperform the market so i like i'll aim and does that talk and that talking like i don't care about indices i'm just going to become rich and i think now with this correction maybe it's time for people i'm i'm kind

of hopeful that people will start thinking okay if i want to get exposure to the next wave whatever it comes maybe it's smarter to do my indexing and then i don't miss out on like basically protocols that will outperform and not instead of like gambling on that talking i think a lot of the reason why uh index investing in crypto has not been popular is because everyone knows that like there's a bunch of [ __ ] in the top 10. now everyone has a different view of what the [ __ ] is right but like everyone is like okay i know these three i don't want to hold these three tokens which ones everyone in their heart of hearts can look inside and they know going back to the question of what's

hard about on-chain investing the other thing you know again speaking to the collapse of tara um one thing that i'm sure you know those of us who are investors know very well is the feeling of oh [ __ ] one of our portfolio companies just got hacked and if you're a regular venture investor this is not an experience you have right you don't get ringed in the middle of the night that like all the money inside of your portfolio company's gone but in crypto it happens it's happened to us many times and it happens almost every d5 protocol has gone through the right of passage of getting hacked at some point right now it might not be at a small contract level it could be at a dns level it could be your discord it could be something else but people have lost money and you got to go

get in there and fix it um and so that that is another part of the difficulty of building on chain is that the the balance of power between attackers and defenders when you're when you're building uh protocols on chain is that it always favors attackers you know just this year alone we've seen some of the we've literally seen the biggest hacks in crypto history and you know it's only may so uh this stuff is hard it's extremely difficult to get it right um and uh that it's it's part of why when i first got into investing i had so much envy for founders like i always i was kind of like you know i'm gonna invest for a little while but like eventually i'm gonna be a protocol builder because obviously that's way cooler than being an investor

um and the longer that i've done this the less envy that i have for investors because i now realize that like being an entrepreneur in crypto is so hard it's so stressful it's so scary you go through so many oh [ __ ] moments that um i as an investor i at least get some sleep and uh i i i realize that as a protocol founder uh it's really hard to get that right but but also the data if you build on chain is available and it's transparent to everyone which i think is amazing too obviously our company prides ourselves in surfacing that information um but you know it's it's live it's granular and it's transparent everything that you you know we see who the mark

market participants are in any given uh pool what the liquidity is so you can have more indication about the risk you know before you get in and once it goes on to an exchange we lose a lot of visibility there for us you know that is empowering to people and it's something that we obviously uh you know want to take advantage of and we enjoy those benefits having it on chain so yeah that's it's huge and a complete net new way to do due diligence in investing in crypto because all that data is public versus in traditional markets the thing is though is you have to be careful not to substitute being data rich or rather being insight

poor for being data rich you can't complete the two and so products like nansen and disclaimer were one of the like earliest investors in manson is uh they do a great job distilling those insights and so that's the one thing i'll say to investors and also founders that are having you know their folks put up dashboards and um really doing a lot of the analytical work is that um it's important because um in a sea of data your ability to really wrap and give the insights and distill the insights you need that's where the alpha is it's not in in all these data points i have a couple different follow-up questions there so i want to return to this idea of like when you're building like one of the the dreams right of

specifically d5 having everything on chain in this beautiful way that everything's governed by smart contracts everything's very transparent and you're supposed to be able to understand systemic risk better in defy right because in tradify right when we went through the global financial crisis there were all these like conduits right there's a bunch of off-balance sheet stuff and you know so it goes oh if this were more transparent then maybe the downturn would have been so bad if we would have been able to mitigate it uh we're currently going through a downturn i'd be curious how much of that narrative is actually true because how much transparency do we really have into these markets do we really understand how leverage is connected do we really understand where risk is because we're living in this on-chain world this is something that i rail on a lot against

crypto um i think we we like to tell ourselves certain narratives that are mostly [ __ ] and one of these narratives that i think is largely [ __ ] is the idea that uh defy is less risky because it's open and you can read data on chain right um first i mean to to your point we have to understand that data and sometimes it's actually hard right did anybody know what was the uh price relationship between ust and luna at which point luna would d-peg or sorry usd would d-peg no one knew we had a kind of vague idea like maybe somewhere in this ballpark things will start unraveling but nobody really knew and it was just purely by somebody kind of pushing this uh curve pool that it turned out the whole thing fell apart and there was no way nobody had any idea

how to risk model it nobody had any system that could precisely identify the point at which this thing would fall out of its stability zone another thing we talk about often is the fact that okay well in d5 you can read the code really what they mean is that i can read the code right you can't read the code right most of us probably don't know how to read the code and understand what's going on in solidity some of these things especially if you're on non-ethereum protocol sometimes you can't even read the code because the code isn't open source um so the the there's there's so much um look at look at luna as another example right about on-chain reserves um luna was obviously backed by uh sorry terra was obviously backed by luna right so there was ust the stable coin and there was

luna which was the lair one native token and tara ust was backed by luna but there was also backed by lfg which was this non-profit that's supposed to have three billion dollars a bitcoin as well as some other random assets um nobody knew what lfg did actually there's a lot of drama going on right now of people trying to figure out where did the bitcoin go what did they spend it on did they actually use it defending the peg or not it's at 87 million now roughly yeah yes out down from three billion so almost solid is gone goes claimed that the all the money was spent but nobody really knows what exactly was it spent on um and so the the reality is that um in in principle it's possible to have protocols that are easily discoverable easily analyzable where all the data is out there and

they're fully unchained one example of that i you know i just talked about it make it out as a perfect example it's a it's an easy to understand protocol everyone knows how it works all the data's on chain it's easy to discover but most things that are new in d5 which is most of what the high yielding stuff is is not like that and so i think the reality is that it is on us as an industry to make this stuff more understandable make it uh do the work so that people who are actually participating investing uh you know developing on these things the the standards of what kind of information normal people need in order to interact with this stuff it has to be enforced by us as a community about the the standards and expectations that we have for protocols when they actually come to market and

start taking on retail investments and and maybe if i could be devil's advocate to your devil's advocate right please uh you know lfg is probably an example of something that everyone knew wasn't totally i don't say above board but it wasn't structured the way that it should be right in that bull market and now the next time there are reserves you know behind a civil rights this really should be unchained we really should have more transparency so maybe it's not that um this is some you know that's a [ __ ] narrative but maybe we're just not as far along as we should be and we haven't been as strict on ourselves as an industry as we should be to put things on chain right because like we're all talking about now there are a lot of disadvantage it's hard to build things and plug into this public

infrastructure gas fees are high the tech isn't where it should be right like where you'd want it to be if you're a builder but yet folks are still doing it right so there obviously is some future that we're all building towards here so maybe in like a more positive way right we're being very this is a bear market panel we're being like these are [ __ ] narratives and this isn't working what are like pay me the picture of what this could look like right what's why are we using this tech that isn't quite there yet why are we taking all this risk as crypto founders like what are we all building toward what's the on-chain the best version of what an on-chain world could look like so look i wanna i wanna sort of jump on your devil's advocate is that like look i i do agree that

when you're building something new it's obviously hard to do all of that right like you're if you're a brand new startup founder and like you know the whole world is looking at you like hey analyze your protocol for me tell me exactly what all the risks are like audit the hell out of your contracts make sure nothing ever breaks and as soon as it does i want you to pay me all the money back right like that's what the deal is supposed to be if you're a new d5 founder and that's crazy that's crazy hard and and i i think it's it's very clear that the choice that we've made as an industry um which is kind of at the heart of crypto is the idea that look we do this permissionless innovation stuff we allow things to try and fail that's that's how we function that's how

we decided to build the d5 industry and i think that's the right choice um so to you know to your point it is always easier to start off centralized and gradually become decentralized when you figure out what all the levers are and how the way the machine ought to work at equilibrium but in the early days it's hard um and so what i'm advocating for is not so much that like hey everybody stop doing what you're doing but more that um i think we need to be transparent with people about the risks of interacting with d5 that isn't as battle tested there's a real there's just an ocean of difference between something like compound and something like anchor and that was something that as an industry we just weren't ready to communicate to anybody and it wasn't something that we were we were

kind of admitting to ourselves into each other as an industry and i think if there's anything that this cycle is going to teach us um is that unless we adopt the norms of being able to you know sort of look clearly at how these protocols interrelate to each other um we're not going to be able to to grow the pie right well you know it wasn't consensus around tara or anchor or luna right i mean if you look there were very much naysayers that were saying from the beginning under collateralized algorithmic stable coins we've seen this before they aren't going to work um there have been multiple threads on on the matter so what's great is that it's actually mixed voices and and um a ton of people are actually against it

because of the open nature of all of this right information wants to be free it's good that we can all discern make our judgments for ourselves so to your question though like why are we all here like we're all fundamentally reimagining the systems and the rails right that power um everyday activities for anything as simple as like payments and authentication or sorry like rather as unsexy or boring as payments and authentication to you how we listen to music or how we play video games like what that actually means to our everyday our everyday you know activities and livelihoods um and and so we're fun we fundamentally rethink the foundation i mean this is

only really a once in a generation opportunity where something like this comes along that turns everything on its head and so you have to have that surface area to innovate to open up the adjacent possible learn from the mistakes and then make better more informed decisions moving forward and then the last piece really i just always come back to is this idea that with the internet it was the first time that we were able to move information across borders without any intermediaries and with crypto it's the first time we're able to move value without any any intermediaries between borders and that is very very powerful and we can't lose sight of fundamentally

what we're here and what we've what's changed i would say i'm quite happy with how this cycle kind of ended like in a way it's over okay i've been i've been through two cycles so i'm not like as og as some other people but like to sell like what did 2017 give us 2017 gave us icos so we learned how to raise money potentially in an unlimited way which was great but that was pretty much it like if if you look at this cycle it gave us basically great innovation like i'm still on the fence whether whether it will work out or not but they definitely generate a lot of volume and a lot of really real interest it gave us well also so g protocols like other compound

maker like that survived and thrived in this in this environment gave us new l ones and we've seen a lot of experimentation about yeah what the scalability how we can play with it this way another and like yeah can you yeah can you be or build a chain that will transact with my insane amount of transactions and you see a lot of like variations that on bsc for example or solana and and we've seen the trade-offs finally we finally have seen okay like what what happens if we do it differently um and so we basically see so many we have so many learnings from this from this cycle that i'm quite excited for the next one basically i think one of the things that became a

norm this cycle is um talking about the benefits monitoring like the fact that the smart contract is on chain and people can it by default and people can fork and replicate and build off that work is just fundam it's like it basically takes a norm that we got from the fashion world and and merged it into the in the world of finance or software it's never been the case like the last time we had open source by default with linux billions of people across the world benefited huge completely unplanned for um and and that was not the norm with software web 2 software up to this point that's what facebook twitter and all those things are like they grew very large but they

were also ossified in their own ways but how many uniform v2 forks do we have now that's like bad maybe for haydn but it's like good for everyone else you know it's like that's useless work you don't have to replicate that's perfect code that you can you can use um you know we built at a moon we built our code base off another project and we're happy if other someone builds off our code base and that just increased the velocity of innovation so much faster and if there's one thing we need was just faster velocity of innovation now a 16 year old kid from kenya can literally build off the work that's all been done up to this point that's hugely positive that's something that we can't discount is the onboarding the sheer onboarding that's been done the past five years of these kids that are

16 and 17 and legally can't open bank accounts that have hundreds of thousands you know if not millions and they're ethereum wallets yeah yeah i that was actually um there's i don't know folks know the folks at framework but i listened to a podcast for them and i clearly list in a lot of podcasts and that was an analogy that really hit for me um is just the speed of innovation and and how much they broaden the base of people who can create financial products because if you had thought of the the original track like if i wanted to create a financial product you can't have to start it like a bank work your way up to become an md create some weird esoteric thing that you sell into an institutional audience and now i mean just the barrier of entry and the speed with which you can innovate is so much

quicker i want to also you know just talk about you know almost from like a higher level right crypto started with bitcoin bitcoin was a reaction to you know the idea that central banks had kind of overstepped that there's too much manipulation going on in the existing financial system and overall we want to create something that's more secure i think you can make a lot of arguments in retrospect about why terra the model was fundamentally flawed but maybe the mission was noble right because i think you do need some sort of decentralized stable coin right existing in crypto and a big part of what we're all trying to do here as well where there's great you know you have the let's say distribution of these financial um products is much greater in the non-chain world but also

you get the censorship resistance part as well how much do you guys think of that you know when you're looking towards the future like do we how important is it that we have this censorship resistance that we have in our money like our bitcoin but also just in the financial infrastructure like how important is that well the thing that's ironic about decentralized stable coins is that we don't really need them until we do and you know today actually usdc is the experience of using usbc and d5 is um it really feels like a decentralized stablecoin right you can transfer wherever you want no one will ever stop you unless you like get caught in like a sort of you know headline producing hack you're probably fine and no one will no

one will mess with you as you're doing your business right and um the the the the biggest thing that i think ust has done is ironically it has created the need for something like usd because it's very likely in the advent of usa we've already seen you know janet yellen um basically making calls for there to be a more robust stable coin regulatory framework by the end of the year so it's very likely that the u.s is going to see some kind of legislative framework around stable coins and i if i had to guess it's not going to be great for crypto um which you know our thesis has always been the decentralized stable coins are really important but they will not be used until

centralized stable coins no longer have the same affordances as they have today right if you get to a world where people have to be kyc to use a centralized stablecoin or let's say there's a transaction limit and above a transaction limit you have to be kyc much in the same way that you know a bank would collect data on you if you have more than some you know minimus amount of transaction activity if that's the way that uh centralized stable coins get regulated then we're going to see a renaissance in decentralized stable coins but until then decentralized single coins have kind of been waiting in the wings but if you look at if you look at dye if you look at frax if you look at these other large decentralized stable coins they're mostly chillin they're mostly used for yield farming they're not really you know dye is

probably the most used but most of the rest of even ust never really had a whole lot of payments use case mostly they were just used in other d5 protocols they're just used as sort of collateral that will change if and when we see a more punitive regulatory framework arise around stable coins i want to maybe end here because we've been talking a lot about i think even you came out and said we're done with this cycle but uh all right let's just say how many show fans how many folks in the audience have only been encrypted during a bull market that's kind of a waste because i can't really see okay i'm gonna assume it's about half and half um guys advice uh because i'm pretty sure all of you on the stage have been through multiple cycles what would you say to the audience if you just joined

crypto you're kind of watching all of this stuff go down and maybe you're starting to feel a little worried what's what's your kind of advice for making it through more of a bear market than kind of a bull period well according to guinea we hit the bottom so you're good i just buy everything yeah um what's my advice um i mean the first thing is that uh one is that crypto is extremely cyclical and if you got into crypto in 2021 or in 2020 um you probably don't appreciate that to the extent that people who've been here longer feel it in their bones that crypto is very cyclical and um it's it's just it's just true that if you look at the long run like toward the

arc of innovation as long as you're betting in that direction you're going to do fine you're you're you know look i can't tell you depending on where you bought in whether or not your particular asset of choice will go up but the you know the fundamentals of crypto actually look great right the the broader decline that we've seen this year is mostly exogenous it's mostly due to macro but but you know users are growing adoption is growing the technology is improving transaction volumes are increasing almost everywhere nfts are bringing in a new cohort of people defy is getting more mature this stuff is getting safer more robust easier to analyze like all the things that we might care about in believing where the space is going is is trending in the right direction so the great thing about bear markets is that you can sleep at night a little

better things are not as crazy you don't get as much fomo you can read you can actually read documentation or white papers uh you can't really do that in bull markets there's no time um so uh the other thing that i appreciate about uh bear markets is that um bull markets it's all tweet storms bear markets long form starts actually getting reads that's true so um i look forward to doing more long form and reading more long-form yeah yeah one of my favorite things to do during a bear market is i did this especially like last cycle was just read reports from the early 2000s and late 90s on the internet failing why people didn't need the internet or amazon.bomb and just thinking how silly

all of those people seemed and then thinking which side of history i want to be on and so that's always a great exercise to do personally that um but really when you're thinking about crypto um just tuning everyone else out sticking to your guns like really understanding like learning using the the bear market to build your your reputation with everyone in the community to sharpen your own skills and understanding of the space and really understanding because to seeps point this is where everything's getting battle tested so you're getting a front row seat to seeing what actually works versus what doesn't and during euphoric times you're never going to be able to see that

you're going to have to outsource your conviction and your learnings to someone who is actually in the bear market seeing that firsthand so yeah use this use this time wisely yeah i would say it's it's really probably the best time to actually use d5 protocols do you use the fire products because in the proper bull market you are you just like way too much distracted with the price especially if you're a new user you're like i know you bought you are on this new protocol you bought a token and like you probably would be just looking at talking going up and then down uh and not necessarily using it that much i appreciate the technology behind it and now like however more months will be half of this like not bull market let's call it like this it's just a much better opportunity to

learn for a lot of people and and i guess my second message would be i kind of hoping that it will also kind of that we as a crypto community like we as a builders and investors we also like basically there's a next cohort of people that we're on board in we will try to make sure that they don't get too slaughtered too much slaughter too much too much like burns on the next cycle as well because i think that's that's not what we do that well yet first of all we're not in a bear market yet so everyone should jump kenny is a cautious person but there's still hopium to be had um second i just share a personal anecdote the last time we're in a bear

market 2018 i basically uh tuned out i stopped following krypto i thought like okay this thing is just gonna be in very very painful unfun mode for a few years i'll get back in when crypto warms up again and it warmed up again toward you know end of 2020 and i got back in and you know the timing was good but um that attitude had a great cost i completely missed defy summer i missed defy summer because i wasn't a citizen in the winter so if you want to catch on to the next new thing assuming it'll wake up again you need to actually go through the pain and stick around for the hard times and the hard times is great for all the things that folks have mentioned read

the white papers do all the actual things yeah like there's there's no roi for reading white papers during bull markets because while you're reading a white paper some pfp project just 10x and you missed it and your white paper doesn't give you anything right so this is a great time to read white papers i haven't read the curvy too white paper love to catch up on that stick around build and then next time they're spring you'll actually catch whatever summer that's gonna come yeah build and make friends too right like this is the time where you're going to get people who actually care about the space a lot and so you know you hear that from chris and chris dixon you know if you actually are passionate about this these are the people that stick around so i mean that's when you're gonna build the best stuff with the the

friends that you make here awesome guys well uh so misery loves company basically yeah make friends yeah uh awesome guys this has been a ton of fun thank you so much unfortunately that's all the time we have guys give them a big round of applause [Applause]