LIVE | CRYPTO TRENDS WITH ALANA FROM VARIANT | 0xResearch

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because I saw my face as I was doing the tweet. >> Welcome back. >> Another episode. >> What? I remove what? >> Go ahead. >> We're back. Xerox Research Live Monday, December 1st. New month, BTC down. Okay. What were you gonna ask me? Go ahead. Um, what was I going to ask you? Was that uh, why don't you have Blockwork? Oh, why don't you have Blockworks Research below your name, buddy?

>> Wow. So, I don't have Blockworks Research below my name because I'm now a podcast host only. >> Very good. And how has that shift been? Did you get lots of celebration from your family over Thanksgiving? No, I don't I don't know if my family is aware to be honest, but uh a lot of celebration on CT thanks to you guys and in the chat. Uh we love to say congrats insert name here in Zero for Telegram. So hop in there if you're not already. Um pretty busy though. I actually have I think I'm doing six podcasts this week.

So that'll be fun. >> Yeah. frontload that schedule a little bit on over on Light Speed. Now, if for anyone who's not aware what we're talking about, >> Felix is making you work, huh? >> No, we just got to got to start off strong because it's holiday season and Salana Breakpoint is coming up. So, there's >> people will be in and out of office. So, just trying to trying to frontload that for for Lightseed. But, we don't have to talk about Lightseed. We can talk about what we want to talk about here on ZeroX. >> I had more. That's fine. We are going to have uh a lot of Lebanon uh from Variant Fund if I'm not mistaken. Uh they they dropped a trends report uh recently with a bunch of stuff all sort of different

things in regards to crypto. So I think we'll talk about that but uh I think we have some time before then. What did you want to talk about before she joins us? >> I want to talk about uh to be honest with you I want to talk about um your name being changed. But I guess that's not that's not what we want to talk about this time. I guess the market I think you've been out for a while and the only thing that you're in is BTC. So you don't really care. I feel like we do the same convers. >> We had the same conversation every week. >> But last week, last time we talked it was 92K, I think, or 91K.

Um, and then the week before when I asked it, we're at 96K. So we're very clearly now in a downtrend. Um I think you probably could have said that when we tried to like go through 120 125 four times we just weren't able to. >> Um what is I guess like one of the things that our chat is saying um is I think jokingly [clears throat] that QT is ending that's why the markets are dumping. Um I'm curious where crypto goes from here. I am I have very limited uh macro as well as um stocks experience. I think uh most people assume that I have some form of knowledge. I would say I have a

little but I've I've kind of been raised in crypto. I've like my like whatever um stock exposure has been Bitcoin. Um which seems stupid now given that stocks are up and Bitcoin's down but um I don't know. feels like we're at this this this like what James said in the chat, we're in a secular bare market for cryptocurrencies. Now, James said it was forever, which I don't think is the case, but kind of interesting this. >> Yeah, I don't think it's forever. I think James also had a pretty good comment um before the memeing saying that uh what people miss when they talk about long-term holding in crypto is

that a lot of this action is basically more like a commodity boom. Um, so it's not maybe not necessarily like a buy and hold class asset class like like Bitcoin is does not have cash flows. It's not a business that generates revenue. It's I mean objectively it's a commodity. So um yeah, I don't know. I'm not a I'm not a commodities expert or anything along those lines, but like I think what he's saying is that uh you know you can buy you can have that kind of long-term hold mentality with uh the S&P for example and just kind of forget about it and not worry about the day-to-day volatility.

But um commodities aren't really known for just like going up in a straight line forever. >> They're very cyclical as well. >> Yeah. And they're driven by much like much different things. Um, so you know, a lot of the tokens up to this point are are quite fairly commodity- like and that they're historically nonrevenue generating and they're driven by like excitement and these like other various factors. And then I think we're seeing that slowly change now. We're seeing more of a focus on on revenue and real business models, but um it's still few and far between, right? Yeah, >> I'd say that's probably like the >> separating out the what? There's like a phrase there. Separating about out the weak from the from the strong or the chaff from the whatever.

>> Um I don't know if that's a saying, but I that's fine. We can go with that. One thing I was going to say is like we say that about commodities, but also commodities oftentimes tra like copper's up because [snorts] this like AI data centers and not AI data centers, all data centers need copper. um and a [snorts] lot of it because of wiring um and gold is up as an inflation inflation hedge um is what people say it's to me that doesn't make a lot of sense because if inflation hedges go up why is bitcoin not going up we don't know >> I think the the one thing I'd want to add and we've talked about that snow end um but I actually think Noah I think Noah was pretty spot on maybe a few

months ago when he said that a lot of the kind of upward price action over the past maybe six months was like largely that fueled and that if that activity had not happened like we would have probably already seen some of these declines in in place of that. Um and I don't know I think like there's some tweets going around strategy had a little uh they shared a little rocket ship chart of how their business is constructed which people are laughing about. Um, but the one thing that they put on a slide, and I I don't know if they've like ever said or written this explicitly, but made an exact note here about if below 1xm, they can sell

Bitcoin. Uh, I don't know if Sailor has ever intimated that he would ever sell Bitcoin. Like his whole thesis and positioning and like ideology is like you just buy it and you never sell it and you buy more and you always buy more and like when people are telling you to sell like you buy more. Um, but there is a very real like I don't know we're seeing with other DATs that like some of the smaller ones they've gone way below MNAV and so like it's become logical basically for them to sell some of the crypto that they bought and then use that to like buy back shares. Um, they're they're talking about this USD reserve that they would potentially build up in addition to their Bitcoin reserve. Um, not saying that this is what's moving the market like today or

anything. I I don't really think that's the case, but maybe just like broader perspective around, you know, we had a lot of DATs come in and buy stuff and now some of them are selling and they're certainly not buying. So just a lot of that like I think everyone would agree that it was >> there was a lot of like flow coming in for a while and a lot of that flow has disappeared and maybe some of that flow is even going out now. Um so it's it's just not surprising to see, you know, a pullback and maybe it'll take some time to kind of work through some of this. Yeah, it is scary because we were pitched this well. Yeah. Well, we were pitched this as like this indiscriminate buyer that will like the same way that Oh, >> all right. Let's um >> you can finish your thought.

>> We [snorts] pitched this as like this indiscriminate buyer and it very much has not been. So, um on that note, on our fantastic macro takes, I want to um welcome Alana. Alana, how are you doing? >> Hello. Uh doing well. Nice to see both of you guys. >> Nice to see you as well. Um, >> glad to have you on. >> Glad to have you on. I guess um I I wanted to start off by saying that this was a a great report. Uh partially because it was very very long, but I didn't notice that it was very very long, which I think is a gift that not many people have. So, I enjoyed reading it and it's it's it's always interesting to see like look back on a year um to see like how somebody looked back

because some of the things that you mentioned I would have never mentioned but it's like good to see that um like different viewpoints and how they um analyze the market especially if someone's in VC which is something I also don't have much insight to. >> I really appreciate that. I did get a lot of comments that it was quite long, but sort of my mental model for how people would hopefully go through the report was like download it, print it out, read it on a Sunday morning with a cup of coffee just like they would a book, but pretty short book. Um, and so I I appreciate you saying that.

>> No, I I I don't think it was too long. I um I think people now though can't really read for that long, which is kind of a part of the times. Um, I guess like I don't I I'm not gonna ask you for a summary of it because I think that would be ridiculous. I have two questions as a general thing and then after that I have like some pointed questions. I'm sure Danny does as well. But um, one thing is what was something that you were expecting that you would see on the crypto trends report that you were like excited to see? It was like your perception is that I think X has been doing really really well, but it didn't. It wasn't shown in the data.

Hm. I think some of the accumulation of non Bitcoin crypto assets was a little bit behind where I anticipated it would be. Like if you look at some of the slides around the pace of adoption for the Bitcoin ETFs, it's really incredible. When I was looking at the data for something like the Ethereum ETFs or what I thought the rate of accumulation would be for other major crypto assets, surprised me that it wasn't further ahead. But I think you can almost break that down to custody still remains a big challenge for some of these buyers. When you think about traditional funds

getting into the the business of accumulating many of these incredible crypto assets, the custody setup and the way they think about securities is totally different than how they think about equities. I think that all change, but it just takes time. And it was one of the things that I just hadn't fully realized until I started digging into the data. I think it's also one of the things that's led to a lot of the dig digital asset treasury companies. My hope is that over time we see maturation in that people can just go and buy the assets directly instead of buying some proxy for many of the assets. Um >> yeah, I think that makes sense. That's something we I guess like only on the fund side you would know. I would have no knowledge of like but this came up

when Hyperlid first launched. I remember people were like, "Oh, funds actually can't allocate that much to this because a there's like um I think like the the custodians um didn't really support it." So, they have to like and then they have to do the DATs and then as you said the DATs aren't we were talking about this, but DATs have now become sellers um even though they were being pitched as like indiscriminate buyers now causing pain across the space. when riffing on that for a sec. When you think about all of the um sort of adjacent things to the or adjacent infrastructure to the accumulation S-curve. So the the report frames cryptos growth sorry as three compounding S-curves. Asset creation, asset accumulation, and asset

utilization. When you think about that middle one of asset accumulation, there's so many things underneath the hood that need to work and just work properly for people to feel comfortable. Custody is one, liquid markets for exchange and trading is another. Security is another big one. And I think we are still in the buildout phase of much of that infrastructure. Um, it's maturing for sure, but there's still a lot of room to run. >> I think that makes sense. Kind of on that note, um, actually before we do this, I realize I jumped way too quickly into the report. Alana, do you want to give a background on yourself and what you guys do over at Variant? I I get excited and then jump around a bit, please.

>> Of course. So, I'm Alana. I work as an investment partner on the team here at Variant. Variant is an early stage cryptonnative venture capital firm. We invest across the full stack of crypto. So personally, the way that I look at cryptos anywhere crypto makes the world more productive gets me really excited. The the firm takes the viewpoint that crypto gives people the ability to own the underlying products that they're using every day. That helps supercharge growth. It creates stronger network effects. It creates much more customer loyalty. Um trying to think what was the second part. Oh, how the report came about. Um so over July 4th weekend I was rereading the Mary Mer report on internet trends

and AI and Mary Mer is this incredible renowned venture capitalist who has been writing these internet trend reports since like the late 90s. I was sitting there with a cup of coffee in my hand and I thought, "Wow, I would love to read one of these literally every weekend. This is incredible. Um, in particular, I wish that somebody would write one about crypto. Couple weeks later, I was like, why why don't I just try writing one about crypto? I know how to make slides. I love looking at data. It's um sort of related to what I do, thinking about where the future is headed and what the opportunities look like. So, I started working on the report in late July and then published it I think a week or two ago and the response has been really great so far.

>> Yeah, I I can't imagine the amount of edits you would have to do to the data side though. Like sometimes we'll have a report that we've written a month ago and I'm like I can't I can't can't go through this do the data again. Has was that an issue? >> It's a good question. If you look closely you'll see that the data doesn't always end in the same spot. So you can kind of tell when I worked on search and charts and that some of the data ends through August, some of it goes through September. I think on the whole it's it's pretty fine. um it might differ by like a month or two on some of the slides but largely going into it I knew that I wanted to standardize the data as much as possible. I tried to keep sources consistent so I used black works

for a lot of the data. I used Artemis. There's a bunch of incredible data providers in the space and so I I really did try and keep it as consistent as possible. More than anything the thing that I worked on was the the sort of storyline through the report. So you mentioned it is really long. It's 150 plus slides, in my opinion, pure gold of data and insights about where the future's headed, but I didn't want it to feel like 150 slides. I wanted it to feel like a story that somebody could sit down and and understand the through lines. So, that was probably where I spent the most time editing.

>> I think that makes sense. And it's also impossible to cover crypto unless it's like a 100 slides plus. Um, totally. I have uh one question kind of related to the custodian stuff but um and then Danny I know you have one um in the same thing as well. One thing is you mentioned regulation at the very start um and how it's been warming up. Um I don't have much insight into it. So I'm curious what you think like right now we're in a very um where the regulation is quite positive if administration changes. Um, do you see that as risk to crypto overall? Like everything that specifically I guess like stable coins, um, equities on chain? Um, do you see that being an issue if like something

changes or do you think we're too big to not be able to go through anymore? >> Well, one of the incredible things about something like the Genius Act, which is the stable queen legislation that got passed this year, is that it was bipartisan. It wasn't one side versus the other. It was really both sides of the aisle coming together to say this is a really important technology. It's transforming the way that finance works. The thing that we need to get right is clear rules of the road so that companies can feel comfortable entering the space. As soon as that happened, there was this massive explosion in the set of companies that are interested in building the space. One of my favorite things to say to entrepreneurs in our portfolio is that the TAM for digital assets is as small as it'll ever be or

oh sorry as as large as um it's ever been and as small as it'll ever be. And so when you think about the history of crypto, the past call it year or so is really the only time in its history that's had a favorable and and sort of like embracing regulatory environment. it has survived through many cycles in very hostile regulatory environments. So even if um say there's a little bit more scrutiny in the future, say depending on the way some of the elections go or you name it, I think crypto will be just fine, it has gone undergone many battle tests and there are more entrepreneurs in the space than ever working on ways to make it really productive for the world. Um and and I think people are

starting to see that which is really exciting. >> Yeah, I think that makes sense. Um yeah, Danny, do you want to >> Yeah, I had a question. Um something I find interesting is there's this sort of framing around, you know, kind of parabolic growth in different ways. One of like total like value of things being transacted as well as now like the number of different things that are being tokenized. But um something big that you call out and I'll just I'll pull up some of the slides here, but like at the top top end, you know, we see there's some changes like you know, I think you kind of call out sort of like from cycle to cycle or 5-year periods. Um but it sort of correlates with some of the cycles that we've seen in the industry. Um but the top top end stays the same and there's even some

relationships called out here like top 10 as percent of the market near 90% and has been for a long time. Um, and then I think this other trend is really interesting. Just this, you know, it's becoming even harder to get into the very very top end of crypto. And obviously something like Bitcoin has sort of always been there. Um, and we've seen like Ethereum and and Ripple and some others sort of like stay or gravitate gravitate up there. Um, I guess the question is like do you see or like what's your view here? Do you think that top assets will sort of continue to solidify? Is there something structural there that lends to those at the top kind of compounding this lead? Um, or something else going on?

>> I'm really glad you brought up these slides. They were some of the some of my favorite in the deck sort of from a macro perspective. One of the reasons that I think you've seen this sort of compounding nature at the top is that there's real lindiness to the top assets. When somebody goes by word of mouth and says like, "Hey, you want exposure to this asset class. what are the safest things that you can invest in sort of the the least volatile and oftentimes you get somebody recommending Bitcoin to a friend or some of the others in in sort of the top that you have shown. You also see that um convert into the institutionalization of what types of assets um entities or organizations that aren't particularly cryptonative want to accumulate. They

also go through that same logic of what is Lindy, where can I underwrite the volatility? Where are there metrics that have been built out around this asset that I can start to underwrite something like Bitcoin? There's a lot more data and sort of frameworks for how to think about that than some of the newer assets that have existed. You can investors can start to reason about that. I think that as you start to think about what the assets look like in call it five to 10 years and whether or not it'll be the same level of concentration, it's a lot more of an open question and that my hope is we start to see many of the projects and sort of tokens that exist today get valued on multiples of earnings or sales much more similar to

how people think about equity investing. I think we are already starting down that trend and then the forcing function will be what are the best products and businesses that people can invest into. Part of that takes time. We touched on custody a little bit. You have to build out the custody infrastructure, the security infrastructure. The market needs to sort of come to some level of consensus around how do we think about metrics for these assets. Um, the other thing that I think is important is anytime somebody invests in an asset, it's just a way to express a belief about the world. And so when you think about the top assets that exist, many people are expressing beliefs, whether that be that Bitcoin is going to um be a version of digital gold or I'm sure

people that hold Ripple have a belief about that where they believe strongly that maybe it's going to be an incredible stable coin chain or something else. Maybe people look at Dogecoin and say, "This is the funniest meme that there is. I think Elon Musk is going to tweet about it at some point in the future." the the set of beliefs can really range from anything, but the the more that the market cap goes up, I think, the more attention some of these assets get and then of course the market cap can go down again, but they've sort of solidified their spot in just the the zeitgeist that exists and it takes a long time to replace that because another asset in order to replace that has to build up sort of the same mimemetic energy and sort of same level of attention and awareness about it.

>> Awesome. Great points. I think um maybe just one follow-up question there because I think it kind of ties into what you talk about or cover with data later on in this report, but you know, you mentioned how things might change going into the future. I guess do you have a particular feel maybe based on the data or what you're seeing kind of trend-wise whether you know those potential future top assets are going to come like natively from within the industry and like you know build out business. We see some examples today, right? Hyperlid and many others that are, you know, generating revenues and people are getting excited about valuing things based on um based on earnings for example. Um or from traditional businesses that that come on chain because I think you cover both and I'm curious like what your thoughts are

here. >> My hope is that both are really exciting areas to invest in in the next three to five years. I think that we are going to see more crypto businesses go public on traditional equities markets which is really exciting because you just get so much more data about what the underlying fundamentals look like. Like I had so much fun reading the circle S1 or like the the Gemini S1 that that's what I like to do on Sundays. Um in an ideal world you'll see those businesses go public on chain or tokenize their stocks. and the difference between what a token and what an equity looks like at least in some respects will start to um uh sort of decrease in that they will

start to look more similar. You can start to get a lot more market consensus around how these things should exist in terms of where there's more opportunity or what the the set of majors looks like. I don't know how much investment advice I'm allowed to give without our COO getting mad at me, but my the the way that I think about it is there's going to be interesting businesses in both. Um the the sort of cryptonative and the go public but then tokenize onchain or just go public and then try and think about tokenization onchain later. And the question really becomes what are the interesting businesses to invest in? And so you have onchain exchanges, you also have off-chain exchanges that are starting to move more

onchain. And so what the difference between those two things looks like in the future is kind of an open question. My hope is that they start to look more similar than different over time. >> Yeah, that's a um to follow up on that, the exchanges being on chain um uh specifically like gaining more and more attention, I guess. like was it shocking to see how much um volume dexes have started to capture from sexes? Um also follow up to that is do you think that's like a this cycle thing purely because we had a lot of memecoin volume which I think sexes could not um accommodate for as easily as dexes were. It's just very natural.

>> The thing that was most shocking and there's a slide on this in the deck around DEX to centralized exchange market share over time. What? Well, it was the the things that were shocking were sort of twofold. One, that Dexus really hadn't gained any market share from 2021 to the beginning of 2024. I think it was something like 6 percentage points of market share. Then over the course of 2024, they gained 10 percentage points of market share. And over the course of the first six months of 2025, it was another 10 percentage points of market share. So the rate at which they started to gain market share starting in 2024 was shocking, but even more shocking was that they just hadn't made that much progress before that. I think this goes back to the the three

compounding S-curves where the thing that really catalyzed more um trading indexes and was a forcing function for people to get wallets and onboard to Phantom or turnkey or you name it was really the set of tokens that got created. people wanted to express a belief about the world and and trade some of these tokens. The only place to do it was on chain because everything on chain is permissionless and um open for people to experiment with. And so at least one of the things that I identified in the report is this growth in DEX market share was really due to there just being an explosive number of new tokens created, people going onchain to trade those. Once you set up a

wallet, it then becomes much easier to trade some of the majors on chain as well. And I think that's really exciting. So it was almost like a gateway to somebody who had never used a wallet before trading say Pepe and then going and saying, "Okay, I want to sell this Pepe coin now. I'm going to convert it into ETH and start holding more assets on chain." Um, so my my hope is that this will continue to rise. I think we probably will see it continue to rise. It's also been a forcing function for some of the centralized exchanges to integrate with dexes. So, Coinbase is a leader in this front because of all the tokens that got um created on chain. They have now integrated with some of the dexes on

their L2 base. I think that's really exciting and it's it's also a major theme of the report in that I think that where many of the new protocols and sort of ways to utilize crypto assets will be built will be onchain but the way they get distributed may be through centralized frontends and we'll probably see more of that and the result will be greater DEX market share over time. >> Yeah, I think that makes sense. One thing I've been thinking about is it's definitely more and more memecoins like more more I guess like assets being issued on chain but another thing is on EVM like unis swap has very very um significant improvements but it's feels purely like on the back end as a user you kind of see the same UI all the time which is a good thing because you want a

simple UI but on I feel like on Salana for example they spent a lot of time packaging a bunch of these products all together like Jupiter is the example of this. They offer the same trading interface across maybe like eight to nine different backend products versus on the EVM side, it feels like it's like kind of a linear improvement like every time it's V3 went to V4 now. Um I'm curious what you think about that and I guess like I don't know how much time you spend thinking about architecture indexes. Um curious like where you see it all headed. Do you think like trading mostly stays on Salana? Um, do you think aggregators continue to dominate or is it like Coinbase and the based app becomes the big thing and we just all

get onboarded onto these applications? >> I think we'll continue to see trading on Dexes be crosschain. Anywhere there's an asset somebody wants to trade, we'll we'll see it traded there. We may have some bridging like I think Hyperlid has become a major spot deck now given that that is just where people hold their assets and they want to trade them. Do you see assets being bridged? On the whole, I think there's you you sort of framed it as there hasn't been as much innovation in sort of the Ethereum DEX landscape. That might be true to a retail user or somebody who's just interacting with the front end. I'll be totally honest, as somebody that trades on these, I don't notice that much of a difference. Where that may start to matter though, and

where I think there has been real sort of backend and efficiency improvements in things like the latency of execution or the depth of liquidity or even just how profitable it is for people to provide liquidity to some of these pools. That matters to institutions. It matters to some of the larger funds um that that are trading in the space and trying to trade on chain. So there there is real sort of impact to the progress that is being made for some of the some of the features that you mentioned like Jupiter has a great DCA feature or um it's much easier to set like uh like T-Ws or uh like limit orders or whatnot on Jupiter than it is on some of the EVM

apps. To me that's more a product question than it is a protocol question. and that there are ways and opportunities for the front ends to start to build that. Um, and so I guess that is a roundabout way of trying to answer your question of do I think Salana will dominate EVM or EVM dominate Salana in terms of dexes. I think the real answer is anywhere there are assets that people want to trade that is where people will go and then the things they care about are best execution and um sort of like the liquidity and speed at which they can get their order executed. There are incredible teams in both ecosystems in the hyperlquid ecosystem on base many other places that are working towards

improving these mechanisms and it's not we're not far enough ahead yet to crown anybody a winner. I think one of the things that we've sort of learned in crypto is the landscape can change pretty quickly and there are a lot of teams sort of working behind the scenes to try and improve different elements of of trading on chain. I will say overall if we get more trading on chain I consider that a major win and so that that is generally where where my hope is. >> Yeah, I think that's that's a very chain agnostic venture capital firm response which I think was a good one. Um I guess uh Danny unless you want to but in I have a question another one about kind of the interface. Are we good?

>> Go ahead. >> Um wallets I um they're starting to become better but I mean surely you expected also that they would have already been the dominant interface by now. They're not like I still have to connect to login. Is this um I imagine you guys have port codes that are wallets. Is this something that you can share that they're actively working towards? Are we going to like only be using wallets going forward or are we still going to have to do the connect to login type of interactions? >> H I don't know is the honest answer. I So we're investors in a couple of wallet

companies. We're investors in Phantom when we're investors in turnkey. And I'm sure there's one that I'm probably forgetting. So, apologies to whoever in the portfolio that is. Um, but with Phantom, Phantom is a destination that people go to. It's not just like a um a vehicle that takes you to where you want to go. You can do pretty much anything that you want to as just like a regular user in Phantom. And I think that is at least in part where the world is going in the world of going to each individual app and saying like connect to trade.

Part of the reason that that exists today, I think, is because people are using wallets like MetaMask or Phantom as as their home and then they want just like a more customized experience. The way that changes over time is with embedded wallets where you can start to get shared assets across all the places that you have the same wallet login. So if I am using turnkey on five different venues, ideally some future state of that is that it is one global pool of all of my assets that each of those individual identifiers or apps can point to and say like I know this is Alana's assets. I don't have to treat it as a separate distinct pool of assets. And that is probably one of the ways that we

we start to move a little bit away from the connect wallet. But I mean even even when you think about logging into any application, most of the time it asks you out outside of crypto, most of the time it asks you to log in or it does a biometric screener. There will always be some form of like one or two clicks to say like just verify that it's you um and verify that this is like what you want to be doing right now. >> Yeah, I think that makes sense. When you mentioned this pool of assets, I I remembered this. I don't know if you guys remember when um it kind of like I think molded the the Eve head when um they're like when Samani Kasamani tweeted out about um like Eve tokens

across like eight chains and they were all separate not funible obviously um or like not easily funible technically fungeible um and I guess that's what you're referring like eventually it'll just say balance and Rabbi kind of does this phantom kind of does this as well kind of does this as well it is surprisingly difficult and something that I would have expected for an intense provider to fix by now. Um, given that they are market makers who just want to bridge one asset from another, I feel like it should be as easy as Phantom talking to Dbridge and saying just do all of our bridging for us going forward.

>> Totally. It's it's a major pain point still. Even as somebody that's a cryptonative user and I interact on chain all the time, it is really frustrating to have all my assets on different chains. I think there are many ways to to fix that though. Um, and who knows, maybe maybe it'll be the the wallet's opportunity to fix it. Maybe it'll be a chains opportunity. Maybe it'll be a bridge. Like I know the relay team is thinking about this to some extent. So, there's a lot going on sort of under the hood. It just takes time. >> Yeah. Um, kind of related to the EH being everywhere um not funible is stable coins. You wrote that everybody's going to want a stable coin. That sounds like a nightmare. Um, how do you think

that like fragmentation of liquidity gets solved? I know there's like two teams working on this. I think one is M0. I don't know if you guys are investors or not, but this is me showing them. Um, I like their their their way that they've set it up. But, um, like apart from do you see that actually being the reality over the next three years? We see like 6,000 stable coins, one for each bank in the world. >> We are already seeing it. So, Cloudflare launched a stable coin. I think Fiserve is thinking about a stable coin. Stripe and Bridge obviously have a stable coin. Phantom is doing cash in partnership with Bridge. I think City is thinking about it there. The I I could probably spend like 10 minutes just going through the list of all the companies that are thinking about or have launched stable

coins. Anywhere that somebody has dollar deposits, it seems like the logical next step is how do you own sort of brand your own money? Um, one of the areas of stable coins that I get most excited about is stablecoin enabled markets. I think this is a perfect example of a new market uniquely enabled by some of the tailwinds that exist where when I want to go from call it Starbucks USD to uh I don't know like Cloudflare USD how do I actually make sure that that's abstract or how does a company make sure that the user doesn't feel that it just feels like they are exchanging dollars and one of the places that we can actually sort

of see where this has happened in history before is with credit cards. When I'm using um like my Chase Visa credit card and the merchant has a totally different payment system, there's an exchange of that credit where the there's an interoperability network that says, "Okay, how do we um sort of ratify these balances and say like this credit is good for that credit?" Therefore, to the user and to the merchant, it just feels like dollars being exchanged. We're going to see that with interoperability networks in stable coins. And so M0 has an interesting model in that any um asset that is issued via M0 has this sort of unified liquidity pool underneath it

where it is using the same I think it's called M0. It's the token um that that backs all of the different stable coins. There are also um companies that are building sort of top down where they say anybody can issue their own asset. It can be sort of on any white label issuers infrastructure, but we are going to create exchanges that are optimized for trading one stable coin for another and integrating with the payment service providers. We have a company in our portfolio that's currently in stealth that's working on it. Um I know that there are probably half a dozen other companies that are also thinking about it. My guess is there's room for a lot of these to exist and and and that the way that they differentiate and sort of

build new market infrastructure is optimized for low cost compliance integrations with the payment service providers. Some companies may require KYC and so just tailoring to the different customer needs. Um, but that would be I don't it's it's almost more like I think it's an inevitability that there will be a lot of different stable coins and so the question is what do you do about it and how do you try and minimize the the pain of the friction for the user as much as possible and not like should all of these exist? Do do you think there'll be a sort of like top-end concentration kind of outcome here like we see of with a lot of other things like for example in in DeFi today like you could make the case that you

can kind of like omnis swap any asset to any other asset if the liquidity pool exists but like by and large you probably have a USDT and a USDC and maybe even like a a wrapped Bitcoin or wrapped ETH pool for like any asset you want to trade or maybe like wrap soul if it's on Salana. Um, and then I I think when you look at like financial institutions, it's like, you know, Black Rockck and Fidelity, like they have their money market funds, and you know, when you hold cash, like you might just be holding whatever their money market kind of fund thing is, their asset is um, and then they can easily swap that to like whatever the most other available form of like cash is to then transfer to another institution. is I don't know would there maybe be an

expectation that rather than some kind of like perfect omni solution it's just like well you know there's tether or there's like black rock stable coin and that one's so big that we might as well just have a pool for that so that if when people want to swap out or transfer out of our uh network that they're probably going to use that one instead >> I almost think the question behind your question is really what creates defensibility for stable coins and I would say there's two things. One, there's a slide in the deck that sort of breaks stable coin issuance and how stable coin gets created out into three parts. There's the actual issuance, there's the distribution, and then there's the brand. Historically, brand and issuance have been coupled and then

distribution has been a separate thing. So, you see this with like USDC. Um, Circle is the issuer. They've branded it as USDC and then like Coinbase is a major distributor. Yes, this exactly. In the future, I think we're moving to a world where brand and distribution are coupled. And so if there um Danny, just to sort of answer your question, one way that you get defensibility for stable coin is you just have a distribution arm that is so big that it creates some sort of liquidity mo for the stable coin. It is so integrated across so many different ways to pay or pay with or utilize stable coins that that creates some level of stickiness and that it is just easiest to keep all of your assets

in this stable coin that has been distributed. Stripe is probably the the front runner on that category today. But there's a lot of open questions as to like if Robin Hood were to launch their own stable coin or major banks like how how does that change the landscape? Sort of an unknown question. The other way that stable coins create defensibility and it sort of relates to how stable coins in the status quo have gained traction is through liquidity network effects and integrations with markets. So one of the ways that Tether has sort of retained its dominant position is its integration as a base pair for many trading assets across so many different exchanges.

Similarly with USDC, it is so integrated across DeFi that it is just the most liquid and easiest asset to hold when you are sort of borrowing on a lending protocol or doing things like trading on unis swap or whatnot. In reality, the the the first call it 7 to 10 years of stable coins, all that adoption was really market driven. They weren't really being used for stable coins. was where do you get integrations across DeFi or exchanges and uses it as a collateral asset. The reason that creates defensibility is when you're thinking about holding call it like PYUSD and I want to go buy soul on a DEX may actually be cheaper um to convert

that into USDC or USDT and then go buy on the pair of USCT to Soul than it is to buy on the pool that is PYUSD against soul just because of the liquidity or the spread. So there are real switching costs if you're able to develop a liquidity mode. Um my guess is that much of the time for that is sort of passed. The the two ways that you might get it is if major exchanges like call it the NASDAQ or the CME decide all of their assets are going to trade against stable coins rather than fiat. Then they sort of king make a stable coin there. The other way you might get it is if there

are some new markets that emerge that are potentially cryptonative or maybe they come from the AI world, TBD and that drives a lot of adoption of sort of market integrations for stable coins. Otherwise, I think what you end up with is is sort of distribution remains king. I love this framing and maybe just to that point you made about king making like do you if you were to just have to you had to pick an answer today like if that were to happen say that outcome did did come to fruition would you would the expectation be that they'd king make something like a circle or a tether like an existing very large one or you know some some of these institutions would come in create their own and then they would decide to like you know together

let's king make this and and make it the new kind of backend for My guess would be that it's more of the latter and you would see something maybe almost akin to Visa emerge where does a consortium of different players that come to consensus on like we're going to create this new asset or this sort of new monetary network figure out some shared economics. The challenge with something like tether or circles they have their own economics and existing partners. The actual tech to create a stable coin is not that complex. And so what really does become complex is the economics, the sort of revenue sharing, the the ways in which they get used. And my guess is that

if we were to see like a new major one emerge, it it would be a con consortium approach. It's been tried, hasn't really worked out to date. But one of the things that's new and has changed since the last attempt is passage of regulation that allows bigger players to sort of get in the mix and really drive forward with clearer rules of the road. >> Makes sense. [snorts] >> I um you guys already answered my stable coin questions. I guess like one thing I wanted to bring up is this kind of feels like there was that time maybe like four or five years ago when state people were congratulating Starbucks on how much money they were making on their gift cards. I guess like that's the reason why all of these guys are going to have

their own stable coins, right? Just so they can collect the yield. >> Exactly. I I just think of it as branded money. Um and then if you it it is like an extra revenue line that a lot of these businesses can add and the cost to develop it or integrate it has gone not quite to zero but it's it's dropped significantly and so the and and similarly like the the difficulty of creating a wallet has dropped significantly. So, the combination of those two things make it almost like a no-brainer for anyone with distribution deposits to to probably build one.

>> Yeah. Do you think I want to share two slides because I think they get into this point really well. Um, we see it and I think, you know, you use the example here with Coinbase and some of the kind of productization that they're exploring. um and not just with stable coins but also with kind of defy and onchain markets but you know the earn the borrow lend the spend there's like different ways that they can offer these as products to their customers and then also you know maybe catch catch a few bips on some of that activity that they otherwise were not sort of collecting on so to speak but you also lay out this slide which I think is really interesting is all of the ways that really like are not being explored um quite yet or like maybe we're sort of getting there or we can see the future

to now with with some of this roll a lot of more stable coin adoption. I guess are there things that like maybe you're most excited about or like you know over the next maybe one two years what's really interesting versus maybe 5 10 years like where things are going >> h broadly new ways to utilize or productize stable coins are really interesting and you see a lot of that sort of on this slide. Um to date, stable coins are primarily useful in terms of crossber B2B payments or like one to many payments. So something like global payroll that is a perfect use case for stable coins. One of the things that's actually not on this slide that I

think is a really important piece of infrastructure as it relates to the endto-end stable coin transaction flow. It's last mile liquidity. And so today we live in a world in which many people who receive stable coins in foreign countries may want to offramp to local fiat. They may not want to hold USDC or USDT for whatever reason. And getting that conversion from the stable coin into the local fiat is more challenging than one might expect. We have a company in our portfolio called Open FX that is doing incredible work in this regard and I think there's a lot of opportunity there. But it's it's one of the areas where I think there's still sort of a lot of room to innovate. The other thing that's not mentioned on this slide that

I'm really excited about within the world of stable coins and it it's mentioned on a slide later in the deck is non USD stable coins. And so I think many people are excited about the idea of onchain foreign exchange where instead of going through fiat rails that may take a day or two to settle. Um >> oh sorry I don't >> it appears. Can you guys hear that? >> Okay. Really sorry. Um I'm gonna keep talking through it. Um as it relates to Okay. I think it's over. My bad. um or I guess building is bad but uh as it relates to non-USD stable coins it doesn't have that same market incentive

that USD stable coins had in that one of the things that drove adoption of USD stable coins was this usage as a base pair on exchanges when call it Chinese whales wanted to sell some of their Bitcoin but it was illegal in China to hold crypto they couldn't really touch the fiat rails and so what they did was they offramped offramped from Bitcoin coin into USD stable coins and it was a stable store of value. You really only need one or two stable stores of value. You don't need 100 plus um different stable stores of value. So the question is like what is the first order incentive for somebody to hold a Mexican peso stable coin? I think the answer is more access to yield. And so you see

different issuers that are saying like hey we are going to go and tokenize the Mexican peso. we will give you access to the underlying six to 7% of SATASE which is uh like Mexico's equivalent of treasuries. Um and then once you develop that liquidity you go and build onchain FX markets there's not that many people working on that right now. I think it's a huge opportunity and that's actually probably where I think like the most startup opportunity is. some of the things that were on the slide you showed. It's an open question to me like how many of these things are startup opportunities versus how many of them are sort of features or products that incumbents can build. Maybe the opportunity is for an incumbent to buy

one of the startup teams and have them work on it. Stripe's done that a lot. Coinbase is doing that some. I think you're seeing Visa, Mastercard, etc. start to look at acquisition opportunities. But really the the places that I am most excited about for startups are like new markets, places with liquidity, network effects, um, and then sort of some control over a scarce resource in the stack, whether that be at the top of the stack with attention and distribution, the bottom of the stack with the actual issuance of the assets and sort of control over the deposits. >> I think that makes sense. Um Danny was it did Brett talk about um this like Turkish LRA um strategy?

Do you remember? I don't recall but I know we do have um some of the loop scale team in the Xerx Research Telegram and they are frequently adding new assets like I believe the Mexican peso you mentioned Alana is uh there's maybe a market that's been thrown up on on loop scale. So we're seeing like small bits of this kind of propagate into DeFi at least um right now. I guess that side makes sense. One thing I was thinking about was like offboarding. I had to um buy US dollars in real life which is impossible to do in Europe um because it requires selling the euro and like going to the bank and saying I want to get rid of this and they ask you a million questions. So one thing is like I guess like in Europe we kind of have revolute.

I don't know if I don't think Americans care about holding other currencies to be honest with you. I don't know if I could ask this or not, but um I guess like there might be some space over there um to innovate, but yeah, that like yield thing makes a lot of sense. I mean, in crypto, people love yield and trafi also loves yield. So, and they're more comfortable with the currency stuff as well. So, seems like a Go ahead. One of the things that um maybe similar to to what Bach Bach is talking about and what you mentioned Alana is like I feel like you hear it now a lot more frequently like people have this thesis that stable coins and specifically USD stable coins are like the way for the US to like take over the world. So I I don't know what what's your thought

because you mentioned you know that this last mile problem is is kind of an issue um unsolved but if hypothetically or like in the future more and more businesses in even what are maybe third world countries today end up you know online and on chain and they have some of these solutions like credit and other things where you don't need the physical cash like is there a is there a point at which those sort of just fall off the map so to speak and everyone just ends up using these, you know, these digital dollars. Anyway, >> my guess is there will always be a place in the world for local currencies in that there's a lot of pride that comes from um holding local assets. It's familiar to people. It's what they're

used to. There are some economies that have started to completely dollarize. Like I think Argentina is probably a good example of this where the currency that they had just isn't as in as much use as it used to be and they're largely using US dollars. There's very much a world in which we see other countries move towards that. We may see countries start to react defensively and we already see some capital controls. It's an open question as to whether or not CBDC's will become a thing. Central central bank digital currencies um one one sort of version of the world that I

wouldn't be surprised if this happens is we see spheres of influence around different currencies that people align towards. So right now USD is a major world currency. It's the world's reserve asset. Whether or not that's the case in 10 years is something that a lot of macroeconomists are debating right now. What does it look like if it's not the this whole reserve currency? Maybe if you get spheres of influence of I don't want to list like a a laundry list of different currencies, but like a few different currencies that where you sort of have country alignments, then the actual reserve currency or like the safest currency becomes something like Bitcoin. I could very much see a world in that where if currencies become

politicized, the only non-political currency is like a non-s sovereign currency or asset like Bitcoin and that it's very much like a a world that we could go to. Hope that's not the or I shouldn't say I hope that's not the case. I hope that the dollar remains a um wellrespected currency in the world. I live in the United States. I um I think that it is important for the government [clears throat] to function in all all sorts of stuff. Control over monetary policy is like an important thing but but there's very much a world in which you could see like spheres of influence of currencies.

>> Yeah. A very scary world. Um I would like if there's I guess like this was the argument right was if what you said happens where it's like Bitcoin is the dominant reserve currency. It's it kind of means that the US doesn't have the pull that it does. And then if the US doesn't have the pull that it does, it's that's a scary world. Um >> to try and be an optimist, I think it just means there's change and how we manage that change is important. Again, like I hope that the US retains its influence. Um so I want to be sort of clear about that. But even if it doesn't, like the US has changed its underlying sort of backing for the currency before. we've seen monetary changes and in in when it like went off the gold standard into just fiat. And

there's a question is just like how do you do that safely and in a way that um [clears throat] tries to make the world better. >> Yeah. >> Yeah. I I'll lean optimistic with you here. Like I I do think you see a lot of non- major currencies that struggle to kind of like fulfill the needs of their local citizens. So if if there's a a meaningful way to you know combine or form a kind of inter nation um you know currency that I mean Europe has the EU for example with member countries. So you could see that in Africa or other places as well and if maybe that helps kind of stabilize the some of the issues that that occur with having you know a different currency in each nation. We also see like

>> totally >> bricks bricks as an organization like have you know they've talked and sort of explored some of these ideas. I don't who knows if they'll ever get there um in like some adopting some sort of standard but um maybe the bigger issue is just that you have some countries that really struggle to uh sort of uphold their own their own national currency. So we could go to more spheres more larger spheres than we have today but not necessarily like it doesn't have to be USA versus China World War II type of thing, you know. [snorts] >> 100%. I I think those are really good examples and like economic interdependence between countries when done right is actually a really stabilizing force and so it's there's a lot of reasons to be optimistic as well.

>> Yeah, maybe it's the European in that is constant [laughter] >> or maybe it's I I guess like cuz I'm Turkish, right? And like I know what the what happens when your currency is not very well respected anymore. Maybe it's that that it's h but yeah, I could see other positive things also happen. It's important to be an optimist. Um Alana, I realize we've spent 45 minutes um grilling you about questions. I I I guess like do you have any questions for us? If it feels like it feels like it's a it's a good time for you to say, did you guys actually read the report or not? Like >> or some final thoughts, big takeaway thoughts.

>> I just I feel bad because we asked maybe like 35 questions. >> I love it. I love answering questions about the report. To your point, it is really long. I I think it's worth sitting down and reading through, but at the same time, there's so much context that I couldn't put into the the report. So, I guess my my request to anybody watching this would be go check out the report. It's in my pin tweet on X. My handle is Alana D1. Um it's also on the Variant Fund website at variant.fund. Reach out if you have questions. I'm probably going to try and publish a series of blog posts that expand on some of the themes in the report as well. Um, one of the things that I'm I'm really looking forward to and hoping for more

of from folks that dig through the report is just like what do you disagree with? The reception has been incredibly positive so far and I've really appreciated that. It's probably the nicest people have been to me on the internet in a long time. Um, but like bring out the haters. I want to I want to know what you disagree with and sort of what I can dig into for for the report next year. Um and so yeah, my main request is just go check it out. Let me know what you think. My DMs are always open. >> Very good. >> Okay, Alana, thank you again for coming on. This was fantastic. Um Danny, do you want to roll us out?

>> Uh yes. Actually, we do have to very quickly, Alana, I want to say thank you for coming on as well. Uh before we close things out for the day, I do have to do one shout out to our sponsor for today's stream. Uh thank you to Uniswap for sponsoring today's stream. We did chat about unis swap a little bit uh and their V4. UniS swap trading API solves the problem of adding crypto to your products without the hassle of needing deep crypto expertise, ongoing maintenance or liquidity aggregation. The trading API provides access to the unis swap protocol which has processed 3.3 trillion in all-time volume. Handle over 465 million swaps for more than 25 million addresses all with zero security breaches. Developed by Uniswap Labs, the USB team behind one of the most used DeFi apps. Access some of the deepest liquidity in crypto, combining both

onchain and off-chain sources for optimal pricing. The same liquidity that powers billions and swaps now available via a singular API. Thank you so much to Uniswap. Thank you so much to Alana for joining us today. And thank you all for watching and listening. We will see you all on Friday. Have a good one. Heat. Heat. [music] [snorts]