Permissionless III: market sentiment and the shift from infrastructure to apps

Transcript

GM good morning welcome to the milk Road show The Daily crypto show that sums up crypto faster than you can skip a Netflix intro I'm your host Jay Hamilton and today we are joined by Jason yanowitz co-founder and CEO of blockworks as you can see we're coming at you guys from permission list super excited to be here at permission list 3 in Salt Lake City we're going to be talking about today how conferences are a leading indicator for where markets are going also how we can understand how they are an indicator for where Market have been we're going to talk about new tokens launching in the next 6 months and we're going to talk about a shift in the market from infrastructure towards app that Yano sees coming Yano great to have you on the show Jay good to be here

you guys uh milk Road rolled deep to permission list we love we love to see it we love it love recording in your podcast Studio on mil this is great we really making friends here at for okay let's start with permissionless the conference this is your third year doing it tell us how how do you feel the conference first of all but also based upon the turnout and what you're seeing at the conference what does that say to you about where we are in the market cycle right now yeah good question okay so the conference is is amazing we've been hosting this for three years so the conference is called permissionless 3 and the reason that we don't just call it permissionless you know year after year is we like to basically delineate by conference is kind of this uh Mark in

the sand and Mark in your memory of like where the industry was at at a certain moment in time and it feel feels like so if you go back 2022 permission list it was right after teral Luna blew up it was 6 months after the kind of prices peaked and everyone there's kind of still this like sense of optimism but a little bit of worry all right 2023 permission list last year there was a u deep sense of dread I would say and basically it felt like we' all kind of bunkered down together in this deep sense of dread the SEC was you know issuing lawsuits you know like they were candy this year is I think everyone kind of feels like there's this change that is about to come that hasn't actually taken place yet conferences are you

mentioning leading and lagging indicator the output of what you're seeing today happened 6 months ago so conferences are a really good indicator of where the industry and was feeling and what what the industry was really feeling six months ago my takeaway from this is everybody on site if you there's there's a really large sometimes there's a alignment between how people feel in person and how people feel online right now my my takeaway is there's a massive discrepancy there's this big gap between the how online sentiment is versus in-person sentiment and my summary would be online sentiment is concern and we've had several months of price consolidation and there it feels like

you know kind of angst around like what are we even really doing here in person right now it feels completely different I would say the entire you know the there's thousands of people here and there's an extreme amount of excit exitement and optimism about really kind of like what happens post election everyone election 30 days out everyone's kind of waiting on that so my takeaway from this is like yeah people online are not don't realize what is about to come in the industry hell yeah I feel the same way and and being here on the ground you really feel that energy in a totally different way than you get online which is why everyone should come to permission this next year but you guys do other conferences as well and you mentioned before we started recording that you guys have another conference coming up tell us a little

bit about what you're for that conference and what that tells you so we have two conference Brands we have permissionless like deeply crypto native audience we have another brand called digital asset Summit Das we have our 10th Das coming up in March 2025 we've been hosting it for several years basically since blockworks began we have never in the history of blockworks had an event with we recently announced it and launched it a couple weeks ago we have never in the history of blockworks had an event with so much Demand right out of the gate so when you zoom out and think about the this idea that conferences are a leading indicator what we are seeing on the ground is that people are not like slightly underestimating they are drastically underestimating this onslaught of

capital and institutional Capital that is about to flood into the space and the reason we know that is because we have these unique insights from who is agreeing to speak at the event that has never agreed to speak at the event these are politicians these are institutional Capital these are the big LPS and the GPS of the world and then also candidly the sponsors right the protocols and what they do with their dollars are actually good proxy for I think where they believe the industry is going so when you see a lot of sponsorship dollars flooding into an event it's the backbone of that is this is the idea that a protocol is bullish on on the future right that's what we're seeing and that's what's leaving us like very I would say a lot more excited about the next six months than I think most people

online are M it's it's so interesting because you have a podcast as well and it's always this balance of I don't want to seem overly bullish because I don't want to be that guy who's just screaming you know the most bullish thing every day but I honestly really do for the first time ever feel like most people aren't bullish enough do you feel we're getting I mean okay zoom out to macro you're getting let's not over complicate this the dollar is turning over right we're going into a new dollar regime we're going to a new potentially a new administrative regime based on polling and markets it seems like 50/50 we into a new administrative administrative regime and you're going into a new interest rate environment right where

we've the last couple years have been interest rates yanked higher than they've been in decades right so now we're going into a lower interest rate environment it's like let's not let's not over complicate this folks it's uh we're we're entering about as bullish of a setup I think as you could you could ask for yeah and I think you nailed it earlier when you said that the key date that everyone is circled in their calendar is the election and I don't really think it matters sure it matches at the edges who wins and there will be different decisions that would be made of course and it seems like Trump would be more bullish but the show goes on and I think at this point we just need to get past the election we just need to remove that uncertainty yeah I mean my two quick thoughts on that are and I

think this kind of topic has been beaten to death a little bit but the thing there's a little more Nuance than I think people like to discuss with like oh Will trump be better will comma be better okay so the first thing is that markets don't like uncertainty and the market crypto or not crypto the market just wants an election to happen and they just want something to be picked so we can get the uncertainty out of the market so kamla's KLA bullish for the markets Trump bullish for the markets and I think people who say Trump bullish comma bearish don't really don't really understand that the second thing is that I don't think it's that Trump is amazing for crypto and KL is the worst thing ever for crypto I do think it's that crypto in the United States will do much better under

uh Trump presidency KLA if she follows the Biden Administration and the this current SEC will do worse than the United States but the industry as a whole is going to flourish over the next four years no matter who's President no matter what I completely agree okay let's shift gears because you have some unique insights not just from the conference business but from some of your other businesses as well and I want to chat about the way you see the current landscape of how many tokens there are currently versus how many tokens there is coming and how you think investors need to think about their positions Now versus what's going to happen in the next six months bull market or not okay maybe we can start to

segment this out into four groups of tokens there's the initial batch of tokens that was kind of like the Ico era to like 2020 right it was a it was Unis swap compound folks maker folks like that and those tokens the way that they issued their supply a lot of them did icos and a lot of them had a large percentage of their supply was out in the market early on so you got to a real valuation quicker that was the first bucket second bucket is um what is happening right now and it was all mostly infrastructure some some defi apps but a lot of l1s and l2s and folks like that all right second wave which has been mainly 20121 until 2024 our infrastructure where the common idea of

how to launch a token was low float high fdv so you you actually issue a really low amount of your tokens into the public and what that does is it kind of artificially inflates the total uh value of your token so that's what people refer to as low float High fdv tokens and they seemed really exciting because they're doing all these cool things a lot of the l2s are like this however what that comes with are these massive unlocks where all of the buying ends up getting eaten up by more tokens that are unlocking into the market every some people do monthly some people do quarterly some people do yearly but those unlocks keep eating into the buying demand which is why the L2 a lot of the L2 tokens are not going up all right so that's wave two wave three are what nobody is talking about for some

reason which is they're about let's say 800 to, 1500 tokens that are going to launch over the next several months and most of these are most of these folks are waiting for the election I would say so they're waiting for a slightly better Market they're waiting for the election um but my I mean because of we have this advisory business and we have this research business and we have media business we can we have a really unique insight into what's coming over the next several months what's coming is an onslaught of hundreds if not probably over a thousand tokens and I think the difference will be that those tokens understand that low fdv high float is a bad model to have your community make money your community is

not going to make money so they're actually launching it what are what is most what I think is a much more reason able valuation and so for the milk Road audience to understand now is not the time to be to basically pick your winners and say hands up I'm not I'm not going to buy anything else the rest of the cycle I think there's going to be a lot of really really really interesting new opportunities that come that's wave three and the last thing is wave four which are going to be the app tokens that that are going to come so we're going to see a poly Market token in the relatively near future infinex is an app that Kane the founder of synthetics launched you're going to start to see these apps where people investors and their token holders can actually make money and that's going to cause this

onslaught of app tokens probably in the latter half of 2025 mhm when you zoom out and look at the current state of builders in the space you mentioned the infrastructure was really the focus early on and we still need to build the infrastructure but I'm curious everybody's been talking about apps for so long and we all want apps and we want apps that hundreds of millions of people use and we're all kind of sitting here waiting and and don't get me wrong I do believe that you know speculation is is an app in itself and it is a use case and we do have apps that have I mean the exchanges have achieved that what do you think we're going to see from the app side is it going to be more speculative stuff or is

it going to be different use cases that we haven't seen yet where do you think it's going to go I think my copout answer is yes and it's all of the above so the first thing I'd say is we have actually seen there was a wave of app this was 2020 there was a there we've already seen one massive wave of apps and we we saw what it did for the industry that was def summer right Unis swap is an application a is an application compound is an application we actually saw a wave of apps but the problem is those that was four years ago so people are sick of it so now people need a new wave of apps I think there are two things that will happen one is you can look at the token markets to tell you what is going to happen next

and the private the relationship between the private Venture markets and the token market so what I mean by this is as long as there's a a way for tokens to keep launching and going public at higher valuations than the last private round we will continue to get infrastructure and protocols but you're just starting to see that roll over so you're seeing folks who may be raised at a $3 billion valuation in their last private round going public and launching a token at a $2 billion round2 billion doll valuation so what that does is it disincentivizes the inv vors to go invest in and Lead rounds in series a series B whatever in the infrastructure so you're going to see these uh investors just by a not necessarily

because they want to but because they need to make returns they need to invest in the applications that's the that's one of the things that's going to happen the second thing is um some of the applications are going to start making money right it's infinex it's poly Market launching a token and then the third thing is to your other question it's there is going to be a lot of speculative apps I think I think speculation pulls people in no no different than how other industries were built right oil in the 1860s and 70s and 80s like speculative Boom the railroads right in the 1850s speculative boom like that that's how Industries are built to speculation I think what will be different is that it's speculation on culture and Society instead of culture uh speculation on financial assets so

the biggest difference being yeah sure Unis swap let you bet on financial assets different tokens there is going to be a hundreds not even dozens hundreds of applications that let you bet on and predict and play with your friends and bet on will Travis Kelce and Taylor Swift get engaged will Mr Beast say the word elephant in his next video and that's going to bring this massive amount of speculation into society and culture most of those will fade away and they'll be irrelevant and they might have too much speculation but a few of those will stick and those will become the new Unis swaps AES makers compounds where there's the Everlasting applications that you know A's been around for 9 years now so I think that's what we'll see amazing amazing okay

final topic before we wrap up here is you mentioned before we started recording that there is a problem with valuation Frameworks within our space and not a problem just is a lack of them to be perfectly honest if you look at the traditional Finance markets they have such well-developed valuation for Frameworks for how they think about their Investments what are your thoughts on the valuation Frameworks within crypto yeah so traditional Capital markets have these valuation Frameworks like you mentioned like price of sales or you know eidon multiples or Revenue multiples we don't have that in crypto and what that does it limits the limits the amount of institutional Capital that can come in because when they look at optimism at a insert your billion I

don't know what their valuation is but you know several billion dollar valuation is that a fair valuation not a fair valuation so the first batch of this was I got to give credit to token terminal they did a nice job of starting to put these p&l statements around protocols and l1s and stuff like that what they got really wrong is they just got the metrics wrong right so they started to look at and and other people too not just them but they started to look at something like profit they were like profit equals fees minus issuance or profit equals burn minus issuance rate that is uh what they're trying to do is apply a they're trying to apply a company metrics to a what is a commodity right salana is not a salana is a commodity yeah eum is a commodity asset it's not it looks much less like Equity

much more like a commodity so we think there are three valuation metrics that we think are really important and that we will become important there's total economic value real economic value and token holders net income so total economic value is fees plus me tips plus issuance that's total economic value real economic value would be the network fees plus the me tips and then the token holders net income would just be the real economic value minus the operator payments and that was probably a bunch of gobbly g whatever but I think what we're trying to do with these new basically metrics that we're introducing into the industry is our belief is you improve the metrics you improve the industry and I think that's

what that is one of the things that will unlock a new wave of capital coming in well and you also put everybody on the same playing field where we're talking apples to apples instead of apples to oranges so many so is arbitrum better than optimism are they better than uh and how do they compare to zky and how do they compare to polygon and then can you put compare that to salana We Believe yes you can compare all of those things and you could say it's basically like saying what's the revenue of this company versus this company what's the profit of this company versus this company and we believe that total economic value real economic value are the ways to do that so I love that excited to see more come out of that excited for us to share that with milk Road audience too Yano thanks so much

for your time today thanks for sting down with us thanks for having the team uh milroad at permission list it's awesome awesome to spend time together yeah grateful for what you guys do you guys have built the like one of the best media companies in a very quick amount of time in crypto so just yeah grateful for everything thanks for just big big hug it out here hug out exctly love it thanks so much for listening in everybody have a wicked awesome day as always if you liked today's episode please hit subscribe and make sure you follow us if you don't miss out on the next one there's also a link in the description through our free five minute daily newsletter where we simplify crypto for you well making you laugh and if you're willing to step up your crypto investing game we're going to also leave

a link for milk Road Pro you get access to our portfolio where you can see exactly what we are buying this is your number one resource to help you invest successfully in crypto one final note this show is for educational purposes only and nothing we say is financial advice investing in crypto or any asset is risky and you should never invest more than you can afford to lose thanks so much for listening in my friends have a wicked awesome day