Six crypto megatrends for the next decade with Milk Road PRO's Martin Toman

Transcript

GM. Good morning. Welcome to the Milk Road Show, the daily crypto show where being early in a secular trend feels less like conviction and more like being the only guy at the party. I'm your host, Jay Hamilton. It's Thursday, September the 25th, and today we are in person with the one and only Martin Tommen, the head of Milk Road Pro, our crypto investment researcher. This guy spends all day every day reading, writing, and investing in crypto. And we want to talk about a few things.

We're going to talk about the six most important trends or opportunities that Martin sees in crypto, not just right now, but more in the next decade. the themes that he thinks the secular trend of crypto has the biggest opportunity to ride. And you're going to want to make sure you stick around for all six of these themes because if you are thinking about your portfolio and there is a token in your portfolio that is not taking advantage or not on top of one of these trends, you might you might want to reconsider. Let me just say that before we jump in. Martin as our pro report writer also has a great pro

report coming out this weekend all about worldcoin or world network. So make sure you guys check that out if you're a pro member. If you're not a pro member, hit the link in the show notes to go pro today. Today's episode is brought to you by Figure Markets. Grow your cash like a bank. No lockups, just real returns. It's also brought to you by Nexo, the platform that grows your crypto without locking it away. With that, Martin, what's up, man? >> Hey, thanks for having me. Yeah, good to be here. So, we're we're together right now. We're in Croatia. We're on the annual Milk Road Retreat. Uh and the other night was Martin's birthday. And so, we sang in Happy Birthday. And then, uh you very honorably stepped up in front of the whole the whole company,

whole crew, and and gave a little bit of a speech. And in your speech, you said that you believe that crypto being present here, being early in the trend of crypto, the secular trend of the future of finance is a rare opportunity and particularly a rare opportunity for our bank accounts because if you allocate correctly in these types of generational opportunities and you're patient, then you can make life-changing wealth. Uh, which was very inspiring to everybody on the team here and everyone was really excited. But why do you why do you have so much conviction? Why do you feel that way?

>> Um, I feel like uh until we're at this point we were just fighting with SEC and regulators and it was really hard for this industry to succeed. That said, I think the success is inevitable and we see that all the tailwinds and all the positive news pretty much every day. So, I'm just uh thinking that the the secular trend is quite obvious and it was a couple bumps on the road, but now I think it's really going to accelerate. And if you you know if if you um just watch news or listen some uh big guys talking from Wall Street or some uh really big funds they are all super bullish on crypto and it's not just

saying that they are bullish they are building and they are investing and yet there is still a lot of money on the sideways but uh I think a lot of money is coming in and like macro is now suggesting that we should have pretty positive Q4 and on. So, um yeah, I think if investors are allocated in crypto these days, the next few months are going to be super positive. And uh then if you zoom out and like don't try to time cycle, you will do extremely well as well. So, but like you know, as Ro Paul says, don't [ __ ] it up. Like it's so easy and there is a ton of [ __ ] coins and different hype tokens. Just just don't do it. Just try to really take it

seriously and think about it like, okay, this is the opportunity today and I don't want to [ __ ] it up. Take it seriously and invest in in the biggest coins or like something that makes sense and that's here to stay. >> So, um, yeah, but I feel like not everyone is taking uh advantage of it there. A lot of people are still using crypto as casino. >> Yes, it's fine. It's fine. I I got it. But uh again like this opportunity won't last like forever and the sooner you get it the better.

>> Mhm. Mhm. Yeah. It it it strikes me that uh I mean don't [ __ ] it up or be patient. Uh these these lines that we hear are could not be more true especially in moments like this when everybody is so obsessed with the daily price action and everybody just wants to look at their portfolio balance and see it go up and then we have these ridiculous expectations which are that we shall we deserve or should be getting you know 5 10x 20x returns on a regular basis. But there is truly a very simple opportunity and that's you know what we're going to talk

about today is when you hear it broken down the way you break it down it it feels incredibly simple and straightforward. Why why do we have this problem in crypto investing uh that doesn't seem to exist as much in other markets in traditional stock market investing, real estate market investing, they don't seem to have this same problem of I don't know a lack of maybe it's it's the wrong information or the wrong direction. Uh where how do you see that problem? Uh I think the problem is because again most of the participants today are not like sophisticated investors or like any serious investors

like at all. So like you know it creates like when like all your success depends on the people that the only thing that they care about is like if you are on you know uh uh in all the titles on newsletters or like if you are just uh getting attention on crypto Twitter but this is like the the current state of of crypto I would say. So it's still filled with the people that are there for speculation again or like it's not really sophisticated market participants who cares about like the the the sustainable fundamentals you know and but that's what we do and like I feel uh the our approach for for milkro is like

uh you know what works for crypto for a stock sorry for S&P 500 it's pretty simple you just want to invest in successful businesses that are profitable and that are here to stay and you know you can use discounted cash flows or whatever you want but those are sort of a time- tested approaches and like I think it's so simple to just take what works in thread sort of uh bring it to crypto and try to apply it to the protocols that exist today that are uh focusing on generating those profits and make uh token holders happy and I think not many people do that Um, and I think once more people are coming in with this

approach, it will push and create more pressure on the things that really matter. So, yeah, I think it's changing. >> So, there's a there is there is still considerable alpha in what you're saying, not only not only in the the secular trend of of crypto and just being early to all these new protocols and I mean, there's new projects. It's easy to say, "Oh, I'm late because Bitcoin's been here for 15 plus years." But then it's like hype was just created a year ago. So there is not only is there new legitimate projects to to invest in, but there's also this sort of gap in the the information available the investment research and the investment

reports available to investors which are not nearly at the level of what's available on the in the traditional financial markets where there's been investment analysts for you know 50 years more creating that type of so there's There's this there's a bit of an edge then. Yeah. And is that is that why you think there's an opport because you clearly believe you know you spent years in Tradfi as well. You clearly believe that being here in crypto is going to allow you to outperform had you stayed focused on other markets. What what do you think allows you to outperform in crypto?

>> Well, the reason why I went all in into crypto is because in Fredfi it's really hard to generate alpha. It means like if you compare your performance whatever you do with S&P you might be able to uh outperform on a one year or two years but like in the long run almost impossible you can but uh it means that you are just taking much more risk you know but uh in crypto obviously crypto is risky like uh let's be honest here but uh you can also try to sort of mitigate the risks and uh while still having a pretty big upside. So, and the other thing in crypto why I think there is still alpha

on the table is um there are no like the the informations that are available uh on the public uh websites or uh trading platforms, data platforms, it's so fragmented and sometimes it doesn't even exist. So like I landed my first job by just uh analyzing some project and I I was interested how many users do they have what what TVL how many fees they generate and this data was non-existent. So I went uh to you analytics and built that dashboard myself and it helped me to get a job. But uh I mean it's it's back in 2020 so now it's it's much better but it's still not like perfect.

You mean like just try to imagine bring some uh experienced stock investor and just try to sell him I don't know um a or laido it's going to take a while because like you cannot just go on one website and see like okay these are revenues these are expenses it's so hard but I think that's the missing piece we still need and also as I was just saying earlier it's because people are not really creating pressure on creating these metrics and board because people don't care like they care only about okay what is TVL going up okay now it's meta it's now meta is buybacks okay buybacks are cool but they what if there

are incentives you know if incentives are higher than buybacks then it doesn't make sense at all but that's fine you know meta is buybacks so like uh >> yeah I feel like the the the the highle picture of the business is really hard to get and al also one more thing is it's really hard to get how many tokens is held by the DAO. >> How there are always some new unlocks happening and stuff like that. So sometimes people look at coin geko or coin market cap and they see okay uh market cap is uh 1 billion but FDV is uh 15 billion. So it's just enormous amount of money that's probably being unlocked

to the market in the future. But that might not be the case. Right now there's a proposal on hype to burn 45% of their circulation of their token supply because most likely it would never hit the market anyway. So you know you are >> 45% of >> 45% of hype token. Yeah. >> So what that would do to their FDV? >> It would reduce by half almost. >> By half. >> Yes. >> Wow. Yeah. And stuff like that >> and most people aren't even paying attention to stuff like this. >> Yeah. But uh the thing is like you know as I said we are bringing sort of a traditional approaches and these tokconomics side that's the nuance of crypto. So if we are fine if we like our job is to like combine those two things

like learn about the tokconomics how much tokens is owned by DO how much is like really in circulation and how much is going to be unlocked in like one year or three years that's my our job and then combine it with our like traditional approaches like DCF and stuff that's our >> it's interesting because it strengths me as the best riskreward approach approach to crypto because what we we're saying is that there is there is an ability to take fundamental asset analysis based on what makes businesses successful and has made

businesses successful for decades and then apply that same framework to crypto and no one else is doing that essentially. And so if you just simply do that by and part of being able to do that does mean you need to be cryptonative and understand tokens and onchain data and how to collect a lot of this data because a lot of it maybe is as you said it's on dashboards but it's not either it's often wrong to be honest or it's not well put together often you have to contact the teams themselves.

So, but there is this there is a basically an opportunity to simplify crypto into a package for investors that says, "Hey, use use traditional business models though. Don't don't go and don't go and try to create a new model of what you know crypto could be in a way that we don't even understand right now. Just look at revenue and users and these basics and use that to form your investment." Like a good example is 99% of traditional stock investors the the main metric they all use is price earnings ratio.

>> What do you think that crypto use? There is like >> there isn't non-existent P ratio. What why the hell is that? You know, so it just shows that people are not really pushing protocols to report stuff like that. >> But uh I hope it's changing. Mhm. Mhm. Yeah. It's It brings up the interesting uh dynamic of I think a lot of crypto investors can come in with a bit of rosecolored glasses of oh, it's so nice to be in a market that is fully global and investable everywhere and has 247 trading. So, it's not like these these other markets that close down in the evening and close down on weekends. And oh, it also has onchain data where I can

permissionlessly see how many users they have. I don't have to wait for a quarterly report. But that is not necessarily a gift really as an investor. It might be more of a burden, more of a distraction unless you have Martin here who is actually analyzing all that and putting it into a format that makes it easy. I actually think that um quarter quarter reports are really good because it just brings all the attention into one day to reflect those metrics. But when it's like 247 like you know today I'm gonna check you know data for some company but no one cares today specifically today

>> someone will uh will also look into it in a week or in two weeks but like >> I think there is some some kind of some good about it that it's like in one specific date that the whole Wall Street is like okay what's Nvidia about to report and everyone is watching it and you know and then like okay [ __ ] they they said that uh I don't know revenues are going down what's going on so it's sort of I feel like uh there's what four times a year there's a times where companies have to report and it brings all the analysts and all that intelligence together to really see like what's going on and sort of analyze it >> versus when it's continuous job then it's like you know it's never like

>> yeah it's never the focal point and and it's also Because crypto projects don't have standards on not only do they have standards on when they report, they don't have standards on how they report. So even if even if every crypto project did do quarterly reports, which I know to crypton natives is going to be like it sounds gross to say that, you know, like it's like sort of like, well, why are we going backwards? But even if we did, the reporting would be wildly different. Everybody would value different metrics because and I'm going to tease a little bit right now that you've been working on some stuff.

you're cooking on some stuff in the next quarter that you might bring out around this. What is the one metric to rule all metrics in crypto investing? But that's that's for another show in the future. Okay, let's let's jump into these six trends because I do think that for everybody listening, there is this great opportunity to these trends are not new. They're not things that I don't think most of our listeners maybe haven't heard, maybe not framed in this way, but understanding a really taking a hard look at are all the tokens that you are invested in in your portfolio, do they match one of these trends? Cuz if they don't, not saying you shouldn't be invested there, but I think you need to

understand that that is much more speculative and you're probably gambling in a big way. And then the second thing is if you really understand these trends, you just develop so much better conviction. And damn, conviction helps a lot when the market is not doing what you want it to do on whatever day of the week. So, uh let's let's jump in. Okay, so first trend, uh I'm trying to remember who said this the other day. I think this was Avichel Gar um from Electric Capital who said that uh I asked him about the convergence between fintech and crypto and he said it they're they're converged. He just said fintech is crypto now. What's what's going on with with the that convergence?

Where are we at? Yeah, I think um fintech 2 point let's say there is traditional banking like all the apps and very slow to adopt and like uh user experience very poor and then all these fintexs came in and it's just a better wrapper of traditional finance most of the time but uh you know just improved user experience and user interface just brought like you know um Robin Hood revolute or New bank they have like a tens or new bank is close to 100 million of users. So it's really is uh that the not real disruption but just a better uh sort of a wrapper and

interface of for traditional banking. So let's call it fintech 2.0 and then you have like fintech 3.0 know which is you know it's not just a better rapper of traditional banking. It's disrupting in a way that it's no more using uh traditional railways but it's using blockchains on the back end >> and it's just opening so much new markets and also obviously the costs are going down very dramatically because like uh everything is just settled and managed uh via smart contracts and uh on the blockchains. So I think this is quite obvious and I guess everyone saw that uh the headlines with Robin Hood or

Coinbase and they are now pretty much everyone is building their own either layer ones or even uh layer uh layer twos. Um so yeah I think this trend is inevitable and it just become a standard I think. Uh so it's going to be like u you know some people were very skeptical and didn't use internet so it will be like okay you really need to use internet and now it's going to be the same for all these financial webs and fintex and nail banks they will have to be on blockchains >> mhm why do people invest in real estate because it spits off cash flow but I'm not here to manage rental properties that's why I'm looking at figure markets their new democratized prime product

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have much larger distribution and incredible apps that are much easier for the average person to use. So how do we how do we think about it from an allocation perspective in terms of uh I I mean two questions. One is do you do you think about it like a good chunk of your portfolio should be in fintex because they are going to ride the crypto wave and then within that which specific to fintex do you like? >> I think fintex are in a good position because they were sort of disruptive once and now they are sort of disrupting again. So like uh they are fast movers and they prove themselves once and I

believe that the steps they are doing right now are are great and like inevitable you know but then you have like traditional banks or someone else uh whose business is still using the old systems but might like uh benefit a lot if they are using this infrastructure. So like it it it might not be necessarily for all crypto investors but like if I hold stocks of JP Morgan or Goldman Sachs or someone I would be really worried because the whole world is pretty much going uh on blockchains and fintexs are now like if you see the traction of how many users are those fintexs able to get um that's that's much more the the pace is much more

accelerating than uh the traditional banks. So it doesn't necessarily need to be like okay this is happening because it it gives you like uh it it boosts your margins and it reduce your cost and also it increases your total addressable market but it might be like okay but uh I think that the the stocks that I hold today do not represent that category. So it might be like okay I should really challenge that position now because they are not like adopting it fast quickly enough.

>> Okay. Uh I'm not going to ask you the exact portfolio allocation but I do know that some of these fintexs uh circle uh Robin Hood Coinbase some of the fintexs that we've mentioned here are part of the Milk Road pro portfolio. Uh so for anybody that is pro or you go pro you can see exactly what percentage u Martin and the team recommends within that not financial advice within within that maybe I know I want a little bit of alpha I want to tease a little bit of alpha from pro so you wrote a report recently on Robin Hood is that can can you tease some share some alpha from that with us but I think we will get into it because then I want to talk about more opportunistic upside that

like all apps are eventually going into and that's the race for becoming a super app. >> Okay. Okay. So, we'll get to that. >> This is sort of a backend stuff, right? So, like you do your business fine, but you might consider using blockchain because it it gives you some benefits and that's the trend, but we will get into like super apps later. >> Okay. Okay. We'll get there. Okay. Uh okay. Second trend that you're seeing is that cryptonative capital is moving into traditional industries. This is not something that we talk much about like you're talking about like crypto capital going and buying a traditional telekcom business for example. Okay. Tell us more about this

trend. >> Uh this is sort of more complicated for investors to sort of uh get exposure to but there are a lot of funds that get a lot of experience from uh being in crypto for many years and building crypto products. But uh there are still a lot of traditional businesses who are not as let's say proactive as these fintexs or nail banks. So it's it's going like the opposite way. So crypton natives are seeing like okay this business is good it's working but it would hugely benefit if they are using blockchains today. So I think Santi uh is a well-known investor in crypto. He

just launched his own inversion uh fund and the things that they are they raised hundreds of millions and they are going to acquire traditional businesses and transform how they work because they believes that they are going to transform them and bring them on chain and it will just improve their margins and their b their uh profits will just uh accelerate. >> I mean it's it's basically the same playbook that a lot of businesses ran using the internet. >> Yeah. Right? You know, if you're a internet native, digital native, you go to a business that's an old business that isn't using the internet and you just upgrade them into better systems.

Boom. Better business. >> Yeah. >> Interesting. And so that is Yeah. Tough to invest in that trend. >> Uh more so conviction building for the future of crypto. >> Yeah. But uh like as I said it's more of a like crypton natives who has their own uh you know private liquid funds where it's really hard for like you or me uh get exposure to I would need either need to uh be part of their uh funding round or uh I cannot get in later. So, it's really hard to get exposure to it, but it's going to happen. And if you ever get exposure to it, I think it made

total sense to to get some exposure because there are like millions of businesses who would hugely benefit for using blockchains, but they just don't have I don't know capacity or skill set or whatever. But now, you know, those funds are bringing that expertise and uh they will transform them. >> Cool. Cool. Okay. Very interesting. Okay. Let's go to the third trend which is DeFi protocols evolving into platforms. We talked a little bit about this on the show but break down what that statement means. It pretty much means that um we saw a huge wave of DeFi back in 2021. But uh it was I was on that train too like I

was so intrigued by DeFi and what can bring but it wasn't ready. the blockchains were not ready was very cost to do transactions on Ethereum and like uh there were not many users and everything was driven by you know hypes and narratives and the token unlocks were also quite brutal as well as incentives. So like even DeFi leaders back then uh were not really a good investments even though we all invested in them but now we know it wasn't a it wasn't good time to invest in but now what's happening is you know they are now uh out there for like five years let's say and they improved a ton so uh

I wrote actually a report about platformization because I think it's a it's an emerging trend and and I had a sort of a three kind of phases for all all DeFi projects and the first one is Spark which is phase one and it's sort of a mean like okay um we want to build this product but we don't know if it's really going to attract users or not. We might need to collect some feedback and quickly iterate over the product. So sort of try looking for a product market fit and once that happens then uh they can move on and the second phase I mentioned was search and it's like okay we have a working product people are interested great uh so let's let's let's

scale it and let's get some growth. Uh that works too, but only uh until a certain point uh because then uh at some point you already you know have a very big market share of of of the market that you are uh targeting and it's really hard to get a new kind of users and so what you need to do is you need to sort of become a platform because until then you have let's say just one product let's use lighter as an example okay it's a leader in in liquid staking or on Ethereum and but until now it only served uh I would say like people like us but it doesn't give enough

customization for institutions or funds who might be interested in using Lido because it's the most liquid product out there with uh the biggest uh supply. So uh they had to become plat Lido has to become platform so they can attract okay you are ETF okay you are a huge fund manager okay you are a high net worth individual we will provide you access so you can customize your product and at the end you will get st as well so you can benefit from it so it's sort of a becoming from one sizefits all products it's becoming okay just come to us and you can built on top of us use other you

know network or whatever it's I feel like a a good analogy is Amazon um right now about 70% of Amazon is just reselling third party products you know so it's not Amazon particularly but Amazon have a a great uh business like logic and infrastructure behind it so that's the sort of engine of it but then there is a lot of people who are going there selling their products. So it sort of feels like a platform, right? Yeah. >> It just connects like uh two sides of the market and like everyone is happy and they are just powering like everything uh using their you know logistics and stuff right. So here is the same case. So we are just expanding

like the user the potential users because now as we as I said earlier the the market is changing we get we are getting more institutional interest and adoption. So it's a natural step for all DeFi leaders and they have they have to become platforms. >> Okay. So natural next question because and this is I feel like this is a tough one when it comes to DeFi is like which tokens do I invest in? Is it I'm going to make the the reach here that you're saying that the best you need to invest in the DeFi tokens that are scaling out.

They are making it to this third phase and they're becoming platforms. >> Yes. Yeah. Exactly. >> Okay. which which ones are on that path so far? >> Um I think Lido is a good example or AVA or Sky and like or Uniswap and those are pretty much all the leaders in their specific markets. So it only justify my point that it's happening and like they are well very well aware and they are doing it right now. But the problem is if you hold some smaller D5 tokens who might have some niche you might be in trouble because right now like um you might provide some you know small additional feature that's not available on AVA but now when a like you

can uh pretty much customize your own market on AA like it's going to be really difficult for them to compete with a because that your advantage it's now gone because now you can customize your markets on a as well. So, and a market leader, they have a you know 50 billion in liquidity. So, it's going to be super hard to compete with this market leaders who are becoming a platforms and it only strengthen their network effects. So, the more money flows in the more likely it it will just keep going because it will attract more more money and more users in. So, the flywheel is on and then it's almost impossible to to compete in. I and I

think there's going to be also power law distribution. So there will be just like one or two who are getting most of the market and then you know the rest the small the small ports might have just a very tiny portion of it. >> To me the the challenge as an investor is there's this um this mindset of always trying to find the next great thing. Uh and what what happens I think to a lot of listeners of this show is you can say to yourself well you can sort of feel like you missed Lido or you missed a or or you miss Sky because they are within their sectors as you said

they are the biggest and so you tend to look for the next one because that's what the Koss are saying has the biggest opportunity right how do you think about the opportunity of of DeFi. Is there a way to to refocus on that way? So rather than saying, "Oh, I missed out on I'm going to try to find the next A," is there a way to to think about, "But what could a be in five 10 years?" >> Yeah, I think um that's better approach to to better leaders. Um because if you think that we are really getting a lot of adoption from institutional clients and you know big money big whales then

they are most likely going to use a and the big ones the winners uh where the risks are limited and a lot of liquidities there stuff like that. So and for all the small small players again uh the product wise it's going to be challenging but also there are pretty high chance that they launched uh you know in the last let's say one or two years it which means that there are going to be token unlocks and a lot of you know incentives or stuff like that and we are getting back like back to that point at the beginning so like bug sky a leo they don't have any more issuance. So, it's like no inflation.

So, you know, it's like >> there might be someone who might get a spotlight for a couple months, but uh it's going to be a quick wave, I would say. But, uh these these market leaders are in a very good position uh to be the winners. >> Okay, let's uh let's go to the fourth trend that you see, which is that super apps are going to become the ultimate user distribution strategy. You teased this trend earlier in the show when I asked you the question of how how how big of an opportunity is it to invest in these fintexs which are these super apps. What is what are super apps I guess is the first question. Let's let's

start there. >> Yeah. Well, super apps are um apps where you can satisfy all your financial needs in one app and it's smooth. you know, experience is great, on boarding is good, and yeah, you can find pretty much everything you need in there. The problem is that today there isn't like one super app that, you know, satisfy all your needs. I would say the closest one uh that's uh getting there is Robin Hood. Um you can get mortgage, you can get savings account, you can get margin account, you can trade stocks, you can trade uh crypto, whatever you want. But uh I think uh Robin Hood is a good use case. So you can see that Robin Hood uh

if you look at average um revenue per user on Robin Hood it's 600 bucks and that's what like wow okay that's super interesting business that's what I want to do too. So we have cryptonative like MetaMask or Jupiter who are on the same sort of a super app race or Coinbase and like many others because once you get the users that's the key right you just need to provide them like uh as many services as possible and maybe then over time you can okay uh you might try to build those services inhouse. So you know it also works sort of like um um like Walmart or Amazon again like they are just they just need needed to

provide everything. So they just let anyone to come there and like create stuff. But once they saw, okay, this is a good business, this is good market opportunity, good profits, good margins, then I'm going to, I don't know, acquire some bakery and I'm going to do it myself, you know. But that strategy in the beginning is just okay, you just need to grow fast and get those users there. And once you have their users on your app, then you just want to make sure that they won't leave your app, that they will spend as much time as possible, that they use as many services as possible because it will brings you eventually the money. So I think that the race for super app is on and uh yeah, Robin Hood is uh right now leading

the way. >> So how do how do let's let's continue with the Robin Hood example. How does how do you compare Robin Hood to to protocols? How how does that comparison happen or or to platforms? Cuz I want to understand the difference between this like super app trend versus the platform trend. >> Yeah. Yeah. Um well, we can look on on that picture which uh I suppose you you're going to uh screen share. Um it pretty much shows what Robinhoo does and then you can see also protocols and protocols are pretty much doing the same services but they are only providing that one service. So for example for

Robin Hood in you know in their app it's called savings account but uh on protocols you might use a and there is a land option so it's sort of a savings account too. It's just a different nuances and different things how they use it. But the diff main difference here is that protocols are onchain native versus Robin Hood. And what Robin Hood offers today, it's fully uh still using the traditional uh railways. It's not using blockchains today. But uh it sort of just uh should remind people or just show him that what Robin Hood is building is already existing in crypto.

And what might be challenging for Robin Hood and other super apps is like okay are we going to uh be able to provide better savings account than is available on some crypto protocol because if not I I'm not sure like if I'm getting 5% on Robin Hood but if but then I can get 10% on Sky or Athena like you know I I might be quite tempting for me to sell on Robin Hood and don't use it on my own. So I think there's going to be a a sort of a competition or a sort of a tension.

Should Robin Hood really use just their internal tools and stuff or should they use you know all these uh other protocols existing and that's actually tied back to our uh conversation before about the protocols because now if I am a and I'll give Robin Hood you know all the infrastructure and everything plus they might be able to keep some you know fee for bringing in users Robin Hood might be okay for us to build everything from scratch it would take so much time but let's just use other it's there and then we at the same time it means that you you will be compatible with everyone else so it's not just I can just play you know in in Robin Hood uh sort of a

isolated island but if I use protocols I okay I can use a but I can use also compound or spark or some other lending protocol so um yeah this is uh very interesting to to monitor >> okay so we talked a lot about Robin Hood but you you mentioned briefly. I just want what other what other super apps are there or could there be? >> Yeah. Well, I think uh Jupiter is uh also pretty good. Um sort of a bad they they have their own wallet. Uh they have lending, they have swaps, they there is no stocks available on Solano on Jupiter too. So I sort of feel like uh Jupiter is getting there too. The only problem

with cryptonative ones is um the majority of people they are still primarily interested in traditional products meaning like uh they still want to have some very intuitive bank account because they are familiar with it >> versus like having something like crypto and setting up a boy or something. Plus you know you you can take mortgage like you know I have a contract so you can see it here I go to bank I get mortgage I can buy house so you know so like those very traditional products but those are huge markets in traditional world those are still not existing in in these protocols so uh I wish that these

cryptonative ones are able to adopt more quickly and bring these traditional products yes it might require KYC but I think as as we were saying at the beginning like it all converge to the same goal to becoming super app and like in 10 years there won't be fintex and cryptoverles it will all be the same thing so and if I'm if I would prefer to use Jupiter today but uh I might not use it because I'm missing some products and the only barrier is KYC I don't mind doing KYC and use it there you know so I think the next step for cryp native uh super apps will be to bring like the traditional products like savings account, trading stocks, um mortgages or

just under collateralized loans, you know, the products that people are used to use. >> Um but because if it's not happening, the Robin Hood and maybe even traditional banks will uh sort of get those users. >> Yeah. Okay, great. Uh okay, fifth fifth trend that you're seeing, very interesting one that we've talked a little bit about recently, but not not enough because this is such a it's happening right in front of us and it's so obvious. Uh Bitcoin miners are pivoting towards AI and HPC.

What is explain this pivot? I know. I mean, you we we've talked about Galaxy as an investment recently, a public company investment, and I feel like probably one of your favorites of the last few months. Yeah. >> What's going on here? >> Um, some people know, but some don't. So, I'll just say Bitcoin has four cycle uh four year cycles when the hull winning is happening. So, the rewards for being a minor are cut in half every four years. So the profitability is really hard to sort of predict and also it's not just that the rewards are cutting half in every four but also prices are very volatile. So be a Bitcoin miner

when you know that your rewards rewards are going down plus they are um denominated in something that's very volatile. It's very tough business. But now what we see is if you have that the that data center built and you have access to the energy, you might be uh thinking okay but there might be a a better opportunity for me to pivot and provide um sort of a data or a storage space for all these uh AI hyperscalers because hyperscaler is like Microsoft uh people are using AI but it needs some computation. So those hyperscalers like uh Microsoft they are building chips

from uh Nvidia but they don't have a place where to put them sort of a they need a storage where there is enough uh uh energy that you know electricity that's powering them and galaxy is a really good example and like in financial terms if you are a bitcoin miner versus if you are um if you provide uh the storage for these hyp scalers the it's five to seven times more profitable >> really >> and it's it's also much more predictable because for example Galaxy signed contract for 15 years >> so you have guaranteed 15 years revenue like

>> right >> and like >> not a four-year cycle that is completely unpredictable it's 4year revenue contract that's consistent and predictable how easy is it for a Bitcoin mining facility to become a hyperscaler. Um I think it's pretty it's not that easy like uh you might get need to get rid of all the rigs you are using for for mining Bitcoin but the key asset here is the energy like you need access to the energy because a lot of people uh keep saying that the thing that we all need and that's not enough on the market is GPU or graphic cards. That's why Nvidia is going through the roof. That's

true. But the other thing is there is not enough energy that support this AI demand that is just accelerating. >> Okay. >> So once you're a Bitcoin miner, you already have a >> approved contracts with energy companies. So you have already access big lead basically. If another company came in and said, I'm going to set up a AI hyperscaler. Yeah. >> They would they'd be years behind basically. Yes, >> just because of all the contracts and tapping into the energy grid and even building out the facilities, all these things.

>> Interesting. >> It might take years and then imagine like you cannot start just building some project like no bank is going to give you a money when okay I'm going to build this AI data center. I'm going to make a ton of money but I I still don't have approval for energy. So like and it might take you know years to get it. So and then okay we have to start a project and those are not like you know those are huge projects. So those are very big buildings so it takes years again to build it and yeah like whoever is ready and who has access to this energy today that's a it's a huge winner.

>> Yeah it it certainly feels like if you believe in crypto which I everyone listening to the show does and you believe in AI which you'd be I think everybody on the planet does. If you don't then you're you're living under a rock. There is and you have an opportunity to invest in both basically right now uh through uh Galaxy being the obvious answer here that that feels like an incredible opportunity. I know you wrote a great report all about this just a few weeks ago. So pro members, go read that report. If you're not pro, you should go check it out as well. There's also an interview that Kyle did recently with uh with Duncan all about Galaxy 2.

So lots of content for everybody to check out. Okay, let's go to the final trend that you're seeing. This one's going to get a little bit nerdy on us, but you know, we can't talk about crypto. They're getting nerdy. Uh, so which is the final ZK proofs are becoming the standard for smart contract blockchains. Uh, explain that to us. I think most of our audience understands ZK proofs, but honestly, some days I don't think I understand it. So, maybe you can give us a little bit of technical understanding as well before we jump into the trend. um zk it's zero knowledge and in in uh in this context it means I can prove something but I don't need to see the

data so I can just show you zk proof that something happened or was verified or uh I don't know that you are older than 18 years old but you don't need to see my passport or something those are zk proofs and the blockchains are going to use zk proofs And like for example, Ethereum, they are most likely also going to change the the language that uh all the smart contracts on Ethereum are written. Right now it's solidity, but uh solidity is not really good for ZK. But uh we all believe that all blockchains are heading into sort of ZK future when everything will be ZKI. Uh so most likely Ethereum is going to change from

solidity to risk 5 which is a language that's optimized for ZK and you can think of it like um if you do transaction um Ethereum was limited by by scaling by scalability because uh they still want to home validators be able to validate blocks. Um but that's the problem because who wants to use blockchain that blocks are you know 12 seconds and you can just squeeze >> that that won't work the world won't use that.

>> Yeah. Just couple transaction. So it's it's like okay it was good but at the same time Ethereum is still the most decentralized and the most secured but they were always lagging uh regarding scaling. But now when they have ZK real time proving so what's going to happen quite soon for Ethereum um we still want to keep those home validators to uh validate the blockchain so you or I can make sure uh while I am home using my phone or something that there is nothing going on that like there are no malicious actors on on Ethereum blockchain. So if there is some transaction on Ethereum, there is going

to be a ZK prover who's going that's going to be another decentralized market and those provers will generate ZK proof that the transaction is correct and me as a homestaker I'm just going to verify this ZK proofs which is very light sort of thing to do. So like you know you might be able to do it with your smartwatch or something. So it keeps Ethereum still decentralized. I can still validate blockchain from home but I will only be validating ZK proofs that they exist. So it sort of shift the whole the whole idea and we don't need you know um some other blockchains they might have just 20 validators because it's really hard to uh meet the

requirements but like like Ethereum now really figure out their main issue and that's that's where it's it's going from here and like everyone will follow it. It's it's just the just the best design and the thing that why it's the trend is running now is because we haven't had uh ZK real time proving available. So it means that you know uh Ethereum block times are 12 seconds and so these provers need to uh validate that the transactions are correct within that time range. So it was pretty hard but we got there like a couple months ago and it's just getting

improved. So I think all layer twos and all layer ones in five years will be using ZK. >> H so is this who where's the opportunity to invest here? Is the is this just bullish for Ethereum? Is that the big opportunity here? >> It unscale like uh it removes the limitation for Ethereum to really scale. If we think that you know the world is moving to the blockchain and you know we all believe that part of it will end up on Ethereum Ethereum becoming super computer super word computer whatever then it really needs this sort of technology advancement to accomplish it.

>> Okay. Okay. So more conviction and more belief in the future of Ethereum. Uh and I know you also wrote a pro report all about ZK's and Ethereum recently. So uh everybody we'll link to that in the show notes. Go check that out. Martin, it's great to get you on the show. We're gonna see you more on the show in the future. Yeah. >> Yeah. Yeah, I guess. Yeah, >> that's what I'm talking about. Well, thanks for everybody for tuning in. We're sending our best from Croatia. We'll be back in the office next week. And uh yeah, make sure you check out Milkro Pro. If you want more from Martin, you can talk to him every day in the Discord community. He's there. He's available and you can read his reports on a weekly basis. Thanks for tuning in, y'all. Have a wicked awesome day. We'll

see you back again tomorrow. >> Thank you guys. >> If y'all are making swaps or trades right now, highly recommend you check out Milkroad Swap. This is a DEX that we built in partnership with Cow Protocol. Why do we build it? Not to make money. Just honestly, so we could have a place to do our swaps for the lowest fees that we could find. This is the fees on Ethereum, Arbitum, and Bass are only.15% fees. Uh this is a huge difference from uh other centralized exchanges that charge half a percent or even up to 1.2% fees on their swaps. Also, you can swap on Salana all at swap.mmillgro.com.

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