Want a Job in Crypto? Exchanges Are Hiring - Ep.110

Transcript

Hi, everyone. Welcome to Unconfirmed, the podcast that reveals how the marquee names in crypto are reacting to the week's top headlines and gets the inside scoop on what they see on the horizon. I'm your host, Laura Shin. Crypto.law, aka Kelman Law, is a New York law firm run by some of the first lawyers to enter crypto in 2013 with expertise in litigation, dispute resolution, and anti-money laundering. Email them at info at kelman.law. Crypto.com, the crypto super app that lets you buy, earn, and spend crypto in one place. Laura, thank you so much for having me on. A fan of the show.

Very, very sweet. I'm a fan of your work. The Block and the Blockchain Association recently released a report on digital asset human capital trends, which I'll just put in a plain English by saying it's about employment trends in crypto. What are the main takeaways of the report? Well, Laura, I think the most surprising takeaway from the report is the fact that this market is is pretty sizable, right? We're talking about over 20,000 jobs, dozens of firms with more than 100 employees. This isn't an industry of basement-dwelling coders anymore. This is a real market with major firms making a good amount of revenue. And a lot of that activity is happening here in the United States and abroad. And over the past year,

we've seen the number of job ads increase. And The investment trends over the past five years are also increasing, right? So total venture funding in dollars has increased overall since 2017, right? 2018, we saw a major pickup and then a 60% decline between 2018 and 2019. But the job market is still healthy and growing. And when you... analyzed the different firms for your report, what kinds of firms did you include? Like, did you include any of the decentralized projects or foundations? Because I did see a few, but then I didn't see the Ethereum Foundation, which surprised me. So I wasn't sure, you know,

what the methodology was. Well, we tried to include as many different types of firms, nonprofits to profit-seeking firms and foundations for the report. We reached out to over 217. Obviously, it's not a complete, you know, overview of everything, but we tried to get as many firms as we could included. But it does range and it runs the gamut from, you know, exchanges to trading firms to foundations like Maker Foundation and many different other types of companies. Service providers like Chainalysis is another example. And so who are the biggest employers in the space and what kinds of companies are they? Well, great question. And

it shouldn't come as a surprise that the major employers in this market are the companies that are making money and that have found product market fit. We're still in the speculative stage of this market, of the crypto market. So exchanges and trading firms and service providers to exchanges make up the lion's share of jobs, just given the fact that that's where we are, right? That's where the market is growing. So Huobi Global has over 1,000 employees. Coinbase has close to 1,000 employees. OKEx is around 1,000 employees. And mining firms also make up a good chunk of the market from a jobs perspective. So Bitmain is one of the largest employers as well. About 46% of the

largest employers are digital asset exchanges, followed by development firms at around 29% and then mining firms at around 10%. This is fascinating because I would actually, like if you were to kind of put all of those in their own category very broadly, you could say they're sort of like picks and shovels types of businesses, which in a way makes sense, I think, for the early stage that we're at. And there was another way that you analyze these companies, which is geographically. So where are they based when you do the breakdown that way? Well, there's a few ways we can look at this. For some of your listeners who might hearken back on the token days of yore, and they might associate this market

solely or exclusively with ICOs or token launches, at this point in time, Singapore has really become the go-to jurisdiction for those types of companies, making up around 37%. to the U.S. is 13%. So I find that interesting just because it illustrates how skittish folks here in the States are about operating those types of businesses given the regulatory reprisal we've seen over the past two years. Overall, obviously, the United States is the leader in terms of where the jobs are, making up about 33% to Asia Pacific's 16.7%. And then the EU follows closely at 8%. So the whole point, just to

back up a little bit of this report, was to illustrate for lawmakers, legislators, and policymakers in D.C. how big this market is, where the jobs are growing, and to sort of pick the brains of industry insiders about our the impediments they face in terms of either expanding their businesses, launching new businesses, and hiring. In terms of job growth, right, year over year, and this is fascinating, giving the backdrop of the price action, the United States saw digital asset jobs listing growth year over year increase 93% in 2019. And I mean, So when I saw that versus what was 37% in the rest of the world,

that surprised me because of, as you mentioned, you know, a lot of these companies are saying that the U.S. isn't providing good regulatory clarity. So why do you think that we are still seeing quite robust growth here, especially compared to the rest of the world? 100%. That's a really good question. And it does, it is an interesting juxtaposition, right? Because you and I both know how, much anxiety there is about the regulatory environment in the United States. And all the CEOs you talk to, all the CEOs I talk to, list that as being one of the larger impediments. But if you think about the companies that are here in the United States, they are the, you know, quote unquote, regulated compliant exchanges, Coinbase,

Kraken, Gemini. And at the end of the day, those are the companies that are hiring. So even though firms like, let's say, Abra, for instance, might face some regulatory headwinds. A company like Coinbase is pretty, you know, they've got their stuff together in terms of they're regulated by, you know, New York Department of Financial Services. They have their money transmitter license across many different states. And they can expand pretty unabated. They have the venture capital to do it. They raise 300 million in their most recent round. So I think that's why there's that sort of, that's how it's shaping out. And one other thing that you mentioned briefly was VC investment in the space. How are we seeing that break out geographically?

That's an interesting question. So again, obviously venture funding has fallen off since 2018. I mean, in total, we saw that go down 60%. The way the value is accruing geographically, obviously the United States is leading the way. The U.S. has 2.7x as many investors with offices as Asia Pacific. So the U.S. is still king in that regard. But then again, what's interesting is many investors have headquarters in the United States, but then have offshore entities to gain exposure to investments that they otherwise wouldn't be able to here in the U.S. Oh, okay. Yeah, in a way that's sort of almost like a theme that

I see throughout where, you know, despite some of the regulatory, I guess, lack of clarity or uncertainty, that we are still seeing quite strong growth. quite a strong industry here in the U.S. Like, you know, many of the most active companies that are hiring are U.S.-based. And even the place where the employer is domiciled, the U.S. is still the largest. It's 33%. So, you know, it's almost like, yeah, I guess it's just sort of saying like, you know, this is the biggest market. It's the most desired market. And so even despite the regulatory lack of clarity, there's interest in being based here and hiring here.

And you have the largest, some of the largest firms based here. Exactly. And that helps. So in a moment, we're going to discuss what impact future IPOs of crypto firms could have on hiring. But first, a quick word from the sponsors who make this show possible. Are you interested in getting into the cryptocurrency markets but don't know where to start building your portfolio? eToro has the answer for you. It's called CopyTrader by eToro. With CopyTrader, you can automatically copy every trade of eToro's top crypto traders at the exact price in real time. No need to study up on markets or develop your own strategies. Simply sign up and copy the trader of your choice. Any profits they make, you do too, proportional to your investment. With eToro, you get access to the world's most popular cryptocurrencies with transparent trading fees, all in one easy-to-use app.

Copy the smart money with eToro. Join now at eToro.com. That's E-T-O-R-O dot com. Did you know about the MCO Visa card from Crypto.com? It lets you spend anywhere Visa is accepted. Get up to 5% back on all your spending. Great for travel with unlimited airport lounge access. They pay for your Spotify and Netflix too. Download the Crypto.com app to reserve one. Crypto.com Exchange is introducing Syndicate Lite, more frequent events with slightly lower discounts for the hottest coins. The first event is offering Bitcoin at 25% off on February 4th. Sign up on the Crypto.com Exchange now to participate. Back to my conversation with Frank Shapiro of The Block.

So actually, before we get to the IPOs, I actually also wanted to ask about this trend trend. that LinkedIn noted, where they said that blockchain was the most in-demand hard skill in 2019 on LinkedIn. And they determined this by analyzing the profiles of those who were hired at the highest rates. So I realize, obviously, this isn't your report, but I was a little bit surprised about this given that the industry is in a sort of perceived slump, or at least we're not in a mania period like we saw a couple years ago. So why do you think that is, that we're seeing that as the most in-demand skill? Well, it's an interesting point and a good question. At the end of the day, yes, there isn't the price action that

we'd probably like to see. And when people take a look at price They would probably think that the job market would correlate with that. But at the end of the day, right, what's the elephant in the room? You have Facebook launching Libra. They're hiring dozens and dozens of, whether it's legal professionals, engineers. You have Walmart, another player, looking for a product manager to build out and design a number of blockchain platforms, mostly to likely improve supply chain. So you have this other trend playing out of new blockchain-related opportunities in the tech world outside of our little crypto-native community driving job growth into 2020. So I think that is likely playing a role. Yeah, a

lot of the companies that they named as being some of the most active hirers are kind of like household names, you know, like Deloitte or Amazon, things like that, where, you know, we wouldn't think of them as, obviously, they're not crypto native companies, but clearly, they see where the future is going. And, you know, the other thing that I took away from that is that a lot of people are saying we're in the I don't even know how you would pronounce, you know, there's so many new funny words we're making in crypto, but a biddle phase, I guess. Everyone's biddling. Everyone's biddling and hoddling. Exactly. Which is the sense that I get. Like I've been saying recently, it sort of feels like it's

kind of been like a slow news period. You know, after last summer's like, you know. Yeah, Libra all the time. It's been a little muted. Yeah. It's been a little muted. And I get the feeling it's because people are just sort of working on stuff and pretty soon we're going to hear some announcements and launches and things like that. There'll be a press release Cambrian explosion at some point, I imagine, in the middle of 2020. But the one thing that's interesting, even though job growth or job creation, whatever you want to call it, isn't necessarily... correlated with the price, there is, and this might be anecdotal, but there is a level of volatility in the job market. And I'm sure you've seen this just in, you know, the folks who come and go in this industry. There is a level

of volatility unpredictability in the job market that's akin to the price swings we see in crypto, right? The recruiters I talk to, you know, they tell me that they warn folks looking for employment opportunities in crypto that it is an unpredictable space. One day a company can exist, the next day it may not. One day a business unit can exist, and the next day it may not. There's not even a guarantee at the most stable firms, the firms that we view as being the poster child for compliant, regulated, whatever have you, crypto companies, Coinbase being a perfect example of that. They spent millions of dollars on that Chicago outpost, maybe even more, developing a new matching engine for their exchange. 30 some odd engineers were working on that project there. And, you know, my sources tell me just before it was going to

be finished, a few months beforehand, they shut it down. And so I think a lot of those 30 people, unfortunately, had no idea that that was coming. And that is just a fact of life in crypto, right? You know, at the end of the day, we don't know what the regulatory landscape could look like. And we don't know if certain companies will find product market fit. So that's something to consider. Yeah. Well, speaking, you mentioned recruiter. And I was going to ask you also, you know, about this LinkedIn thing. Blockchain is not a skill. That's what I wanted to tell LinkedIn. Be like, hmm, just so you guys know. It's an idea. It's an idea that transcends thought, Laura. It goes beyond that which is...

Are you going to become a philosophy professor? The blockchain guru? Well, so, but I was thinking, you know, obviously, blockchain is like an adjective, I guess, that you could apply to anything from programming to law to education or journalism. And so I wondered, you know, and I don't know if you have asked anybody this, but... Do you know if for people seeking jobs in the States where the greatest opportunities lie? Like what types of blockchain jobs are most in demand? That's a good question. Well, obviously the opportunity is going to be where companies have found product market fit. And right now that's trading firms, that's exchanges, that's companies that offer services to exchanges. And that's because, again, we are at a speculative point in

the market. Legal professionals, huge opportunity, just given the lack of clarity that we have. And another thing I see actually just scanning LinkedIn as often as I do, they call me the LinkedIn assassin here at the block just because I'm always on it. But a lot of marketing and communication jobs are out there. And I think that's just because... and you've probably experienced this reporting on the space, it's hard for some of these companies to explain what they're doing to a general audience and to communicate what they're doing to a general audience because it's complicated. And so I think that's another opportunity that I've seen. And I've heard huge offers for, I don't know if I can name

the company, but But they had an offer on the table for... Do it, do it, do it. Yeah, right? I'm considering it. I don't want to give away my source, but a fairly well-known cryptocurrency project was offering $500,000 for a senior, very senior marketing and comms job. So I wouldn't sleep on marketing and comms, even though it's not necessarily the most hard skill job. It's not a hard skill, but it's a difficult job because... Like this is something that annoys me about freelance writing is that like the pay for freelance writing hasn't changed for like a century. And the reason is because especially now with keyboards, people think that writing is typing. And I'm like, no, no, no, no, no. People writing is clear thinking

and that's expensive. So, um, yeah, I get, I get super annoyed when people are like, oh, I'm going to pay you like five cents for that. But anyway, people do not think that communication skills are cheap. Good ones are not. All right. So let's move on to the IPO thing. Actually, before I get on my high horse. No worries. You recently wrote about IPOs in the crypto space. When do you think we'll see our first crypto company IPOs and from which companies or which types of companies? Well, it's interesting. And it kind of goes back to what I've said ad nauseum during this podcast. Value is accruing where we have... product market fit, right? So exchanges and providers of services to exchanges. So Coinbase is

likely to IPO at some point. They're a cryptocurrency exchange broker, custodian, eToro, which is pure play crypto in the U.S., but also is in equities abroad. They're also looking to IPO in the next two to three years. They're an exchange now. They're a broker broker. Blockchain.com, one of the oldest players in this space. They started out as a consumer wallet, but to sort of diversify their revenues, to position themselves better for an IPO, they've also expanded into more diverse revenue streams, including exchange, OTC, lending. And at the end of the day, that's what a lot of these companies are trying to do.

In addition to seek the necessary regulatory requirements, sort of certainty that they would need to IPO, they are also trying to bulk up their revenues. The other thing that's interesting, though, about many of these companies looking to go public is the fact that they are looking to do it through the traditional means of a standard exchange paper share listing. And I think that's That's because those are where the institutional investors are. It's fairly easy, standard process in the United States to go public. And as a result, I think that's why a lot of these companies don't want to necessarily break the mold, so to

speak, and do some highfalutin, crazy token offering of some sort. Yeah, no, definitely not. If I were them also, I wouldn't fool around with that. Yeah, and we've had Peter Smith of Blockchain Investors dot com on the record saying they wouldn't consider that. And some firms are, but mostly they're going to be smaller firms that would probably have a harder time raising as much money via standard listing. Yeah. And when you see those IPOs happening, how do you think that will affect employment in the space? Well, I mean, historically, after a company IPOs, that's when the majority of job creation occurs. So, The

fact that many firms in this industry are looking to IPO in the short term is a tailwind from an employment perspective. But again, given the unpredictable nature of this space, you can never be too sure. And there have been some hiccups for some firms like Bitmain, which a source described to me as being in a sticky situation originally, right? They were looking to list their shares in Hong Kong, but its application launched lapse, excuse me, in March 2019. And so at this point, they're kind of in a similar position to others, reducing expenses, eliminating business lines that have been less successful, and shaving headcount. Yeah, well, we'll see how this happens, because obviously we saw with WeWork that just because a company files

for an IPO, it doesn't mean that it's really ready. It could also be a game of hot potato where they're just trying to pass the buck on to to everyday investors. But anyway... Well, that's an interesting point. If I could put my traditional U.S. equities hat on for a second and jump off that point, my sources at New York Stock Exchange and NASDAQ told me that the WeWork IPO actually had a profound impact on the number of companies looking to go public at the end of 2019. And that kind of muted the IPO market during that period. And now we have many companies sitting on the sidelines who are going to go now. But effectively, WeWork did spook the market. So

that's a good point. Thankfully. I mean, I think that's a good thing. You know, hopefully not too far, but just enough where if you're going to go public, it should be because you have financials that, you know, can withstand that kind of scrutiny. So, yeah, I agree. hopefully people will learn some lessons from that because that was really over the top, I thought. But anyway, now we're getting really far from crypto. But I think the overall... I know, that was my fault. No, it's not. It's not. Because actually, you know, I think this actually ties into the overall theme of this show, which is that there is a lot of demand for jobs in the crypto space, more so even than the searches. There was like a little...

I think Indeed study that showed that the number of listings is growing while the number of searches for such jobs is shrinking, which is probably why blockchain was the most in-demand skill in LinkedIn. But anyway, you know, as Frank pointed out, like despite all that, because the space is pretty volatile, for those of you listeners who are looking for a job in this space, keep your eyes open. All right. Well, thanks, Frank. Thanks for coming on the show. No, it was my pleasure. Don't forget, next up is the news recap. Stick around for This Week in Crypto after this short break. Crypto.Law is run by crypto OGs in New York who understand crypto and fintech. They were already operating in the space back in 2013 and they accept crypto as payment. One of the partners, Zachary Kelman, is known for drafting a bill submitted

to the U.S. Congress in 2014 aimed at exempting on-chain Bitcoin transactions from U.S. regulations. The other founding partner, his brother Daniel Kelman, became well-known in the crypto law space for his work in the Mt. Gox civil rehabilitation. So if you operate a fintech business or have a dispute with some person or business involving crypto, or you just need legal advice related to crypto, info at kelman.law. That's K-E-L-M-A-N dot law, or just go to their website at www.crypto.law. When you think crypto, think Kelman. Hi, everyone. Thanks for tuning in to this week's news recap. First headline. Joel Monegro on Thin Applications. Joel Monegro of Placeholder Ventures has an update to his 2016 FAT Protocols thesis, which I would say was in part some of the fuel behind

the initial coin offering craze that took off the following year. In that thesis, he talks about how at least until then, most of the value in Bitcoin had been accrued at the protocol level, not the application layer, which was different from previous tech history. In a new post published this week called, you guessed it, Thin Applications, he contrasts the way crypto networks function against the way big web companies do. As he puts it, quote, web users are locked in by force through the centralization of data. This is what happens with big web companies. Crypto applications, even if they're built more traditionally, don't have that same ability to lock you in. But user staking creates a kind of opt-in economic

lock-in that benefits the user by turning them into stakeholders in the success of the service. It creates defensibility through user ownership instead of user lock-in. He goes into some detail with various examples and talks about how in this model, the user brings his or her own data. It's probably a piece worth reading a few times to absorb the ideas that that he's talking about, but I found it pretty compelling and felt that it gave some hint at the kinds of disruption we could see once this technology matures. Next headline, Bitcoin nowhere near reaching unit of account status. BitMEX research analyzed almost 1.3 billion Bitcoin outputs with non-zero values since the And what they

observed is that more than 70% of transactions have a degree of precision of one satoshi, which is a fraction of a cent. And they found that this percentage has increased over time from about 50% four years ago and even kind of 30% before that. BitMEX research concludes that the reason we're seeing increased precision spending of Bitcoin is is because more Bitcoin payments are actually being fiat denominated. And that indicates that Bitcoin is nowhere near becoming a unit of account. However, on the plus side, they do say that in Bitcoin-denominated transactions, there are generally two outputs, one which goes to the

recipient, and then the other is change that goes back to the payer. And in that kind of transaction, it's pretty easy to tell which one is the change, which That's usually the output that has higher precision or more decimal points. And so they say that when you have both outputs with high degrees of precision, that actually increases financial privacy. Next headline. Compound alleges Chinese DeFi project stole its copyrighted but open source code. The block reports that popular lending protocol Compound is accusing Chinese DeFi lending protocol DeForce of taking the code for its money market contract from version one of Compound's money market protocol. DeForce

has almost $8 million locked in it, which would make it the fifth largest lending platform on DeFi Pulse, although it's not currently listed there. While this raises questions about the meaning of the term open source, the block writes, quote, Though Compound's website describes its protocol as open source, that doesn't mean that the company can't exert ownership claims over the work it produces. Compound CEO Robert Leshner told the block, quote, all compound code is available for review, inspection, and auditing, but that does not mean you can freely steal or republish it. In fact, all of our code is copyrighted, e.g. rights reserved. Primavera de Filippi, a legal scholar and permanent researcher at the National Center of Scientific Research, says, quote, Compound probably

advertised their code as open source in the sense that the code is available for anyone to see, but not for anyone to freely reproduce or modify. This might be slightly deceiving, but since they didn't mention any specific license, DeForce should have known better to go check the actual terms of the license before forking the code. Next, I have a little Bitcoin roundup with news about Lightning and Taproot. Jack Mallers announced the launch of Strike, which enables you to make Lightning payments with your debit card or bank account. It's currently in beta. And Peter Woolley, a Bitcoin core contributor, submitted code for Taproot as a pull request, which is a sign that the code is closer to being ready. Taproot would enable smart contract capabilities to Bitcoin

that help make transactions more private. I also have a brief crime roundup with news bits from Quadriga and BTCE. The lawyers representing the former users of Quadriga CX asked the Royal Canadian Mounted Police about the status of their request last month to have founder Gerald Cotton's body exhumed. As for BTCE, after his extradition from Greece to France last week, Alexander Vinnick, the alleged operator of BTCE, was charged with extortion, aggravated money laundering, conspiracy, and harming automatic data processing systems. Vinnick says he is innocent of all charges. Fun bits! I have two fun bits for you guys.

The first is All the Blocks Crypto Resources. For the data nerds out there, the block published a monster list of all the crypto resources it uses, and it's a great thing to dive into. I'm sure a number of you could spend days doing just that, and I'm sure that I will. Second, fun bits, not everything is on chain. For those of you who like fiction, Emily Parker wrote a really fun sci-fi piece for Slate on what life would be like if everything were on blockchains. It stars a journalist who makes end of hype predictions, which are basically predicting when the hype surrounding, you know, the latest animal meme or teenager or whatever will end. And then she makes money from these predictions in

the form of, you guessed it, tokens. By the way, this made me wonder if this was going to be my dystopian future. Please, God, no. However, in this world, banks no longer exist and all records are instead kept on very chain. But then she meets a strange man in a cafe and, well, I won't give any spoiler alerts, but let's just say she eventually realizes that not everything makes it onto the blockchain. Thanks everyone for tuning in. To learn more about Frank and employment trends in crypto, be sure to check out the links in the show notes of your podcast player. If you enjoy these news recaps, then why not sign up for The Real Deal, the weekly newsletter I publish every Friday. Some of you have asked

me for the links to the stories I mention on the show, and now you can get them delivered right to your inbox. Go to unchainedpodcast.com right now to sign up. Unconfirmed is produced by me, Laura Shin, with help from Factor Recording, Anthony Yoon, Daniel Nuss, Josh Durham, and the team at CLK Transcription. Thanks for listening.