Can Crypto Find a New Narrative? | Haseeb Qureshi & Tom Schmidt

Transcript

this episode is brought to you by paris swap the leading aggregator to find best prices across various dexes you'll hear more about them later in the show this is what we see with every technological cycle is that people are going to iterate air drops for just people who touch your product before your token was live right that's the that's the norm today that will change to something that more closely maps onto what we mean by loyalty and it's probably different for different applications but eventually we'll find something that tracks the thing that we actually care about which is that i want to reward loyal community members that's what people really want to do airdrops don't really do that very effectively anymore all right everyone we are back with two of my favorite people in crypto we have

tom and haseeb from dragonfly welcome to empire guys thanks for having us thanks for having us yeah of course you guys um a month ago yeah haseeb you came on with the vitriol back in uh maybe january or february and this year and you were just maybe it sounded a little tired i know you don't drink coffee but you're kind of just like there's narrative exhaustion in crypto i don't know we were coming off two years of just a crazy market um and then you guys wrote this kind of depressing piece about a month ago layoffs are coming battened down the hatches so haseeb i want to pick on you to just kick off this podcast uh you tell me how you're feeling these days are we exhausted are we excited are we tired are we pessimistic optimistic how are you feeling these days well i'll

tell you markets seem pretty exhausted so obviously we've had uh a pretty choppy month since the collapse of terra in in may uh the macro picture has started to pick up a little bit actually stocks have started to recover a bit but crypto hasn't come alongside it and so what you're what you're broadly seeing is that uh you know before may we were talking about narrative exhaustion now we're talking about really searching to try to find what narrative if any is there that's going to sustain crypto it seems like right now um we're we're entering into a different cycle we've already seen a number of companies starting to get down rounds we've seen coinbase institute a full-on hiring freeze as well as we're sending some of their outstanding offers

we're starting to see the very first inklings of people running out of money the the interesting thing about crypto startups in particular is that they raised so much capital over the last year i mean there were tens of billions of dollars that flew into crypto startups which means that even when you enter into an environment of tighter capital and harder to raise money uh if you've raised a lot of money from your previous fundraise then you don't really need to lay anybody off you don't necessarily need to tighten the belt and you don't need to raise a down round you can keep going for a while until you actually run out of money or until you actually start hitting product market fit but if you don't get there if you don't get to either of those two then at some point the shoe drops so in crypto

right now when you're when you're monitoring the news and you're seeing like huh it seems like there's still a lot of fundraising announcements that are happening it seems like the money's still flowing you know a lot of these hundred months ago so we were just you know uh monitoring the news and someone was chatting was like man it looks like all these startups are still getting funded we're like oh wait that one yeah we talked to them like four months ago so the um the reality is you're not getting a real-time picture of what the funding environment looks like unless you're actually on the either you're raising money or you're yourself on the uh on the funding side so it it is it is a choppy environment right now now why am i not totally depressed i'm not totally depressed for a couple reasons one is that

fundamentals in crypto are still okay so they're not they're not looking terrible this doesn't look anything like it did in 2018. if you remember 2018 2018 was like oh my god it's all over 2018 was like never mind no one cares about any of this it's all like nobody was ever going to ship anything and we were we were all fed a lie that was what 2018 felt like and 2022 feels very different right 2022 all these applications work they're all there you can touch them you can feel them you can interact with them there's an enormous amount of brilliant people building real stuff in crypto and the amount of capital that's gone into the space means that um there's gonna be a lot of people solving a lot of hard problems for many years to come regardless of whether or not uh you know

prices or macro or whatever ends up improving over the next year or two and the thing of course this was a macro driven sell-off and macro will eventually get better right now it's bad right now it looks ugly right now there's not a lot of demand for risk assets but that stuff it waxes and wanes depending on the overall macro picture right now inflation is high when inflation goes down almost everybody i know expects that the fed will eventually pump the brakes and interest rates will go back down in which case there's going to be more demand for stuff like crypto so in the long run crypto is going to be fine i don't know anybody who thinks that like yeah crypto's over and it's time to move on and you know go back to you know optimizing advertising or whatever like 2018 yeah 2018 it very much felt like oh

my god did we get this wrong did was i just completely wrong on this and like i'm going back to my job and i have to like come crawling back to them now it's uh now it's just how long is this bear market gonna last we're obviously right about crypto it's just is this a uh how long and how deep of a bear market is this so maybe tom i can pick on you to just expand on haseeb's thoughts about the choppiness of the venture um of the venture markets right now and just knowing that like maybe a lot of folks in nrc and a lot of the listeners we're getting this like maybe delayed stream on venture so maybe in three months we'll see the real state of what venture looks like today but if you could just give us a glimpse inside the

eyes of someone you guys just raised a 650 million dollar fund i think three so i'm assuming you have a bunch of dry powder like what does the venture market look like today and like how bad is choppy and give us some like maybe real world examples of this yeah i mean i think um people think of venture as just like public markets but like smaller and you know private and it's like not true they're in fact i think pretty you know discreet um and therefore they kind of lag each other and they're not quite yeah sort of sort of one to one um i mean i think um as far as uh venture goes i think seed stage is still getting done um valuations i would say have come down 50 60 compared to a few months ago which sort of you know mirrors yours what we

see in the public markets um it's more kind of growth stage and later stage where we've already seen a lot of you know markdowns tiger announced today you know they're down like 52 and we already seen people you know doing big down rounds in sort of growth stage um but it's also just a lot more painful of a conversation to have right like if i'm an entrepreneur as my first time getting funding you know for me i i'm sort of going with every whatever the market is um and i'm i'll just go to go with the best you know term sheet i can get if i've already raised a seed round at some crazy valuation from you know six months or a year ago and now i expect to do an a because i'm running low on cash and i expect a markup um you know oftentimes

those rounds won't get done or it'll get done uh you know in a very painful way with the know the investors that you don't necessarily want and so it's not quite you know sort of sort of one to one there um and i agree with the steve's point as well where there is also this weird dynamic where um teams that you know raise a lot of money um in their seat or in earlier stages last year they might not need to raise for a while i've seen teams that have you know in their investor statement their their burn rate and sometimes the burn is like 10 years or the runway's 15 years or something insane and you know obviously they'll be hiring that will come down but like there isn't that sort of pressing need for cash there's also this weird dynamic in terms of like private

public market compression where um you know doing private over the past two years has in some ways felt very easy if you have access to great teams and great deals and great products um i think um because in part because the public market was so strong and would you know for a great product give you a great you know evaluation when things launch a token or go public or get acquired or whatever um now we're seeing i think great products um great companies great great teams that are public that have a token or you know have tons of usage and have a real product um you know their public market uh uh asset is is trading on like uh you know a pretty pretty uh pretty cheaply compared to where you might see something in the private and

so it's it's harder to you know justify doing a seed or an a when you look at sort of the public market comp and you say well like you know why do you think you should be valued at you know half of this existing public market you know dominant product or sometimes even the same price and so i i will i am curious to see like where that sort of starts to blend and maybe we start to see um some of these funds get allocated into the the public markets um there's also this weird dynamic with just so much dry powder i think um sitting on the sidelines in specifically in venture we see these you know new funds including ours get announced you know every week every month um you know standard just announced that it did 500 million uh this is andreessen 4.5 billion you know

fund there's a lot of these funds coming out and a lot of them want to do early stage you want to do you know sort of seed um but obviously not everyone can you can't deploy a you know 4.5 billion dollar fund into you know a bunch of you know 30 million deals so i'll be kind of curious to see how that dynamic plays out as well yeah there's kind of this spectrum of leverage that exists in venture and it kind of swings back and forth between the founder and the vc depending on when we're in a bull market or a bear market right so at the very top of a bull market the founder has all the leverage not giving up a board seat uh i'm i'm taking whatever valuation i want i'm i have any vis every vc and every angel uh coming at me to to invest so i get like

my pick of the litter uh and the in a bear market right it's complete in like the heart of the bear it's completely flipped i'll take any terms along that spectrum where i mean the first approximation for where the balance of power is between entrepreneurs and uh sources of capital is interest rates actually interest rates you can think of as being the price of money and when interest rates are high that means money is expensive when interest rates are low that means money is cheap whenever interest rates go up that means that the counter factual return that you can get investing into something that's less risky than investing into a startup is higher and so the the startup is not going to demand as high a premium so generally speaking when the

when the when the spread between potential investments collapses and it's like hey you know i could go invest in this thing in the public markets which is worth just about as much as you know what what or like you know twice as much as what you're asking for but you know if if you really knock it out of the park you're going to get a 2x which is not that great um that means that venture capitalists are going to have more power than entrepreneurs at the end of the day it's really about the um the growth rate of the industry if the industry is growing really rapidly then um you know that incentivizes more entrepreneurs to come onto this side of the market right and when the when the returns of the industry are are suffering and there's there's there's less uh incentive to invest into the marginal

startup then that's going to shift the balance of power more towards the capitalists and so it kind of whacks and wanes over time like there's it's never it never just stays one way right because both sides of the market are it's a market right it's a totally open market meaning that you can you can have more venture capitalists show up you can have more entrepreneurs show up and they both get attracted by the price signal of what it's like for startup funding when when rates are at rock bottom really what what that means what what the world is telling you when rates are rock bottom it means that we have no good ideas we don't know of good ways to put money to work and so we're happy to fund almost anything right as long as you can produce some marginal rate of growth right we're so starved for growth in the

world that we're willing to pay almost anything for a good idea that's what really low rates means now when rates are higher that means they actually have a bunch of good ideas and you know if you have some other new good idea it's like it better at least hit this margin for us to be willing to invest in you um and so that especially if you're thinking about starting a startup um ironically is one of the most important things to be thinking about is like what is the risk-free rate the risk-free rate is going to affect a lot of whether you want to go work for a big company that's working and actually putting money to work as opposed to starting a company which is finding a new way for growth to happen as opposed to investing already in a way that we already know how to grow the economy so

then how much of this how much of this bear market right now is predicated upon what the fed does like how much of i think i think maybe it's a two-part question which is are we just dependent on the fed and are we is like going along crypto right now just trying to fight the fed and then the second part of that question might be how do you think about like how far into the bear market we are we're maybe six months down from the tops does that mean we're 50 of the way through is this like a long bear market but maybe if we could start about just like how dependent are we on the fed i'd say yes and no in a few ways so one would depend on the fed because obviously the you know fear of interest rates and the rising of interest rates

is a lot of what has spooked the crypto market as well as growth assets across the board so it's not just crypto cryptos correlations other growth assets has been at historic highs since this macro cycle um also we've only it's worth remembering that we've only ever seen crypto in an environment of rock bottom interest rates right crypto bitcoin was literally created after the great financial crisis ever since then rates have been extremely low and we may be moving for the first time into a high interest rate environment as we haven't seen in decades so now we'll see whether or not that actually comes to pass but if if the worst happens it may really really disrupt the way that we think that crypto works and the role that we think it plays uh in the in the context of broader financial assets so in one sense yes we are

dependent on the fed um as we it's we've already shown ourselves to be um another way of answering that question though is to say no because like the fed is also not operating in a vacuum right there's a common cause to why the fed is operating the way it is and the common cause is just the actual macro environment right which is what's going on with inflation what's going on with the war in ukraine what's going on with supply chain shortages what's going on with covet all these things are affecting the fed and that is you know through the fed it is affecting crypto but you could argue that well that is also the picture that's affected crypto which is just like the the slowdown in in uh the increase in inflation and the slowdown in the global economy um now more broadly speaking uh

the other thing i would say okay is crypto totally dependent on the fed in the sense like can crypto not recover unless the fed you know uh jacks rates down to near zero again and i think to that i'd say the answer is no clearly no uh crypto can grow if we start building great products and start getting adoption and start solving some of these deep fundamental problems in crypto the reality is that in the last cycle um we haven't solved that many big problems we've done a few things in the last cycle like you really do the accounting of like what happened the last two years what did we actually accomplish in the crypto industry so d5 really took on its own so that was great got defy um at least gen 1 of d5 right so we've got trading we've got borrowing lending um

but that's kind of about it not a whole lot else is really working besides trading and lending um then when it comes to games we've got like some kind of janky games we don't have a whole lot honestly like the games in crypto are not that good yet and not that many people are playing them an absolute scale right so there's maybe maybe like on the order of a couple million people playing crypto games in the context of what real games look like a game that has 2 million users is not a real game right that's like okay it's a tiny tiny like a tiny mobile game it has two million users um and then beyond that there's been a bunch of layer ones and a bunch of their twos and you know things like that but like the throughput and the actual scalability of

these blockchains is still pretty meager you know even the very best of them are on the order of you know hundreds of transactions per second which is just not what you need in order to sustain a world scale improvement in what we want for blockchain adoption so the reality is that like i think if you look objectively at what's happened the last couple years we've got a long way to go before the stuff is ready for mass adoption and i think we were getting a bit high in our own supply and uh about about how much progress we've actually made in the last couple years once we get farther along and we actually hit the milestones that we're trying to hit i think krypto is going to grow i think krypto is going to do great but these are hard problems that's why it's taking so long to try to solve them

so i think it'll just take more time tom um you're really deep on the product side of things and this is kind of a trope at this point but like bear markets are when great products are built and really good founders double down and uh good vcs fund really good projects that end up taking off in the bull market just piggybacking on what hissy was saying about like there are still a lot of existing problems before talking about what you guys are excited about what are some of the big problems that like now that things have cooled down we've had six months to maybe like breathe a little bit and just say okay the last bull market was crazy what are some of the big problems that you see uh that we still need to fix yeah i mean i think within within d5 at least i think as dc was

sort of mentioning um i think the past two years has in large part been about um giving you know sort of permissionless leverage and permissionless reflexivity to people um in the crypto market that's a large part of what a lot of the stuff was used for and i think you know i'm not as as down on this concept as i think um a lot of people are i think this is sort of like one of the the core faults of of bitcoin and why we see a lot of these smart contracts proliferate is like it's in some ways not super useful to have just permissionless cash without sort of permissionless financial services to go alongside it and that sort of crippled bitcoin in in some ways and i think having sort of a truly sort of self-contained financial system for some sort of permissionless you know store of

value um actually is like pretty essential so it's sort of like where we've built you know the tesla roadster where it's like it's kind of a toy and it kind of works but like it's self-contained and it's sort of end to end but i think that in and of itself is not necessarily enough um what we sort of see is the vision for d5 and what i think it needs to be you know successful um is to sort of facilitate real economic value and real flows um in order to uh you know do something in the real world that generates some value um and and sort of underlying that and i think that's sort of what we've seen in the shift in terms of um what's been happening in in defy um it's a shift away from these you know super leveraged super reflexive kind of games to um

things that might look more productive or more useful in a bear market so um i just you know thread the other day talking about you know what's working in a bear market what's what's not working in a bear market i think the things that we've seen in terms of like you know metrics and our performance are uh real-world lending uh facilities so things like maple things like goldfinch um things like trufi um even makers real or assets you know they're making tens of millions of die against um things like invoices and other types of real-world collateral um it's things like uh you know different types of financing services that you might want in a bear market so um porter finance for example one of our portfolio companies um they just did a bond issuance um through uh ribbon so instead of having to sell your tokens at the

bottom of the bear market for cash um you can tap into people who are willing to you know lend you assets um or you lend you cash um you know uncollateralized for you facilitating some sort of uh you know real world economic value maybe you need to pay people you need to pay contractors you need to you know pay rent whatever um i think that whole space will actually continue to grow um we've also seen people i think uh lean more into uh uh you know some of these structured product platforms as well um that don't necessarily need you know huge amounts of leverage in the system to actually sort of function so like all the dov platforms for example are actually seeing large net inflows um in kind of these assets so like you know like a ribbon or a friction they're seeing um you know

all-time highs in terms of ether in terms of sole being deposited in the system people looking for yield um in in a bear market but ultimately within defy i think it is sort of about how do we actually make um products and financial services that are going to be evergreen and long-lasting and not only really useful when people want to you know get leverage on their on their ether they want to trade some you know random you know long tail new token um but it's sort of about servicing something a little bit bigger um so i think within d5 that's kind of where i get excited um and there's obviously many different components within there um beyond that i think one sort of i mean i think you could you could talk about gaming or nfts or something but one sort of pet uh uh uh

i guess focus area that i really love is sort of this sort of crowdfunding on steroids um idea and i think we sort of saw like the first inkling of this with constitution dao where it's like hey you can spin up a smart contract um and within 24 hours you can raise 40 million dollars from people all around the world to go do something if that's maybe try to buy a copy of the constitution or maybe that's trying to buy a golf course with something like link style or you're trying to buy you know a co-working space with empire now it's still obviously janky and i think it's still in this really legal gray space right now but you occasionally see those sort of um moments of clear product market fit um both you know working in in product but also as if you see where it's like oh like

people really want this it's not really built to do the thing that it's supposed to do today but like it's clearly really highly desired i think we saw icos being sort of like the first example of this where it's like oh yeah global permissionless capital markets are like actually amazing um maybe not sort of the best direction of that capital there were a lot of issues with the way that was structured but clearly there's something there and so i'm actually really excited to see that space mature and take off and like you basically give everybody access to uh you know uh different fundraising mechanisms that maybe they currently have and so um in my mind that's also like a really promising area uh for for crypto um is basically you know people have global permissionless capital markets yeah when you i actually just want to go a little

deeper on one of those use cases which is the uh the porter finance um ribbon like convertible bond issuance i saw you tweeted out like red emoji alert like big moment in defy history is this because it unlocks the other side of capital markets which is like debt um a lot of things have just been equity uh driven in in uh in crypto capital markets is this deal such a big moment because it unlocks the debt side of this in d5 yes exactly um i think you know we're also seeing a sort of a similar trend even in non-crypto in terms of like venture debt um you know being a more attractive source of funding for a lot of these teams you know why would you want to sell your equity you know um when at as low as your price ever um when maybe you

could raise debt at a reasonable interest rate and use that to sort of fund yourself if you um see signs of growth and you see a way to sort of you know eventually get to a higher valuation so it's like you know you don't want to uh by the top you don't want to sell the bottom it applies to companies as well um and so the ribbon porter thing um is a very um simple example of that where you know today it is a convertible bond it is over collateralized um but you know in the future you can imagine this being you know under collateralized backed purely by you know the promise of the doubt it could be backed by um you know cash flows from the dow a lot of these dows do you have real revenue streams it's not just their token inflating and

and you know them counting that as revenue but it's the people who are using these protocols paying fees into the protocol treasury and the dow having control over that money and so yeah right now these amounts are not huge we're talking millions or tens of millions of dollars but um i think you know at a global scale these things will be absolutely massive and there's gonna be you know better ways to use that treasury than just having it be sitting there so um there are gonna be teams that pull through this bear market by you know finding more innovative sources of funding rather than just like you're trying to trying to sell tokens on the on the market yeah it's interesting because just historically i mean maybe outside of minor financing debt has been pretty non-existent uh form of financing and crypto in general hasive you do you

think that debt financing makes up a much is this the bear market where we see debt financing really play a role in keeping maybe some companies alive so debt is always hard to do for startups and most of most of the things that are happening in crypto are startups um debt is is an easier tool to invest into things that have uh reliable cash flows right so if if you are a protocol that's actually operating at scale or a dow that's operating at scale you have real revenue you're underwritable then you can say hey um i'm good for this right like in in an absolute nightmare scenario i can still pay you back and um you know there are other um so we're we're also uh close with the debt dow team and debt dow is another

guy another team that's also trying to build a sort of on-chain debt instruments for daos and uh the idea is that you know if you if you hook in directly to the revenue source of the dow it's kind of like you know in the real world normally what you would do is if if you're not being paid back by a uh by a debtor then you'd take some kind of lien on their property or the lien on their business and and you'd have to go through the legal system in order to actually enforce your claim but in a dow in principle at least you can you can have a mechanism like that in the smart contract itself such that the protocol is actually not able to generate any revenue until all the debtors are paid back or sorry the creditors are all paid back um that kind of mechanic you know

a lot of what we are thinking about in crypto is how can you remove trust from the system or make trust unnecessary within the system now there's always of course some risk that the protocol itself could blow up in which case okay yes that's that's a risk that the underwriters are taking on but the same thing is true in the real world right if you if you uh you know give some if you give a loan to enron okay then you're screwed it doesn't matter you know how good your covenants are so there's um there's a i think this is part of the broader evolution that we're seeing in capital markets is that there are some mechanisms for which crypto can just do things unequivocally better um it's exactly the same fight that ftx is trying to fight with the cftc of like hey if we just remove the middleman and

we remove all this other craft and nonsense we can do things much more efficiently make things 24 7. make things real time make things you know we don't have to go call somebody in the morning and say hey are you still good for this the same thing can can absolutely be applied to a lot of markets including debt is this interesting for only is this only interesting for on-chain companies um so like let's use an example so i know debt is not as common of a financial instrument for startups but crypto startups are different right like openc did 386 million dollars of revenue in one month this year in january i think it was so that's a that's a ton of revenue for a startup like normal startups don't generate 386 million in revenue in one

month so will i guess to like two-part question one is will these companies like the like c5 whatever you want to call it like openc coinbase block fies of the world gemini's uh use debt financing in this bear market more frequently than we've seen in the past because they are generating a lot of uh revenue or is it more just like you'll see these d5 protocols like what is this one called porter finance where it's like bonds for for dows i mean open c at least in their case openc just raised so much money i'd be amazed if they need to raise debt um but also i don't think openc actually needs yeah it needs money right now but yeah they're also incredibly profitable right so if you're profitable like you probably don't need you probably don't need that like openc is not a

uh you know it's not a very intensive business like it kind of to some degree it sort of runs itself um whereas there are a lot of other things that require an enormous amount of r d in which case they're you know if you're if you're trying to build a zk roll up it's like okay that thing is not going to be done for many many years you know even once it's in mainnet there's still so much work to do so that kind of thing requires continual r d work even in lieu of having on chain protocol revenues right it's quite likely the zk roll ups in the early days they're probably not going to have particularly high fees or meaningful fee payments until they hit scale so that's the kind of thing where i would expect that it's more likely than not that they

would want to find alternative forms of financing if the market doesn't come back in time but for the very best projects i mean they'll always be able to raise equity financing yeah i want to go through a couple things that are maybe like advice for founders um i know a lot of found actually there are a couple of my buddies uh you guys have invested in and they said that you guys are consistently one of their most helpful uh vcs so uh back backpack to you guys but uh you guys gave this like you guys wrote this thing on medium which is i think a lot of folks found really really helpful and you had three different buckets you said um one if you've recently raised now is the time to focus on what's important and cut the fat both in product direction and in

personnel if you've over hired next is there's gonna be strong calls for regulation some of the regulation will be bogus uh there will be more incentive than ever to offshore the innovative stuff and the third is the market will be less speculative for a while especially as retail investors are no longer driving as much of the flows many narratives will get reset we will not see the same old stories play out so i want to actually touch on all three of those maybe starting with the last one and tom i'd pick on you for this what are some of the narratives that happened in the bull market this last bull market that maybe have been reset where people are saying okay maybe maybe this didn't make as much sense maybe maybe this uh idea like when we were storing at the wall and it worked in a bull market and maybe

this actually doesn't make sense as a product strategy and as like as a company building strategy yeah i think you know a lot of the stuff i mentioned around defy is very much in this bucket um of you know uh maybe people don't want to get a ton of leverage and maybe you know using your token uh you know it's sort of your sort of ridiculous ways to you know offer that is not really productive it's sort of just a you know ponzi like game at the end of the day um but i think uh nfts are actually like sort of a story around sort of the meta shifting um many times over the past few years where we went from you know nfc's being sort of this very small you know part of what happens in crypto to sort of this you know celebrity driven nft culture um

maybe in sort of early 2021 and this was sort of when nifty gateway was super dominant and you had like grimes giving you know selling your nft and people thought oh nfts are going to be sort of a new modernization method for you know artists and brands and that's going to be sort of what it is and then i think over the past year we've seen this shift towards you know basically the sort of crypto punk inspired 10k profile picture collections and people swapping these collections and um you know live sort of variations on a theme there um but i don't know if that's necessarily going to be sort of the story around nfts forever i think there's a lot more that you can do with sort of you know on-chain you know scarcity nfts being sort of one example of it but i don't think the future of

nfc is always going to be someone dropping a new 10k pfp profile or vfp questions so it's like you know the meta will sort of constantly be be shifting um and it's true in d5 as well some of these other you know categories as well um i think also we've just seen sort of the story around um layer ones and layers two layer twos themselves you know shift a lot i think if you think about you know what was sort of you know popular in in 2018 2019 um there were a lot of promise around some of these like next generation blockchains and then in practice what we've seen is you know the most dominant platform for blockchains over the past you know year has really been a lot of these um you know evm based blockchains it's people basically taking something like that putting a new

consensus you know mechanism on it or speeding it up or tweaking it somehow um and that wasn't really something people were talking about predicting um back in the day that like these would in fact maybe be more popular than a layer two because um they're you know cheap and they're fast and you know the bridges are sufficiently good to sort of move things back and forth um i don't know if that's gonna be the case forever i think we're big edm bowls but i think it's gonna take a while to sort of um you know even improve on the evm and like make it better than what it is today but um that meta could also sort of shift over the next few years so um i i think you know it's it's easy to sort of get married to how the world is today and i

think that's kind of what we what we've seen um in previous cycles of people you know really getting sucked into bitcoin and believing bitcoin is gonna be the thing and everything's gonna be on bitcoin and maybe that was like a i think a very credible thesis in 2016 um when we saw you know ethereum was having so many issues and like um bitcoin has longevity and etcetera etcetera but like you can see what happens to those people when they get you know married to that thesis and sucked into it and not able to sort of reassess reality and reassess the situation and um i think we'll probably see a similar shift over the next few years of people who got you know married to sort of the you know 2021 uh mentality of how they see the world and not able to sort of reassess

and look for fresh new ideas and and changes in the market all right everyone quick break from the show to share a big update from our friends at paraswap the best platform to stake swap trade farm and more periswap just launched gas refunds based on how much you stake you can now get up to 100 of your gas refunded on all of your swaps on pair swap this is huge for anyone who has spent a lot of time in d fire maybe it's just starting out you know how egregiously expensive the gas transactions can get the gas fees are ridiculous at some points in time and now you can get those entirely refunded on pair swap to participate all you need to do is take a

minimum of 500 psp big shout out to the pair swap dow for making these refunds possible really it's just it's tough to be pair swap right now they give you the best prices uh they save you money you've got this gas refund if you stake psp they've got a smooth and really user friendly interface fast swapping it's really everything that you'd want from a d5 platform if you don't use them already check out paraswap today dot io now let's get back to the show there are i know i said i was going to touch on those three things that you guys wrote about the medium post but there's a bunch that i want to pick on so and tom i just go back to you do you think the layer one wars are kind of largely over and like does this competition move to l2s or like what do

you think about the layer one wars just as we move forward in the bear market um i don't think it's over i don't know if it will ever be over because i think there's always probably gonna be a huge market premium on somebody claiming they have solved some huge problem with blockchains and wanting to launch their own layer one um but i certainly think the um bounds of the competition have have changed quite a bit we've seen again evm just become super dominant really you know the only competitors that that you would think of are um are like solana and sort of the cosmos ecosystem um but even those if you look at like percentage-wise are you know pretty small and even those are also looking for ways to integrate um you know uh evm or you want some compatibility so it's like not necessarily um you know sort of truly

discreet ecosystems um i think like as we were sort of alluding to um i think evm still requires like a lot of upgrades to make it work i think if it's javascript like in that way right where like you know javascript did not get replaced by a totally new language it evolved over time we made stuff like v8 that made it run so much better we learned how like you know improved parallelization improved throughput we added you know higher level languages to like you know make it more usable by developers i think there's probably a similar story for you know the edm as well where it's sort of this this base that has um this sort of lending is to it that's gonna be really hard to get to get away from um instead we build abstractions we build improvements we build ways to sort of just make it more

usable over time um so i don't think the layer one wars are are over yet i also frankly would not be surprised to see more specialized blockchains come out and i think that's actually kind of what we've seen a few examples of over the past year is um you know the idea is that well ethereum block space is more valuable than you know uh some other random you know evm chains block space because you have security and you have co-location right um and i think um for a lot of applications that maybe don't care about either of those where maybe i don't need nation state level you know uh security guarantees because i'm you know a video game or maybe i don't really care about location because the people who use my application are not using other

applications they're only using my own app um it probably actually makes more sense for me to run my own chain or to do something else and get those fees down and really cater to my own users and kind of what we've seen is actually a sort of cross block chain market for block space where if i'm adapt and i you know really have my own sort of user base i will shop around for the cheapest block space available that sort of fits my uh you know where i stand on the on this uh spectrum um and that's kind of what we've seen like we saw like you know audience moved from like xi to solana you know we saw dydx you know move to starkware and now potentially moving the cosmos we've seen you know axi move to uh yo ronin um and so it's like for for these kinds of

applications that have really sticky users that might not have the same security guarantees or need for co-location as other applications i suspect they will probably continue to shop around or maybe even run their own blockchains that are more tailored to their needs what does that mean shop around uh because if i i thought someone would like if i'm audience i'm basically saying here are my needs here are my technical needs just like you would do if you're like we're recording this on this thing called riverside it'd be like here are my needs i've got aws i've got google cloud and i've got azure uh let me do a demo of all three of them and see which one's better um is it not the same is it more like hey solana's gonna pay me a hundred k avalanche will pay me 250k like what does it mean to actually shop around um

well i'd say well it seems like has seems like not common no no no i i'd say um i don't know it is a little while ago but if you guys remember the amazon hq2 uh episode i think that's a good analogy for what is what it's like to build a blockchain today which is that it's a little bit of shopping around it's also a little bit of like in the process of shopping around you get to know people you get to understand like how much support you're going to get you also understand the technical needs and like look you're not going to talk to you know boise idaho because you already know boise idaho is not the place where you want to put hq-2 but among all the places where you can see it working nothing is boise boyz is great i'm sure i've actually never been but i'm sure

it's wonderful um but among the places you're like look i know like look my options are basically solana avalanche or polygon and all right why don't we all talk you guys can each make me an offer and tell me how bad you want me and then you know i'll pick my favorite and that and that is how the majority of really dominant projects that are in the shopping around phase i mean we saw this with the terra collapse so after after the terror collapse a lot of the biggest projects on tara did exactly this they started going talking to all the bd teams from all the big protocols and um they decided hey you know it's a combination right it's not a single thing you don't just literally take the highest offer because of course most of the value of being on a chain is

not just what you get in tax incentives quote unquote it's it's the overall picture of like what's the quality of the people there what's the marketing support i'm going to get what's the blah blah blah what's the infrastructure look like all that stuff goes into a decision of where you want to build your application right i mean we saw a polygon launched their quote-unquote uncapped fund to bring to bring folks over from tara that sounds like that's basically just an incentive fund uh to bring folks over so that's um and is it just money related or is it tech related or what's all the above right it's multi-dimensional people care about the tech they care about the quality of the people they care about the daily active users they care about the spending power they care about the tvl and they also care about how much money

you're gonna give them and how much tech support you're gonna give them all those things matter are these like 250k checks is this like a million dollar check what are we talking here i it it depends on the quality of your product so like if you're um i don't know uh what's what's a blockbuster project look if you're stepping and stepping's like yo i'm i'm done with solana i want to move somewhere else people will be throwing a lot of money to get steppen to come onto their chain um but if you're you know some marginal developer from some random country that most people haven't heard of it's not likely that you're going to get anywhere near what stefan's going to get if steppen said i want to move to a new train how much money do you think they could get uh i'm speculating at this point because i

have no idea but i would guess somewhere between five to ten million but it would probably be unlocked over some period of time and it's like you gotta you know you don't get it all day one it's not all cash yeah yeah yeah i'll ask you two the same question i asked uh ciao and imran they came on the podcast last week um and i said if you could build if you had like a seed stage startups like three amazing engineers and they basically came to you and they're like we've got this amazing idea and you're like holy that is an amazing idea and they're like yeah but we don't know where we're building it we we need your advice and whatever you tell us to build on we're going to build on it and ciao imran didn't answer but ciao was confident enough to answer live on

the show so i'd ask you to i'm curious if you two agree on this what was his answer i can't tell you until youtube until youtube tell me your answer but it's a controversial one i'll tell you that tom what would you say uh any any blockchain that or layer two that dragonfly is invested in i think is a good choice um it's such a cop-out answer tom yeah um i don't know i'm i'm certainly not been in this position so i've not thought that deeply about it um but i think frankly like anywhere within the evm ecosystem like yeah polygon avalanche aurora ethereum even like a layer two it would probably make sense i think if i really cared about yoga you know future proofing or something i would maybe think about making sure looking at some

of the zika edm um projects that are sort of um in the pipeline right now i think i'm pretty bullish on that as with the future of where scalability and where blockchains are going to go and so um maybe not building on it today but thinking about how you're going to get there or be being compatible with that in the in the future yeah my answer is a bit of a cop-out but it's like it depends a lot on what the application is and like i think people don't think about this enough as they sort of think about the chain as just like a community or a token or a price but the question really is quite strategic about look if i launch this thing on this chain who are my competitors on that chain like if let's say you're building a lending protocol okay if you launch a

lending protocol on solana it's like okay well you've got so long to compete with right okay do you how do you think you're going to do against holland and how much support is solely on getting from salon adventures or solano labs or you know the salon ecosystem if the competitor on the other hand is something like ave it's like okay how much of it how much is ave dedicating to this chain do i have a competitive mode to be able to say like hey ave is the biggest right now on polygon let's say but if i have my own token and i have my own go to market i can get the support of the polygon team and i can potentially build a wedge to become the dominant platform on polygon um uh whereas on avalanche you know it's banky and banky is uh you know banky's

got a lot of buy-in from the avalanche team it's a native token they've done their own liquidity mining scheme so it might be harder to go to market against them so the details really matter it's not just about the chain it's also about what you're building and how likely it is that you're going to be able to take mind share away from what's already there on that particular chain and it also depends on you know to your point like when we when you know if you decide it's to my mind it's almost like deciding okay i want to build a i want to build this uh restaurant and i've got you know amazing recipes in my restaurant it's gonna be really great what city should i should i start my restaurant it's like well depends on the kind of restaurant and depends on you know how many other restaurants are

there like that in each of the cities and also just where are you going to vibe where are you going to get support where are you going to be able to build a real community and you might suck at doing that in houston but you could do it really really well in seattle so it it or in boise boise might be your jam like you can dominate a small market that's that's always an option too tom i gave you a layout by the way with uh with the question about like what's gonna change coming out of the bull market and you know we threw at the wall and it's stuck in the bowl but it doesn't stick in the bear i wanted you to answer with air drops because i know that they're useless in a marketing stunt and i might be putting words i might be

putting words in your mouth and going too far but i'd love for you to share your thoughts around air drops yeah i'm actually uh working on this this your research piece right now basically looking at you know what is the activity of people who get air drops and you know how much of their activity change proportionally to how much they receive in the air drop are they actually going to be loyal stick around um and i i think overall like you might my feeling and some of the your early data is like you know i i think people loved the uniswap airdrop it was this amazing story it was amazing thing um know getting thousands of dollars for free for being an early customer super you know delightful incredible you know branding opportunity that i think you know i was maybe slightly critical at the time but i think i've

come around on it that yeah you spent 150 million dollars in in marketing but it's kind of a marketing story that you can't really even buy um with with money um but now it's become kind of expected you have people gaming air drops you people get pissed if their job is not calculated correctly it's and it's just become um the optimism community was like you're not allowed to sell yes yeah that that would be a great air drop actually is you get a commemorative token that you can never sell but it's a way to say thank you for being part of the early community i'm sure people would love that um but yeah it is kind of a question like what is this for um the story is always like it's a way to thank the community i don't really think that's true anymore um it's a way to get early

users to use the protocol well then you should be explicit about it you should sort of hint at an airdrop it should just be an explosive project like liquidity mining you should design it correctly you know it should be a grants program something like that um so it feels like it's kind of become this social expectation that if you have a product and you don't have a token you better give a token to early users but i think in practice that just like doesn't even really it's it's nft projects where it's like uh the expectation became you have to give free things to your nft project over time even though that's a pretty crappy business model um it's like if you launched a project and it's in d5 like i'm expecting and i use it i'm expecting my airdrop now i think there's also there's an element of it that's just um

there's a there's a kind of running a strategy dry and then continuing to try it even though it doesn't work anymore we see a lot of that in crypto right so like in you know obviously the ico bubble was basically that you know writ large and then you know in in the summer of 2020 it was liquidity mining where this felt like this magical way to have a token appreciated just do some liquidity mining program and then pretty quickly people figured out liquidity mine doesn't magically produce value and then you know it became air drops and air drops are just this magical way to make things valuable and then suddenly it's like okay it didn't work there's the ve model then there's the you know running raising the ecosystem fund ecosystem funds became this magical way to make their ones really really valuable um then of course there's the

um you know there's all the stuff around nfts and then there's 20 apy tokens became this you know really incredible thing if you do this your layer one is gonna pump or your application's gonna pump um and and the thing that we realized look the first one who comes up with this idea gets a lot of bang for the buck it really really works right in the same way that um you know back when facebook first launched uh you remember there was this thing where facebook would import your contacts and email everyone in your contact list and be like hey come sign up for facebook and that really really worked that was incredibly effective um if you're a new application and you do this it's not gonna work it's not it's just gonna be spam people are gonna ignore it and the same thing right i mean there's

pretty steep diminishing exactly it seems like for all of these yeah yeah exactly once once people kind of ride a particular marketing tactic into the ground it stops working but a lot of people are too afraid to to not do it yeah because it's a kind of um you know just becomes like a best practice quote-unquote that becomes solidified it's like okay if you don't do this someone will get mad at you or who knows maybe your project would have been successful if you had on the airdrop but because you don't uh so because you do you at least know that like look at least no one's gonna get mad at me but you know tom's point they get mad at you anyway because your job's not big enough or the calculation was wrong or you you know remove some people who look like fraudsters but you also

removed some good people or the fraudsters complaining to you yeah so it's very hard to win given that um you know it's a lot of tokens that get expended in air drops but the the actual um uh loyalty of most people getting the airdrop is not really there and so i think what we'll probably what we'll see over time and this is what we see with every technological cycle is that people are going to iterate air drops for just people who touch your product before your token was live right that's the that's the norm today um that will change to something that more closely maps onto what we mean by loyalty and it's probably different for different applications but eventually we'll find something that tracks the thing that we actually care about which is that i want to reward loyal community members that's what people really want

to do airdrops don't really do that very effectively anymore yeah i am people try to solve that by just ve basically just locking people up but you can't lock you can't lock someone in to create loyalty uh technically they might not be selling it their token but um how do you advise companies who are who are coming to you okay so i'm a founder of a dragonfly portco and i go hey tom um i need help with marketing i need help with user acquisition we're going into this bear market nobody cares about my thing um liquidity mining doesn't create loyal users ve isn't a great strategy uh airdrops you just told me they're useless i can't go raise this 300 million dollar ecosystem fund like and i can't go run ads on um facebook and instagram and all that kind of stuff like i feel like i'm

i'm out of luck here so what am i doing here tom yeah uh well i am regretting investing in younow because you're but no i think um you know there is a component in here where it's like there are no no shortcuts to like building a great you know company or product and i think you know marketing is sort of like you know kerosene where it can sort of help grow things quicker but if you don't even have a flame to start like this is really going to do anything um i think from a product perspective you know i always tell teams like you have to start small smart start focused build to where the market is today um i think a lot of teams have this very grand vision

and this they want to be a platform they want to do all the things um and then they launched and it's a really muddled confused experience there isn't really a great sort of uh you know polished experience with good liquidity you know a good ui like it's like everything that that users want you would have to start small and branch out this is like classic startup advice but we somehow forget it sometimes crypto um i think on the marketing side teams also i think come at it um with the idea of telling the story about themselves they want to talk about themselves and what they're doing and sort of they're shouting it out into the universe and expecting that people are going to notice and care i think that works when you're at scale like people really do care about what's happening with unit spot where people really do

carry care about what's happening with with step in um but most of the time you're sort of small you're this little ant on the ground and you're shouting and you're saying hey like you know please pay attention to me and i think in actuality like if you want to do marketing in the really early stages of a startup or crypto start specifically um you need to be thinking about how to tell a story that is bigger than yourself and then insert yourself into it um so it's not just hey look at this cool thing that i'm doing but hey here is this cool part of the market here's this cool thing that's happening um here's this bigger story and we're a part of it and um you should be paying attention with us because we are also this really cool amm that is doing something kind of similar to uniswap or

whatever um i think the other thing teams also get wrong is they want to outsource marketing they think i can just hire like an agency and they will just do everything for me and i think ultimately like it's very unique to crypto is that there is sort of a um cult of personality and sometimes around some of these founders and the founders are the ones who are active on discord the founders are the ones that are active on on twitter um they're the ones who are who are telling the story and i think that is sort of what we seem to be the most um i think potent way of of of narrative building is like it's this founder who's on this mission or these founders who are on this mission um and i think like if you don't have that um like you probably know all the top

founders of a lot of the top blockchains a lot of d5 products and it's not even necessarily true of like your normal startups or products that you might use you probably don't know the founders of a lot of the you know uh products or companies that you use day-to-day but for crypto it's very true and so you've got to be in the weeds a little bit um and in some respects it's a a benefit because you're actually talking to you know uh users you're getting feedback from them um you're you're sort of having a really tight feedback loop which is uh really really you know key pro part of building a successful product i think that's really really good advice that folks oftentimes forget especially in the bull market is go as niche as possible and capture a super niche market right and like you look at

some i mean the overused examples are like facebook started with college students and like ebay started with um uh collectibles or like i think craigslist started with like san francisco meetups it's like go super super niche and capture that market and expand out from there uh going back to some of that founder advice i'm curious how do you advise founders who might maybe they didn't raise in at the top of the bull market and they need to raise again um block fi i don't know if this is true or a rumor so i won't like confirm it but you know they're i think there is a three billion it was rumored they were raising it like a five billion today uh came out and said that they're raising it like up one billion uh so it's down between 66 to 80 right what what is like the psychology

of a down round and how do you advise founders who maybe have to raise it a down round but like the other side of this is if they don't raise it the down round they go they go under well i mean the first thing you say is that there aren't a lot of founders who are there right now you know there's uh again because so many people have raised so much capital it's really only the very capital intensive businesses that need to raise money now now eventually a lot of companies are going to be there but there's a strong impulse to not be the first right so i i can guarantee you if block fi is raising right now at a billion uh it's not because they want to they are they are probably backed into a corner and they have to raise right now and so

they're raising at a very tough time they don't have a lot of leverage they're not fielding inbound demand but instead they're going out to investors and saying hey i'm in a tough spot i need to raise money right now the folks who are raising into a strong environment where there's actually demand from investors as opposed to their demand for capital um they're seeing much less aggressive markdowns than the folks who are going to be forced to come out to market right now and that's one of the reasons why the standard advice that we're giving to founders is hey cut your burn extend your runway make sure that you don't have to raise because if you have to raise you are going to get very punitive terms compared to the person who is enticed to raise by getting an unsolicited offer so you know back in the bull market

everybody was getting unsolicited offers it was just you know the job of the vc was to go and think of hey who do i think is really interesting and then go try to give them a term sheet and in an environment like what we're seeing right now very very different dynamics so the number one goal is like don't get there in the first place don't be the situation where you need to raise money once you do need to raise money like that you know over the next three to six months we're gonna see down rounds become more normalized being the first person to do a down round it's like it's very kind of walk of shame right like there's everybody's going to report on it i mean you can see how much glee there is in the market talking about hahaha block fi they're raising a down round you know it's over

blah blah blah which is whatever market's going to do what market's going to do the reality is we're going to see a lot of down rounds of this uh of this size or or even worse than this over time um some of them are going to be quiet a lot of them are obviously not going to want to announce just because down rounds are not sexy nobody wants to trump it that they did a down round and so you're not necessarily even going to see a lot of the announcements come out in the public about these down rounds um they might get reported on after the fact yeah um but you know at the end of the day the the the reality is that the number one job of a founder is to keep the company alive until you can get to the promised land and the promised land might be you

know waiting until you get to the next bull market or until you ship that one product or until you expand into this market that you think is gonna help you dominate um but uh you do what you need to do in order to keep the company alive and that may mean a combination of uh of of uh a financing that may lower your net valuation uh but it also may mean again finding things to to cut your burn which may be letting people go which may be cutting salaries which may be you know a lot of things that people have not even wanted to contemplate for over a decade and uh but we will start seeing it especially in a lot of the companies in crypto that have been over funded that don't really have product market fit what is the psychology inside of a

company when you raise a down round like what is the kind of spiraling effect that happens i mean when when you raise a down round everything in venture conspires to make down rounds hard and that's why most often when you see markets go down instead of seeing a slew of down rounds like if you're a public company the moment the market goes down you're worth less and so everybody just kind of gets it all at once it's one big kind of pill to swallow it's like oh okay well people had options are down people at rsu's their packages are worth less um you know the the executives have you know their net worth has decreased materially um but like it's done it's done in a day and nobody has any delusions about what's going on in a public company and your competitors are down the same

amount right i'm lyft and i'm down 40 well that's fine because uber uber is down 40 too so it's like yeah and everyone i mean hopefully yeah you hope you hope that your competitors are also down the same amount or maybe worth more than you um but uh in a private company when when the market goes down um you're still kind of in suspended animation everyone can sort of imagine in their heads that they're not under water or it's like okay well maybe if we raise our next round in two years and the market comes back then nobody will be underwater and nobody has to write downs and nobody is you know nobody's at zero everyone is still above their strike price um and you know when a lot of people's packages especially because you know in startups people generally don't get rsu's in the early stages of startups

they often get options and if you have options then your strike price really matters so if the company has materially decrease in value literally you might be at zero like if the company goes public today you make zero you make nothing and that can cause a lot of people if they can actually do the math to want to leave it also means that the founders own materially less of the company to down round because of course the preference stack starts to really grow because the series a investors get their money back the series b investors get their money back especially in a down run oftentimes you see structure introduced into a deal um so i don't think we've seen any of this in crypto yet but there's a good chance that we will at some point especially in the later stage stuff that um there may be situations where there's

like a guaranteed payback to some of the later stage investors uh in which case it becomes really really hard for the founders to even own enough of the company to make an exit material even if they they come out at flat so all that stuff makes it hard and harder and harder and harder for all the normal effects of a startup which make everything at a startup accelerated everything to startup moves faster everybody's more excited everyone's making money quick it goes in the opposite direction in in a down around period which is why very often in a down round you have to go out and make fresh equity grants you have to go out and kind of figure out how do we keep the incentive still working in the down round so that everyone's still incentivized oftentimes it means that the previous round investors might

have to go down a bit just to keep the company alive and make sure that the the down round investors actually feel like there's a cap table that's workable for the whole thing to make sense so that's why downloads are hard there's so many things you need to solve in order to make a down round even work whereas in up around everything is designed for apparatus you know everyone's making money exactly everyone's happy everyone's making money you know it's like oh maybe this maybe that but like fundamentally it's easy to get a deal done down rounds are painful nice press release yeah yeah yeah exactly tom do you have anything to add to that no i agree i think um we're actually like putting out a blog post soon around hiring in a bear market as well and sort of talking about i think the big issue is just around tower

retention like as succeed said like if you're doing a big down round like just due to liquidation preferences like your equity in the company as an employee might be like totally wiped out you might be a zero at this point um or maybe it's down you know 80 90 um and i think when when that happens um as a founder you lean on two things one is company culture um have you built an amazing place to work with great people that are really motivated about solving working on the right problems like um yeah i could say what is that zero x we had like actually zero attrition during the bear market um up until like you know 2020 when people started to leave and start to build you know new things and new products and stuff like that but like i think it was a testament to the

fact that the people who were there really wanted to be there and they had a great time working there a great time building new products um even if you know maybe their their token grant was down you know 80 90 or something like that um but yeah i think the other component is just like um you know prioritizing you know house of the health of the company as well like um if you uh you know it's it's painful to do some of these things but ultimately i think it's better for people to you know take a cut versus have it because you have a zero and uh yeah have the company shut down or something like that i think the last thing to just touch on here guys is um uh one thing that one of you mentioned at the very beginning of this conversation which is uh becomes

difficult when you've got the private equity is stacked really high or is um the value of the private equity is really high but then public tokens are down like 90 percent but you guys are vcs and investors and you you want to support the private side of things but obviously you need to return capital to to your lp's right so how do you think about like when just capitulated public tokens become too enticing not to just load up on some of the public tokens well so it depends on the structure of the fund so um our our venture fund is constrained from investing into public so we can't just go buy stuff on coinbase um now that being said i do think what you're going to see over time is that the market will equilibrate because it just it always does right

that's how economics works so if you wait long enough eventually people who have unrealistic expectations of outcomes will start to reprice things and you'll see a different uh you'll see a different regime with respect to pricing right now you know like we said some seed rounds are being priced much more favorably so we're seeing things come down 50 60 percent in terms of seed round pricing but some folks are like hey i had a term sheet just two months ago at you know uh 50 million so i want 35. and some people some people will probably get those rounds done um but i think the longer you wait i mean again assuming the market doesn't rebound which i mean in the short run i'm not expecting any you know really impressive rebounds um unless the market rebounds pretty soon

eventually at some point people will just kind of get the message about what the new price levels are and uh the same thing happened in 2018 it took a while to see the market adjust the fact that like hey yeah the bull market's over uh people are not expecting just you know automatically making money investing in this thing at 50 or 100 million ftv anymore and once once we internalize that the market is going to adjust so in the seed round it's easy because you haven't raised any money before so starting at 20 we're starting at 30 we're starting at 40. it's kind of like okay it's just a number it doesn't really affect anything um like we said it's in the later rounds where it starts to really affect things and you've built up all this cruft that gets affected by a round being materially higher materially lower

than what you were otherwise expecting but the reality is you know people are really um people are naturally really industrious so in a bear market like what you find is that in a bull market a lot more money gets raised but it doesn't mean a lot more stuff gets done right very often a lot more money gets raised and it gets mostly wasted or just like spent on incentives that don't really go very far or it gets air drops to tom's point and people like to start finding ways to spend money but in bear markets like i mean i i would say that the last bear market was incredibly productive pretty much everything in d5 was built in the last bear market and um people are just people just have a lot of ingenuity and the most valuable stuff the most important stuff the most

important hires the most important ideas are the ones you do first so very often that's another part of the reason why i'm actually not that worried that um projects that we're not going to see as much progress because there's not as much money in the space because usually the extra money that comes in at bull market doesn't end up accomplishing a whole lot compared to what the kind of base line of funding already accomplishes what is the um relative to 2018 we can wrap it with like this two-part question here i want to get both your guys's take on this um the first part of the question is relative to 2018-2019 what is this what will the severity of this bear market look like um and the second part is i'm assuming you guys have a lot of founders who get on the horn with you and they say haseeb

tom i'm trying to prep i'm trying to cut burn i'm trying to figure out what we should do with our product strategy and refocus the company but like how bad is this bear market going to be like how long is this going to be and so i think there's a maybe it's maybe it's just one question here around like the length of the bear market and the severity of the bear market so uh i can i can start to give tom the last word on the length and severity of the bear market like the only honest answer is that no one knows the reality is that but that doesn't make for a good uh that doesn't make for a good podcast answer i know i know but look if somebody claims they know how long the bear market is they're either bullshitting you or they're bullshitting themselves

nobody knows right that's why it's a market and the the overall picture that i would get is that look unless we see some kind of exogenous shock or something that really really takes off in crypto in a surprising way i think it's unlikely that we're going to see a lot of positive accelerants for crypto in the next six to 12 months um right now macro is dominating the picture and most people who are looking at macros say like look we might we might skate by without a recession that's the most that we can hope for but beyond that like the picture doesn't look amazing inflation is still at you know roughly a 40-year high um supply chain issues are bad there's a war in in eastern europe there's you know china is just now starting to come out of these massive coveted lockdowns it's a bad year for growth

across the world so um and we're seeing you know consumer uh saving like household savings uh down massively from where it was a couple years ago and interest rates are higher so there's less demand for speculation less demand for day trading you know all these exchanges around the world are seeing less uh retail inflows so all of that should tell you that like hey it's not a great look and crypto is somewhat reflexive so i would say you should be prepared for this to be you know up to 18 months will it actually be 18 months who the hell knows it could be longer than that it could be much shorter it could be over in two months and then you know the war in ukraine is over and then turns out the next cpi print is really low and then it's like fed's like okay great we

can avoid a recession rates go back down and everyone's happy and bitcoin bumps so it's impossible to say because it involves predicting so much about the world tom any insights that are uh i don't know if you have any more like specific insights or a little more clarity or maybe a magic ball that tells us exactly where this goes tom definitely has that but he's been hiding it from me yeah yeah i got it that's right everyone's got the magic ball yeah um i mean i agree with a lot of that um i do also think it's important to emphasize just like this looks very different than 2018 where there was like literally nothing instead we have tens of billions of dollars in stable coins these indexes are doing you know hundreds of millions of dollars a day in volume like there's real stuff going on and i think one thing i also

have to say is like crypto only ratchets up um like if you look at talent inflows into the space capital inflows into the space companies who are looking to integrate crypto into their product lines uh do the amount of amount of funding it just constantly kind of always inches up a little bit um i think if you zoom out like that overall is is super bullish it's like um you know it's also sort of like like don't don't fade the youth um if you look at sort of where you know younger people are interested where they're excited about working what they're excited about working on what they said about using it's crypto and ultimately you know there's sort of this you know sad component that like society doesn't progress by like you know six-year-old people deciding that bitcoin is great all of a sudden um by by them retiring

and dying and young people replacing them and i think it's it's really hard to sort of uh it's really important to remember that and remember that like you you know uh the youth are sort of the future and i think that's kind of where uh i see like most of the the crypto is coming from yeah isn't there a really depressing quote it's something like innovation happens one death at a time or something of that yeah so um awesome well this has been a really enjoyable conversation hope you guys enjoyed it and uh as always thanks for coming on empire guys thanks for having us jason thanks all right be well [Music]