Is Crypto Broken? | Roundup

Transcript

You know, we've had so few household names come out of crypto outside of Bitcoin and Ethereum. That's what we need. If five good tokens ripped that made sense that weren't just based on some narrative, that is what takes us out of this. Hey everyone, quick disclaimer before we get into today's episode. Nothing said on Bell Curve is a recommendation to buy or sell securities or tokens. This podcast is forformational purposes only and the views expressed by anyone on the show are solely our opinions, not financial advice. Our guest and I may hold positions in the companies, funds, or projects discussed.

>> What's up everyone? Welcome back to another episode of Bell Curve. Got me, Miles, and Zave. Zave fresh off his 30th birthday party. >> How was it, buddy? >> Yeah, good. Thanks, mate. Uh, good to be back this week. Uh, celebrated the milestone birthday over the weekend, so it was good fun in Monorca. Took a few days off. First time taking time off in a long time. So came back to see much of the same this week in in crypto. So I was hoping to see something a bit different but turns out if you take a few days off especially this year seems like not a whole lot actually changes.

So yeah very good to get out of the way and good to be back behind my desk and yeah doing a lot of reflecting I guess on this year so far and where to for the rest of the year. >> Yeah. Do you think that the crypto markets are doing this simply to give you an existential test on your 30th birthday for whether you're working in the right industry? >> Between a new decade and the markets being down and you realizing you spent pretty much the previous decade in a technology that now is having a tough time and I guess you then think, wow, there's like a lot of other people I guess like me have done the same thing and are now doing potentially different things. Some are obviously staying in crypto as well, but there's quite a few

doing different things and you see more and more. So, I'm sure we're going to talk about a few of these things in the podcast today. But yeah, like I had a lot of crypto friends at this event as well that I worked with at my previous company, Chorus One. So, met a lot of good friends along the way, which is always the the most important thing, including you guys. So, fingers crossed it all turns into >> That's the stage we're at. Oh, it's all about the friends you make along the way. No, no, no, no. You're the market will come back for your 31st birthday. It's all about >> That is true. I was I was saying actually at the event that I should have had my 30th birthday during the 2017 ICO bubble. That that would have been a good time.

>> Yeah, exactly. Exactly. >> Do you think it's a bigger test now than it was during the 2017 ICO bubble? >> As in 2018 bare market? >> Yeah. Well, if you remember the sentiment at that point, right, there was all of these ICOs that raised super consequential sums of money. I mean, EOS or Block One raised four.5 billion dollars. That's a that's a historically successful IPO raise. You know, only with the AI raises are we getting, you know, consistently higher sums than that. And then it just went to zero.

>> I mean, I feel like crypto has this habit of memory holding itself. I keep hearing people say this is the worst sentiment since 2015. It's like I think you're forgetting. >> I think I think you're simply forgetting. >> I do feel like it's uh it's never been so bad from like a a grass is greener standpoint. Like in those previous bare markets, we weren't like, "Oh, [ __ ] We should have gone we should have worked in sets, you know, or like we should have worked somewhere else like no." And and I do think with like AI and and now robotics like um there is like a bit of nerd snipe jealousy to go on top of like um and and and capital intention jealousy to go on top of everything. Um and people like a lot of people have just you know Z to your point like we've

been in the space all the while. Um and so I can see folks that are just kind of tired. Uh and that's part of it but but not us. Not us. We're ready to go again. I also think like what is different is not only do you have one technology that's super hot in AI, you actually have pretty much any single technology you can think of about to go through a bull market. And crypto seems to be the only technology in a bare market right now. I mean, let's see how long the bare market lasts. Typically, it wouldn't last so long. And I'm sure longterm, I'm still bullish crypto, don't get me wrong. But like I was saying pre-podcast, which I'm keen to hear your guys' thoughts on, but I am a believer personally of AI making a lot of other industries a lot better, including like

space and bio and robotics like you guys said, but I actually think it makes crypto worse in the short term. And there's been a few tweets that maybe we can post in the show notes, but a lot of people are coming out. There's a lot of debate around AI and DeFi and security and all of that. And I'm of the camp that AI will really hurt security of DeFi in the next six to 12 months before things start getting better. And I think this is going to be really hard for DeFi protocols and startups to raise capital. I might be in one camp. I know you guys might be in another camp which I'm keen to hear your thoughts. But it's interesting that I guess AI is like such a creative technology. It's really benefiting all these industries. But I think in crypto it's actually harming it

more than benefiting it right now. Long term I'm bullish AI still and I am bullish on agencies in crypto in the next few years. But I think there's going to be a lot of risk in between here and there. And if you start too early, especially from a BC standpoint, uh, you know, being too early is the same as being wrong. So, it's just interesting to think about timing of when it all happens and what happens first and in what sequence. So, yeah, it's definitely been confusing for me personally to see all that play out. >> You know, I'm going to react to that word confusing because I I I think actually that So, here's just an exercise that I think would be helpful for everyone to do. Um, I I think you actually can't learn an enormous amount, funnily enough, about listening to current,

sorry, you can learn an enormous amount, obviously staying up to date on things, but I think you learn the most by going back in time and listening to specific people and what they were saying at specific moments in time. It's one of the great things about podcasts that you can go back and actually just do that. So, I mean, even Miles, what you said, you know, now there's some, you know, there's all these sexy new industries that we're jealous of. Okay, go back in time and listen to what people were saying in bull and bare markets during crypto in 2017 to 2018, 2022. The the bare cases were like I mean it was so much the government's going to ban this, the SEC is banning this, every regulatory agent there. The bare cases

were so much stronger than there might be a better industry to work in now. I mean, I I just think you got to put this in perspective of of where we've where we've been. The other thing is I think it's equally as instructive to listen to what people were saying during crypto bull phases. Um, you know, because a lot of those arguments came true and didn't come true at the same time. And that will be true of these new industries, AI, robotics. They're not new industries, but you know, they're having their moment. Um, there will be some things that come through in spades, but it might not happen in the way that everyone thinks, like everyone's just going to become a gajillionaire. That very, very rarely happens. Do you remember when crypto was I remember Pomp used to tweet uh, you know, like 20% of the world's

billionaires are now crypto people. In hindsight, that should have been a massive signal. Um, and I, you know, at the end of the day, I just trust my own gut instinct over, you know, having lived through a couple of these, you know, these phases. Um, I don't know how it's going to happen. I'm not in the weeds or smart enough to predict, but I I think that something would happen. So, if you're if you're sitting listening, don't listen to me. Just just go back and listen to what people were saying during previous uh booms and busts and then write down the bulls and the bare cases and see how today, you know, stacks up. Um, that that would be my suggestion. But in terms of it being confusing right now, I I I mean, I went on a rant before we we hopped onto this

podcast. I I I think it's the least confusing it's ever been. Um I mean I think if you view crypto largely through the lens of you know we have the only new really net new thing that we've invented here are L1s are a new type of asset they're they're they don't neatly fit I don't I mean they're going to get classified as a commodity but I I think they're there's there's something interesting in between maybe like what a commodity and a security would be but um most of these things are are businesses they're financial services businesses really high potential because you can scale globally from day one um you know 24/7 all these very interesting properties uh but we didn't look at them like that for a long time and you could throw infinite money at kind of these

teams that honestly no offense but you know I think we could all admit that a lot of these teams don't stack up or didn't deserve it or were openly scammy and now we're resetting now that a lot of the early unanswered questions and risks have been solved the only thing you have to do is create value and scale a business but the incentives of the industry weren't set up to do that. So now we have this period that we have to churn through where good businesses will rise and all the rest of the the stuff will will fall and die. Uh >> I don't know. I think it makes >> a huge amount of s frankly the last six years haven't made a lot of sense to me.

This makes sense. This is it's not always fun but I'm not confused. Like I feel like I've got a good handle. >> Sure. And a lot of these projects were like uh underwritten at valuations that were just kind of like based off of false false priors or like um you know uh the the in basically trying to project out like okay infrastructure these tokens have just made you know valuations that no one really really looked at like revenue or actually thought about it from a fundamental standpoint and that will continue to be the case like going forward. uh and the majority of projects like that got funded were infra projects and then over the course of the next few years it became like very very obvious and

consensus that capital like like value capture has risen up the stack. So like if you were building you know an app or like had that mindset two or three years ago. Um I think like you're you're actually in pretty good shape right now in crypto. Um, I do I do think that there's just, you know, the vast majority of projects that were that were funded were going after problems that it didn't exist and now, you know, there's no market for their solution and so they're they're pivoting or, you know, getting flushed out. >> Yeah, I have a few small points, some points I've been thinking about. So I think on my birthday weekend actually what I was thinking about is when I got into crypto you know in my 20s and I

think when we all got into crypto back then I guess it's because we genuinely thought that crypto would like change the world and the people we were taking on like banks etc. and they're the people now where the value is acrewing. And so I think I completely understand some people who have been in the space a long time being unsure about I guess spending a lot of time in the industry and then now seeing the space change so much to like if you think about it really like postregulation stable coins now are a massive part of I guess crypto and probably are seeing the most adoption and that's fantastic to some extent. There are obviously cost savings, emerging economies. That's really cool. But I think back in the day, if you think about like the TAM of

crypto and like when we first got into it, it's like bit everyone's going to have Bitcoin. Ethereum like the world's banks finance is like everything's going to be on Ethereum. Oh, Salana like you know that's like the next Ethereum and the TA for that is is massive. I think what's happened in the last 6 12 months is stable coins are now existing on some chains and really the chains that benefits the most are the ones with distribution like Tempo and Circle etc. I think that actually hurts the old L1's and I stand by the point that especially Ethereum right now is in a really tricky place and you know I love Ethereum culture and people in a community but I think ETH and Ethereum network are not in the best place right now and that's again because I think stable coins are really here to stay and I think that's a

really like obvious use case of crypto and then if you believe that then I guess then the question is like yeah that whole story about overtaking the world if you I had this thought exper experiment actually a few days ago thinking like let's say that all of us got into crypto 10 years ago and then we were told like okay this technology you're entering for the first time in 2016 2017 the biggest use case would be like USDC on chain or like a stable coin if you think back 10 years ago like tether was I remember swapping to tether and selling it straight away because we all believe that tether was back 70% by and not 100% and like I was I was not even thinking about stable coins I was thinking about participating in this new world economy that would like really challenge

how he did things for the better. I think right now that is also layered on with a David Hoffman piece which he wrote today which I think we should also put in the show notes which I don't know if you guys have read or not yet because it's early your time but I thought actually to be honest with you like the piece was in my opinion quite well written and I think I mean the same I'm obviously one person not not all but a lot of his points made a lot of sense and I think one of the points he made was that these layer 1 assets now are becoming more and more valued which we've already talked about in a show as just like on their revenue revenues and fees and whatever else it is. So like it's not really money anymore. And that

was the whole line of his piece is like ETH is actually not money and the thesis was wrong. And to some extent I think a lot of thesis like sorry to interrupt but that's so like look also I know that Blockworks isn't going to get any credit for this but that was so obvious to not believe. That was always honestly there's so much mental damage that got done by anyone ever saying or believing that. I mean, sorry, but like come on. Come on. >> I frustrated by the fact that these these theories ever like gain traction and now that they're being proven wrong, it's like we're all questioning everything. Come on. You can build you can build a financial implication, you

know, application from anywhere in the globe instantly and sell it to anyone. That's always been the value proposition and you have to make money >> and you have to make >> I guess when when we entered the industry 10 years ago like I think okay the thesis was wrong and I think all of us didn't think that ETH was money for a very long time so I'm not saying that we thought ETH was money in 2024 2025 but I think back then in 2017 we did think maybe that ETH was money and like all these other [ __ ] coins were also money at the time and that was fantastic and we were making a lot of money and that was really fun time to be in the industry. I think now it's like what I'm noticing as a VC especially this year to be honest is like it's the ambition and

the like creativity of a lot of teams early stage is like dwindling in my opinion right now there's not a lot of new ideas people are scared obviously it's a bare market but people are following where the money is already going like prediction market stable points etc super competitive spaces and then you have to ask yourself the question like why can't the incumbent especially with more resources and AI just overtake that from the start so I I think from a VC startup perspective and obviously all of us wear different hats. I think it's challenging especially like last bare market there was still ideas even 2018 to be fair technology was younger there was even though it was a bare market there was still DeFi came out all of a sudden like there might be another DeFi in the next 12 months something like that like agents start

using blockchain which could happen like don't get me wrong but I think the way that I see the cycle right now in crypto is like we don't know yet like this next crypto cycle that takes us out of this trough and I think that's obvious because every cycle we need something like we had DeFi one cycle then we had like L1's another cycle etc but I'm asking maybe it's agents like who actually knows but 2026 as a year I think is challenging more than anything more than confusing because I think we're all waiting to see like what is that next thing that takes crypto into the new cycle. >> Why does it ne why does it need to be a next thing?

>> Well I mean here here's the I think the challenge is like maybe just to articulate Z's point on the the fundraising environment like uh the leverage is with venture investors at the moment. So the bar is really high for you to get funded in terms you need revenue, right? And you need and there and and like to have um near-term sight to like high growth and revenue. Uh you need to be going after something that's like kind of already working today, right? And so then you get like okay YC like projects that are all pushing you into this little like fintech bucket um to take some slice of you know ramp or XYZ or whatever, right? Um, and I would argue that those startups like compared

to crypto startups of the past are probably like not well positioned to win those industries because those industries are already established and the big incumbents are already there, right? So you have this weird tension of like the VCs are like telling you that you need revenue and that you should go like listen to customers and go after something that's working, but if you do that, you're actually fighting like a much harder battle than like trying something new with no competition, right? Um yes, but here let me just defend the perspective here for do you think it was super if you think about the big companies that you know from web 2.

>> There are some like Google that were the 30th search engine but many like Airbnb were super unobvious ideas and they had to work really really really hard to get that money from VCs in non-obvious categories. Correct. I would argue that I mean with all due respect to VCs who might be listening to this I mean there's a lot of trend following that ends up happening and those like if you're investing in the nth per deck right now unless you sell on like a one-year time horizon you're you're losing money I I like >> okay so this is but this is also reinforced by um how hard it is for VCs to raise right they have to sell a narrative that LPs are like yeah that I can I I'm down for that right and stuff

that's working. So then they have to, you know, then >> I agree. I But it's hard. Yes. So basically the bar has been raised. This is a thing that's too I would argue that part of the reason things are so hard is because the bar was too low. It's too easy. It and honestly when the bar is too low, it creates problems that you need to work through for years after years. Like it's not an advantage that you can raise, you know, for a startup idea with no money, no revenue, no nothing. That's bad. That's act I mean it's bad. So if when you've raised the bar some founders like new founders now that raise in non-obvious categories with non-obvious opportunities those are going to be the Airbnb equivalents and

you know if you're following on and not doing something creative and you're succumbing no one said this stuff should be easy. I think that's the there's kind of some optimal level here of too much easy money kills things and the bar being too high prior and and I my point is that counterintuitively like raising the bar is now giving like is actually putting uh >> giving VCs like a smaller percentage chance of having an crazy outsized return right because if you raise the bar then you push things push everybody towards like the hot categories of us working that's crap outed and then like okay great like you might get to like you know >> I agree but but when has that ever been

the like you so okay there was a period of time in 2021 when crypto was very different you could snap your fingers and raise money for anything was that good did we like was that a good thing for the because I think that the tendency right now is to say you know you know it's so good for in AI it's so nice you can just snap your fingers raise money they're going to have to deal with the same overhang that we are now working through the like I I think um I I don't know what it is about modern times that it seems like the bubbles are more bubbly and there's maybe there's just more capital in the world. I don't know what it is, but you can't there's some kind of law of physics, right? Like too much easy money, very young founders, not a lot of

discipline. It's AI might be a more significant technology in the grand history of humanity than crypto, but you you can't defy those laws of physics. um at some point they will need to work through the same crap that we're currently working through. Um >> yeah, no, I totally agree. I think you both made good points there. Um I think going back to like this cycle versus previous cycles, it's just something else to grapple with is not just the new technologies pumping a lot more than crypto, which is okay, maybe that's just one small thing, but going back with my VC hat here again, uh I guess we were ready for crypto applications. We spent so much money on blockchain infrastructure and then I think we've had some breakout crypto

apps probably not enough versus like what we funded because we funded many many billions and I feel like the revenue made by some of these applications is actually nowhere near the amount that we funded. So I think that crypto still has room for applications like don't get me wrong like I am actually still bullish on crypto apps but I think again going back to my point and I think Miles said it before as well but it is true like the imagination of people now in the space and I think this this is caused by many things. One causation is like institutions who were waiting for for so many years. They're now coming in. But then you go to a crypto event and it's, you know, no offense to any of these, you know, because a lot of them are good people and creative in their own rights,

but like if you go to an event of like just suits and no like kids and sneakers, well then the ideas are a bit different. The ideas are more like trading and like institutional stuff and compliance and like that is definitely necessary in crypto. like don't get me wrong and there is actually a market for that and that is continuing to grow and some VCs do a great job at investing in that. Um at the same time I think there's less creativity and I had a chat about this with someone today because now you can literally build anything. So like you know if you're an investor and you're seeing a pitch and it's like I've got this idea to build this stable coin it's like it's kind of unbelievable in the first place that you even have an idea like that because like literally anyone can build anything and will only

continue to become more like that over time. So your idea has to be incredibly differentiated massive moes around it like strong thesis like there's a lot that needs to be I think the bar for investing right now outside AI especially in crypto is much much higher than what's ever been and so that makes it harder for startups which is a good thing like you guys are saying as well because like what Michael was saying before is like when everyone makes money and the space is hypy and doesn't make sense which maybe you can argue AI is right now to some degree I think some of it is also very valuable obviously then it's like okay this is feeling toppy And like to be fair, I'm in you know some other people's camps where I think AI is frothy right now. I think it'll get much

more frothy but like at some point in the next few years yes like probably it'll you know flatten out and the money was raised and we realized that there was no modes etc. But crypto is like there needs to be I think for me more ideas like I saw a lot of teams this quarter in particular uh and I I also think actually last point I want to make on this is I guess talent which I haven't noticed as much until more recently like I just think that the talent which obviously probably has some correlation to the ideas itself is less strong the talent is different it's more institutional it's more banking background etc. which can also be a good thing but like the kind of interesting

creative like why I would expand the TAM of crypto isn't there right now at least it could come back and I think it will come back actually I think as agents become more capable I'm personally very bullish on like self- sovereign agents using crypto at some point in time and I think we're not there yet in terms of agents in general we're not even there with with multi- aents yet like that infrastructure still needs to get built yet in AI and I think until those things come on the AI side I think crypto will be the last beneficiary of all this but I think it's impacting crypto right and and yet we even say the retail money which also holds up crypto is now also moving into you know Korean whatever it is ETFs and like they're now bidding like memory stocks and stuff like that.

So I think there's like there's a reason why we're here right now in crypto and plus world economy which has we haven't even talked about but like there's so many different things going on in crypto right now. So like to some extent it actually makes sense that we're here today and I am still long-term bullish on crypto but like you have to be cognizant of what's happening around right now. Yeah, I yes, I agree with that. Um, here's what I would say though. I think without like without AI, we'd be in a very similar spot. So, let me just respond to a couple of these points, which is this disillusionment. I mean, if you go back and look at what people said about the early internet all before in like the 90s, pre 2000s and all these companies scaling and working, they would say things like it will

democratize access to information and level the playing field. If you look at the stock market today, 40% like some like 40% of the market cap of the stock market is concentrated in the top 10 names. So, it obviously didn't deliver on the ideological promise. And by the way, does it feel like the world is democratized because of access to information? Doesn't to me. Um, but what did it do? It created an enormous amount of value and changed the way that we live our lives. The early the early participants of crypto were ideologues and it was inevitable because crypto as a technology had to interact with humans that it was going to fall short in major ways of what it promised to deliver on the timeline that a bunch of very young ideologues expected. So again, on the

theme of not being confusing, it's not confusing to me that an anarchist dev, you know, who hates, you know, everything to do with traditional finance is feeling disillusioned right now because the technology is in the process of going mainstream and is going to have to make concessions. What you will trade off for those concessions is people actually using this stuff. That's like again, I I think that this is following the trend of what technology does. And Zave, you know, to your point about creativity, I would actually argue what crypto really needs is obviously creativity is always good. We need people who can scale businesses. The the industry has been set up to the incentives of the industry has not been

to create any value. Honestly, the the incentive be one um bug of being able to launch tokens so early and early investors having such little discernment is that you could launch a token around a sexy narrative. Uh like I've gotten on a b also keep in mind maybe there's a little bit of a a chip here from somebody who's been building a business in very unloved categories for like eight years. Um but you know I got on a lot of VC calls. Um no one had their cameras on. When's the token? Hey, I'm outlining the business. When's the token going live? Oh, there's no plan for a token in 12 months. I mean, I'm I'm hope like I'm telling these stories because this will resonate with other entrepreneurs who've been building in

this space. It's really discouraging, but those are the in but in a very honest way, those have been the incentives of the industry. Oh, is this a sexy narrative? Is the token going live in 12 months? Can I hedge it? Can I just get out? That is the incentives. So, we need to work through that. That's the pro. AI is making this worse, but this would have already needed to happen. So, I don't actually think we need some new sexy narrative to get us out of here. We need big outcomes. This industry is struggling from, you know, we've had so few household names come out of crypto outside of Bitcoin and Ethereum. That's what we need. We need more Coinbases. That we need five or We need I'm not kidding. If five good tokens ripped

that made sense that weren't just based on some narrative that is what takes us out of this not new money speculation coming in some pump and dump some dumb stuff again I'm sick of that game I think everyone's sick of that game so obviously we're going to get some of that but the space needs to make sense we need to create a set of incentives which is actually based on delivering value as opposed to selling something into a frothy narrative I think what matters now from like an innovation standpoint is not like truly wild wacky out there ideas on chain. Um now I do think like caveat I do think some of like the stuff that didn't work in 2017 to 19 some flavor of that could work today and actually be really really

interesting. >> I agree. >> I think I think it actually even touches like um like the innovation we need should be aimed at the stuff that is working. And I'm talking about like how do you for RWAS like how do you generate demand for the tokenized version of an of an asset versus the the non-tokenized version? Like what periphery services are you going to put around the the issuance of that asset on on Ethereum that's going to make people say actually yeah I want that version versus the one that like I could buy from my Fidelity account because I'm going to do XYZ with it. Um, I would say same thing on the on like the merchant side with stable coins. Like today stable coins are amazing, but like you merchants don't

really accept it for the most part. We've like solved that slightly with with virtual cards, but like what can we do to get merchants like to view stable coins as something they actually want to hold directly and like own so we're not constantly, you know, doing this on an offramp thing. Um, yeah. Yeah. And and again, like for tokenized equities, things like that, like there's there's a lot of more juice to squeeze in terms of like like getting I'd say like the issuance process um up to par with with the offchain version. Um because it's not just like, you know, hitting a contract and printing tokens obviously. Um, so that's the stuff that I'm actually very interested in and and I think that that's maybe not like the totally out there like, you know, white paper sort

of crazy idea that you're maybe referring to, Mike, but it's like actually quite needed to like get what is already working to the next step and a real leg up or we're have, you know, all these things clearing through the DTCC on Canton like sweet, that's not really what we want. So look at some a project like Sky. So Rune conceived of an onchain CDP prethereum. I mean talk about you have to be so that's one of these crazy out there. I mean you really had to have vision 10ear vision for for that to be the case. Now the way that Sky needs to scale is they need to bring quality assets in. They need to scale

USDS, right? They need to scale depositors. they need to bring quality assets that generate yield and manage manage that. It's it's a very different set of skills at and so that that's what I mean when I say like look they're going to need to solve really innovative problems right they're Sky and Spark are are leading the industry I think in terms of creating these standard sets of uh like a standard framework for onboarding collateral that will get verified not just by their internal risk team but by others innovative interesting not maybe the zero to one that got us all interested but what the space needs And yeah, we absolutely need creativity.

This is new and freaking cool. Like we're rebuilding capital markets, financial rails in a way which is global. Has huge geopolitical implications. That's enough for me. That's that's really freaking cool and interesting. Um and and I also think I mean I mentioned this at the beginning of this episode. Uh this is not to take away from robotics and AI. I'm sure all of that stuff is going to work and be massively transformative. I don't know what it is about the period that we're living through. It feels like the challenge of our time will be navigating markets that go up a gajillion% and then down 80%.

And you you you just need to pick your spot. Um and and and figure out where you want to build and actually gain expertise and solve problems. So, you know, I I think if you're in crypto listening to this, you know, just know, you know, if if you go to a there's going to be a lot of people who have been building there for an for a very long period of time and it's going to take you a while to gain that skill set. During that time, the bloom will probably come off the rose and you'll need to gain deep conviction about that. Um, and same thing with any same thing with any industry. Like I I think it's a more of a mental game than than almost anything else. And sometimes it's funny thing to say on too much thinking can get you in trouble and you just got to

close your eyes, put one foot in front of the other and trust that the original reasons that you got excited about are still true. So you know what you actually kind of need to midcurve it. You you either need to be you actually either need to be really early and left curve it or you you got to or mid-curving is actually kind of the right. Like if you go back and look at a lot of those memes and the mid-curvers, I bet you the mid-curve takes held up really well um over time. So that that's I I don't know. I think that's the one of the I I mean I do think like the the core primitives that will like you know probably be the foundation of the next wave of innovation are still going to be

like permissionless capital formation and issuance uh you know to against that capital formation uh and composability. Um I do think like we're uh there's two challenges that like make it a little bit hard to leverage that like as as your core um primitive that you're innovating on. one is security like as Z mentioned at the beginning of the call. Um you know things like I think we do need things like circuit breakers. Uh we do need you know far far more robust like key management um than we have today. Like it's still pretty bad out there and and the second is regulatory stuff. So like you do kind of get pushed towards these walled gardens um which is you know um a detriment to composability

like when I think more regulatory clarity comes into exactly who can hold this stuff. Um so that's why like I don't know the innovation gets pushed down the capital stack to like the real long curve you know uh stuff which I think is still cool. Yeah, >> I I agree with the point that, you know, obviously crypto is maturing. It's consolidating. We're seeing that across the board. I think all of us know that more than most. I also think though that this cycle, so I've had a few bear takes in this podcast. I'm also very bullish on crypto on like a three four year time frame, which makes it interesting as a VC obviously to be investing now, especially with valuations so low. So like whilst that the challenge

especially if you invest early like preede is like you don't want to be investing too actively when I personally think right now we still don't really know these new categories that are going to emerge. I'm I am still bullish at new categories emerging in crypto this next cycle. I think some categories like prediction markets stable coins like exchanges the ones we will know IWAS like we already know these categories and but I think it's I don't think it's thinking big enough to say that there's no other categories in crypto. I'm sure there'll be at least one or two categories this cycle alone and so that's why I think we don't really know yet what that is and hence we will obviously know in future and at that point I think that new category helps the you know categories consolidating

like prediction markets exchanges etc because it brings renewed interest of like oh hang on like crypto this thing like I don't think any of us here think crypto is going away so then but to be fair there are obviously periods of like innovation and some periods of like less innovation I think right now as is a period of like great growth and and like necessary growth and things are working and this is fantastic because it's been a long time for it's taken this to happen. Then I also am I guess I'm saying is I'm encouraging especially anyone listening to this podcast like if you have ideas on the fringes or you think of categories like I don't know social or ID or like whatever quantum like I do think that is an interesting time to be thinking about a net new primitive that you know lasts like a

decade longer plus in crypto like a unis swap or like a make a dow its day back in 2017 but like think of this like now however also on the funding side you also want to time where like I've heard from several founders recently like preede in particular in crypto was like non-existent like what Miles said before on the call as well like you if you have a category defining idea which doesn't exist right now and like you have no revenue it's a weird category like the issue right now is that these things aren't being funded they're hard to fund like don't get me wrong it's like well okay what's the actual long term of this and like I can't see it etc however it's a good time for both founders and VCs to take risk I'm not saying necessarily like today If anything, be really

thoughtful about like you can build anything like I was saying earlier. So, be very thoughtful about like go do your research, look at the history of crypto, like look at what's worked, look what hasn't worked. Like think about categories that are completely novel where you can, you know, build a moat around what you're building. Like I think it's dreaming bigger. Hopefully, we'll be there to fund that as well for anyone who is dreaming bigger because like we like these things and I've been thinking about this a lot myself. And another point I'll make is like I I do think that crypto is splitting into like two camps right now in real time. Like and I'm trying to figure out what camp I'm in. I think I already know deep down what camp I'm in. But like one camp is like the institutional camp. Okay, we

all know the institutions are coming. They're the people wearing the suits I talked about earlier in the episode. The second camp which I think is also coming back actually. It's people like I guess some of us and many other in the crypto communities which is like the cipher punk kind of ideals of like let's go hardcore back to crypto ideals. I'm not saying that's going to be the biggest winner of all time, but you are seeing like Zcash obviously coming back, like some privacy stuff coming back, like Vitalics kind of taking Ethereum back to where it all began. So like, and maybe there is some merit in, you know, what's happening in the world and taking crypto back to where it needs to be in terms of like why we got it into it in the first place. And I think actually this cycle, this could be a repeating theme like

what Mike was saying, maybe you can go back on this podcast in the middle of a bare market with me saying this and see if it's right or wrong, but like I see those two camps right now. must be intimacying the innovation in both. >> Uh, you know, I for what it's worth, I just to respond to that last point, I think I see the world in a slightly different way. Um, and also people should know like everyone on this podcast has slightly different like, you know, I I I can feel my opinion over time drifting more towards one of like, you know, I'm talking a lot about scale and um, you know, growing because that's what I spend a lot of my time thinking about now. And Z, I know you're early stage VC, so you think a lot about creativity and funding early stage.

listeners should just know, but I I think I actually would divide the world of crypto into um I I think that there is a I think the market is telling because there's always been this like centralized decentralized I'd like to rewrite that set of trade-offs. I think that the market is telling us the market will be the ultimate orbiter of how cipher pumpkin decentralized the ultimate solutions that like honestly I don't actually spend a lot of my time thinking about that because my assumption is that the market is just going to tell us um and that but what I have found myself thinking a lot about is you know to your point Z like people don't use I think crypto suffers from people not using it or there not being applications that like adoption so that's why I spend a

lot of my time thinking there's like early stage stuff and creat creativity, new ideas that need to get funded. I feel like a mom telling their kids like, "Hey, we don't need McDonald's. We've got burgers at home." Like we have a lot of stuff here. Uh what we need is to make it bigger and more usable. Uh that's to me to me and and like I'm speaking my own book here and and talking from the corner that I end up thinking about. But I mean that's the consistent thing that you hear about crypto. We have an optics problem because people don't look at AI. They everyone uses it. No one questions the utility now. people are like the data centers are sucking up all my drinking water. I don't think that's actually true. It's actually it's interesting.

It's at least even for me. Remember we bit Bitcoin used to get all those hate articles. It's it's at least we're a parody here. Okay. At least you know people are consistent in hating these new technologies. But I I I I the thing that AI doesn't have to compete with is is this thing useful? I still feel some degree of responsibility. I I I just I would trade I would there the two camps that I would say Zab is I I actually don't view it as like cipher punk institutional. It's like scaling versus new and I want to get some things out in the hands of people using them on a global basis that isn't taking punts on shitcoins which which I I think we've I think we've taken that as far as we should as an industry. The only push

back I would say to that point is I think you do have cippher punk things scaling now. For example, Zcash, which has been around for like 10 years plus, is just like now rallying for the first time in a long time. And vice versa. I think institutions actually are building probably more startups than cyber punk people actually for the first time as well. So like it's just interesting for me. I don't have any numbers on this or or sentiment or anything like that, but like it seems like what could happen is like a return to crypto ideals. Not as big a market obviously like cuz you know there's only a few of us in the world probably. But I do think that like privacy is becoming more important even near like obviously they're kind of like privacy verifiable intense like would

that be a market like yeah probably I could see that. So yeah, it just seems interesting to follow also like I mean I keep saying it but you know quantum is coming in this cycle and you have to be semi-cippy punk to care about that because like obviously cryptography is involved. So it's a interesting time to be a cyber punk I think right now and I think maybe returning back to the crypto ideals of being that cyber punk and caring about security of the world economy is a good thing whilst obviously the institutions do their thing which is also good by the way of like trading finance etc because we also need those applications as we do the heavy backend lift of infrastructure. So yeah, more like a note, but I do see two camps sort of splitting and then maybe some of us are in the middle like like all of us in

here probably to be honest. >> I mean I I view my view of the the broader space is like we've found a lot of growth in addressing underserved markets. Um everybody who doesn't have access to like dollars or to to assets. Um and that's really driven like the growth of stable coins. Um we've had okay like traction in let's say um markets where we off are trying to offer something 10x better or like just better than like what people already have access to. Like I don't see myself moving, you know, my my stocks like out of Fidelity and into like, you know, my my Phantom wallet, right? Like they there's just not a strong enough reason for me to do that. And that's what I'm

talking about like real innovation even in the stuff that's working like give me a reason to use stable coins on a day-to-day basis. Give me a reason to use like tokenized securities on or like choose that over the the not right and then there's just net new stuff like and and I think that you know where that's that has kind of like come and gone in waves. Um but we we've for the for the most part really pushed out what I would consider like the uh the ideologues, the cipher punks. Um the grifters of the opportunists have been largely pushed out and and honestly the academics like the academics like the professor coins have just gotten murdered. Um and and probably for a good reason because for the most part academic people like

doesn't translate to killer operators like with definitely some exceptions but like that's that's by and large how it's been. So yeah, I don't know. I don't view it as just like cypher punk versus this. I view it as like I a little bit more of a spectrum. It's also I one of the biggest challenges for for from a company running standpoint and I'm sure this is only this is much more difficult at the Coinbases and circles of the world is finding people that are domain experts and industry experts like that ven diagram for a very long time has been vanishingly small and it doesn't matter at an early stage it absolutely matters as you start to mature as a business and I I I think I

actually view a lot of this stuff like if go back a couple years if you wanted to get someone who was kind of a crypto expert. I mean like again not to but if I were to paint with a broad brush a lot of the people who were crypton native gigabra brains on Twitter it was kind of this like arrogance you know they had made all this money trading shitcoins you couldn't get them they didn't want to work like it the again maybe this is why like I'm just kind of exposed to slightly different pressures but I think that's changing in real time and you know I look at some of these AI businesses I'm like man I know what it's like to build a business in that environment that must be a nightmare a freaking nightmare Um, and honestly, they're making a ton of money and I I

get it. But I also waves management through I I don't know. I I think that um in a lot of ways things are getting easier and making more sense than they ever have. I think it's as I think it's incredible that we've built what we've built with two not even one hand tied behind our back. It's two hands tied behind our back. One, a bunch of people tried to do stuff in Dowo form, which is like the craziest thing to me. I mean it's crazy that you anyone built anything when people actually subscribed to the idea of Dows which maybe has some merit if you were to fundamentally rework it but in in the last six-year instantiation of Dows it's amazing that anyone built anything and then the other thing was that the US was fighting you the entire time um and that's fundamentally changed and yeah it

takes a couple of years genius hasn't even been implemented yet that's not even happening till November of this year so these things take time but I don't know. I mean, going to to to end the podcast where we started like look the the catalyst in front of in front of us are so obvious right now. You have the president, the secretary of treasury saying they want to move dollars onchain. You know, you have the SEC and the CFD saying we want to rebuild finance onchain.

I just can't see a world where that's not unbelievably bullish. And yeah, I think if you are a super hardcore cipher punk, then some of this is going to be disappointing to you. If you're someone that's looking for great riskreward and, you know, an intellectually stimulating new challenge, I I how I just I don't understand how that's not exciting. That's super freaking exciting. Um, and I can't see a way where the businesses that are building here don't end up being successful and making a ton of money.

That's I think I think anything other than that is you're I think it's overthinking. That's that's >> I agree with that. >> I fully agree. >> Um, all right. I feel like we've I I will say I mean we didn't even mention the tweet that was inspired this podcast which is the the founder and CEO of Open Zeppelin saying he doesn't trust any anything in DeFi. So we didn't even talking about that. >> I definitely I don't think we did >> reference that with thinking that we did. Uh >> no just just uh you know get those key key management setups a little better guys. Um, >> yeah, >> we'll come out, you know, like a I think it'll be good overall for like security long uh maybe some short-term pain, Ze,

as you mentioned. >> Yeah. All right, guys. Um, Zave, happy birthday. Um, thanks for processing. I feel like this is a therapy session processing the existential crisis. Um, >> yeah, next one is the next one. >> All right, cool. All right, guys. This was really fun. See you both next week.