Crypto’s Identity Crisis: Investing in a Better Tomorrow | Matti & Rapolas

Transcript

I think that currently we're in the uh I call it embracing our shadow part of the crypto Evolution you know we're kind of admitting we're Jokers nothing works and let's just find a new marginal buyer for this token or mcoin whereas you know last cycle we really believed or you know maybe partly fooled ourselves that we are rebuilding Finance with with Defi and the Deion were more like a fringe part of it but today they are us right today Deion are are embraced and I and I think that um it's a quote from y that only the man who goes through this Darkness can hope to make any further progress and I think like this is us on the rebound right like we were hurt this by this beautiful idea of of Defi and

we're jumping on this mem coin canang and uh you know the financial degeneracy is unraveling and uh the shadow our shadow was playing out in the open the polygon Community grants program was launched with 1 billion tokens all four polygon Builders season 1 is live right now and features 35 million in madic to support the next generation of polygon projects builders on polygon these grants are for you join the aggregated future today by applying at polygon.net platform that has a novel consensus protocol subnet infrastructure and the hyper SDK toolkit which allows web free developers to easily launch custom powerful blockchain Solutions you can start building today by checking out

the link nothing set on ZX research is a recommendation to buy or sell Securities or tokens this podcast is for informational purposes only and any views expressed by anyone on the show are solely our opinions not Financial advice Pacho Ryan and our guests May hold positions in the company's funds or projects discussed what's up guys welcome back to another episode of ZX research today I'm joined by Ryan from blockworks research and MADD and rapalas from Z Prime Capital to talk about how they're thinking about the markets and crypto in general um before we get started Maddie rap thank you so much for joining do you want to give a short introduction of yourselves and a bit about Z Prime um thanks for having us um

sure we um yeah Z Prime I think that this story goes that we we just emerg from the depths of the subconsciousness of this ecosystem and meaning we're likely demons but uh yeah we started as a prop shop VC Prop Shop group substantially into free funds over the years um majority of the capital we we manage is internal um and we're investors uh with a long-term investment Horizon um our funds are close-ended 10-year vehicle so um but we're looking for zeny wacky Solutions with the technological substance I guess that's how I would describe it in short perfect yeah that

makes um I've looked through a lot of your research and a lot of your website and that's definitely the vibe that I got is that you guys invest in more zany is the right word I think like more interesting stuff than I think most other funds do um which I really appreciated do you want to talk a bit about what narratives you guys are looking at right now or what sectors you're interested in I think I'm mostly interested in being surprised um you know anything that you know I know that can become a narrative um has much less power than um something you know I or we have not conceived of yet and yeah I mean I know that crypto

um in crypto we think of narratives and narrative waves and narrative rotation but to me at this point I'm I'm much less interested in the narratives because everyone knows these are just narratives and therefore like it has much less power so to some extent some of the narratives can materialize down the line but it always takes time to so personally and maybe some other Z Prime team members I'm not speaking for all but we try to pay attention to the slow more than uh to the fast um so I read somewhere that fast has all the attention but slow has all the power um

but I do think many of our narratives like you know Desi culturei or socialy deepin and and defi will likely um in the long run produce great products I don't know the sequence of things I don't know when it'll happen I might see some good attempts right now but at this point I'm just hoping for some real Innovation trigger that Sparks a new wave of adoption regardless of a narrative I would also add maybe that I guess which narrative comes back is not as important as seeing just good execution on you know either one of them um I think people over index on let's say over engineering the

tokenomics and like trying to think what else could be the utility of the token or how you know like it fits into the product but I think there's not enough we haven't seen like enough um good attempts at actually building out like useful products that wouldn't just cater to you know the existing demands of you know the people who are in crypto today um so I think maybe we should just like try to think how to execute better rather than you know come up with new narratives that die quickly and then we expect them to come back but ultimately that's that's not the whole point that makes sense I

um regarding execution over I guess token Dynamics um and like how projects are building is there a specific thing that you look for in a project when they come to you or like when you're doing your own research process is there how how do you tell that like you think these people will be able to execute or they have a unique way of executing is there something specific there um I guess I can start by saying that you know we're always put off by just like simple copying of ideas you know from one ecosystem to the other and you know being X of Y uh is never like a good idea so I think I guess what we try to spot is just people thinking for themselves and uh trying to establish a

new playbook rather than following in someone else's footsteps um because I think if you just like copy what other people did the chances had that the outcome that you're going to have is not going to be as great as the first person for whom it worked yeah that makes a lot of sense how how do you see products evolving over the past six months like cuz in the be I assume that the products that came up that you guys were interested in the protocols the apps they were quite a bit different to what is launching right now and what has been launching over the past few months um and not just in terms of like valuation but in terms of quality and their execution plans is there something that's noticeably different I think from

the perspective of like a a VC or you know the the private markets um it was it was pretty volatile I think earlier last year it was mostly dead like it felt like no one was allocating sometimes felt like we were alone um and with the market pumping later last year um the private markets got crazy you know big rounds big INF plays AI nonon K rounds people started clustering around you know certain buzzwords and um optimizing for the VC pitch again um and I think that you know some some some investors that were scared to deploy earlier last year were were

overcompensating and um I'd say um you know sort of like now with the market kind of going down and and and the lowf flow High fdv bubble bursting things started to to slow down again um and I think people are starting to reposition to to to f applications at least that's my feeling um so would say that um this is one of the bigger uh shifts uh in the industry is people starting to call out infra uh and large and um and uh asking for for more applications yeah even in um as far as

what I've seen being discussed about ECC there seems to be some form of like infrastructure tiredness and people trying to get away from people constantly building infrastructure um in favor for building more apps and one thing that we talk about quite often in uh at block works is that the prevalence of uh infrastructure is kind of related to ethereum having to scale through rollups and that's why it's like there's a lot of infrastructure constantly launching because there's always like something that needs to be fixed is this do you guys think this is like a good take or do you have any other idea why we might be getting a lot more infrastructure

than perhaps is necessary yeah I think well in one of the articles that we published recently is that you know because ethereum has sort of not enshrined a lot of the protocol Solutions um you know at the protocol level that created the sort of the DC Surplus value to be captured by you know investing in startups that do all of these small pieces themselves uh individually and you know all of these small pieces can then go to the market market and command you know High valuation um and so the natural incentive is just you know to do that and I think there's another aspect of this Market where because you have like

quick time to liquidity compared to the traditional markets um then you're obviously incentivized to go for the you know for the largest outcome so like you know build huge ideas get you know liquidity quickly and then you know hope that it's like survives over time somehow as opposed to like starting with let's say a a smaller Niche wacky idea uh and you know taking a long time to execute it um so yeah I think liquidity and time to liquidity is also a big um aspect contributing to this and I think also in the past uh the biggest houss were always like infrastructure place and so

there's this just mimetic uh mimetic desire to you know follow the what's worked in the past basically that's a that's super interesting um it I think it begs the question like okay the crypto industry needs to shift towards apps from infrastructure to me thinking about the people that I've met in this industry what they're interested what their skill sets are like an infrastructure founder is very different than like an application layer founder um I'm wondering if you agree disagree and like what are you seeing in the market in terms of like the founders

that you're meeting with um like does this necessitate a completely different mindset than the current like mix of developer skill sets in crypto right now like are we going to have to pull from like big Tech or does that Talent exist um in crypto today I I definitely think that we always need to tap into the new talent pool um I think it does require um a different sort of a Founder in terms of that it requires some bit of idiosyncrasy right so you you probably cannot be just a nerd right you have to be a joke if we're going to the archetypes I I um and you know there are people like that um in crypto um and

hopefully there there will be you know more of those um but I think it's it's also a question of a risk where uh you need to have a I think you need to have a higher sort of like a risk appetite to be building on the app layer because you will you will fail much faster than sort of like techn babbling yourself in the uh um you know in the infra um cluster because it's um you maybe get you know two or three pivots and and then you're and then you're gone because as an app you you really need users um it's not about you know Partnerships and um you know other deps using you it's um it's about very clear uh goals and and you know

it's it's data driven do you have users and and how much money you're making by having these users or how much money can you actually potentially make um and I and I do feel like um perhaps other other ecosystems than ethereum are are doing better at this uh or I better at this because like ethereum's ethereum has this like a long-standing death fetish and I think think it's probably costing them in the race uh if if it's TR truly a race against other uh chains um but I you know I you know people are talking about even you know um I've heard lately uh amongst the DS it's like

oh you know a good ux but I don't think you know the ux is a problem it's um if you're offering people great product or giving them a way to make money it matters less how many times you click or something like that so um I do feel like um we need to tap into the new Talent cool indeed um but I do also feel like we need to um stop playing these um um sort of like almost almost you know I think many people they would go for the ethereum space mostly they're over indexing or on impressing other people within their group so they're trying to out smart one

another um and I think too many people in that Circle optimize for smartness they sort of like indulge in this self-image of um oh um smart map genius or blop Optimizer or ZK magician I don't know whatever right and and the fact that that they actually got rich in the past re uh re real fast as well just enables this obsession with status game rather than building outside of the C J circle jerk towards users so I think that the incentives are also not helping so if if if you get more people interested in building apps I guess um you know the the focus can can shift towards them and uh it may also convince existing

Builders to to to build there also I think to add to this is that what we see let's say in the uh crypto consumer product space is that the founders who build that are not those who've been around in crypto for 10 years you know they're more like the people who entered crypto let's say in 2021 2022 be it through nfds or you know some other like popular means and you know if if sort of you're part of that cohort and you know you want to be a founder and build something like why would you you know why would you build another L2 or why would you build you know a bridge between l2s or the aggregator like the chance saw that you will want to build something that's kind of you know

unexplored um because you know the incentive should be uh the strongest for that right so yeah I think just to reiterate what Maddie said is that um it matters like what part of group you are and like who who who I trying to impress those are two really interesting observations um I guess what we're alluding to is like different cultures forming around different chains and like kind of a path dependency there like with e being more infrastructure related or or more infrastructure focused um so that kind of makes me think about like

brand new like blockchain ecosystems right like an aptose or a sweet like certainly less burdened by like these cultural path dependencies that you guys are alluding to um but at the same time they like it's hard to start a developer ecosystem right so like how do you guys think about new people coming into the space and what chain they're choosing I I always say that you know we are product investors for ecosystem second I I I truly don't think it matters where you're building as long as

you're building a great product that because if you depend on being on a on a certain chain are you even a product or you just like a x of Y right like I'm a Unis swap of blast or or of Mega E or something um and yeah it's just uh um I don't think it really matters the ecosystem doesn't matter if we if we're talking about applications I agree with you mad I don't really I mean there's definitely some that have done better in certain ecosystems but I wonder if that's just culture or because of the way that they I mean I guess it's a bit of both it's like for example Bas has done um comparatively really well with

social fight especially with um FR Tech and farcaster both being on there but then you also see valant efforts like I think lens is on ZK now um but it originally launched on polygon so I agree I mean apps I guess as long as you're building it for users the end goal should always be to abstract away the back end anyway to not let people focus on what's happening in the background uh going back to the base example I think it's um good right because like they started with the onchain summer last last year where you know they had this like daily nft mins and this and that we just like you know click with the expectation that this will amount to the air drop in the future or something like that and that obviously like didn't really uh lead to

a lot of usage and then frch came along in August and that just like you know flew it out of the water and you know was the thing for quite a few months um and I think that's a good example that like it doesn't really matter the ecosystem that you're building if you have actually uh a mvel product that creates new user roles um you know like FR was at of time and and also um lately we had an experience we were on a call with a with a specific application and you know we kind of questioned whether they are you know because they were build on one of the uh or they're building on one of the uh I mean upcoming hyped um ecosystems and I asked like you know without this

like who are you like do you have an identity or um does it matter that you build on this and it took a very wrong turn and people got offended just because us questioning if this is like an ecosystem play or is this an actual application that cares about the product more and I think there's a lot of a lot of this where you know it's even funny to talk about culture of these things because these things have haven't been around for you know maybe some for like a year like there's no culture it's made up there's no Community there're just people uh waiting for upset which is which is fine but there's no culture um they're just you know opportunist um mostly manufactured applications that um

you know got entitled with like a bloated seed raises um but they have nothing to show for right it just you know um it's a you know decent salesmanship but I guess the staff and if we're asking where are these new users coming from um there are they really don't care if you're build on Bara chain or Mega E or monad or whatever thing that's not even launched yet right it's just um it doesn't make sense it's just a very very kind of Niche inward looking game that um um I don't think it's productive when it comes to um yeah I would say

it's mostly Zero Sum rather than than than positive sum for for crypto yeah I mostly agree with you I um I think like the most extreme example of that do you even have an identity un like without this chain is when throughout 2022 2023 there were a lot of um apps that were just over and rap you kind of mentioned this is like where X on Y and I think it was like with GMX Forks a lot it was like oh we're GMX on polygon we're GMX on avalanch well I guess it was already an avalanche but you get the just it's it was a lot of these and I think we're going to get a big wave of this with the new l1s or l2s that launches well especially the super hyped Pointes um Mega E bar chain monad are the ones that

you mentioned I think those are going to largely disappoint um is my controversial take maybe not Mega E just because I haven't read up too much into it but I mean I like bar chain and monad and the guys but I feel like they're going to be a bit overhyped I'm curious what you guys think though I don't know like there's nothing to assess yet I don't know like uh I don't think anything has been launched like nothing is live on mainnet right um um I I don't think it really matters um I think that for example Solana when he was coming up it it it wasn't it wasn't hyped right I remember like 20

2020 um in like the ethereum community there was a lot of f around U you know the unlocks um in early 21 um and and stuff like that like you didn't see salana coming up right like um whereas um you know all of these um ecosystems or ecosystem I mean these chains that you mentioned like they everyone sees them um they're overhyped um they you know they're not launch yet so I mean I don't want to talk about things being priced in but um yeah um I I I'm not saying that they won't be successful or

they cannot be successful but I guess it's uh um it it it might largely disappoint um in the long run who knows uh but in the short run I don't know and I think one one one of the other questions that I give to Founders you know who let's say build in the new ecosystems that are far from launch uh is like why do you want to sacrifice like six or nine months of your time just to wait until this chain launches so that you can prove your idea like isn't isn't a better use of your time just launch it somewhere where it's like available today where it's possible today because you know there's plenty of

block space and wouldn't you want to validate at least something in those six or nine months until we wait um and no one gave me a good answer yet yeah that's a fair point I mean worst case you can just Port it over to these chains um I kind of want to talk a bit about social fight with you guys and not just socialy like a bunch of these new consumer apps that you guys mentioned that you look into um but just to start off with social fight how do you see it evolving um do you think that there's something there I know we said we don't like to talk too much about narratives and if it will come back or not but how do you view that space going forward um I think that we've we did see

some good attempts um whether it was frch which was roughly last year when everyone got bored I think that it was a it was a cool game when um where it didn't provide sufficient depth as a game um and what happened later was that you know they didn't sort of like double down on the on the sort of like vertical aspect but like when really horizontal and now when I you know go into the ab I don't even know what's happening yeah um then um I think meme coins largely are um also social five primitive um that got validated and um so I so I would say that these

are like a first experiments someone someone said um uh and and we keep repeating this that that that frch is is to socialy what cryptokitty was to um nfts and um that means I think well we are largely optimistic we've invested in um bunch of things but um I I I do feel like it's going to take a bit longer to to to get somewhere but um I'm I'm trying to be optimistic and hopefully someone will combine these ingredients uh in a way that will make sense in the next um couple of months and we will get some kind of um socialy

or as I like to call it now culture um application that uh uh will become adopted at least will um sort of outshine um frch or some other um other apps that we've had so far and also I think uh it's interesting to observe how let's say frch uh inspired many Founders in Social f space you know with the bonding curve and then we saw many many people try to apply the bonding curve to their product um you know even in places like decentralized science uh where you could trade early stage research uh on a bonding curve but

anyway I think um it could be that next breakthrough in Social pie comes from something completely unrelated you know something like maybe blinks that salana and you know dialect enabled you know on on X um and this is you know something completely out of the field that you wouldn't expect right because the way people thought of social F until now is that you know okay you have like these mini social apps and you have speculation on them and you know you you stand to make a lot of money in a quick amount of time um and then somehow that you know kind of reaches the escape Velocity and you don't rely on speculation as much but yeah maybe the next breakthrough comes from you

know somewhere that's uh completely unrelated and and and probably um sort of coming up with cool features that could be embedded with existing social networks uh could be better play than sort of the existing sort of unchain social protocols um that are largely just recreating um what we already have but but on chain right um so I would say we grew more skeptical of these sort of Twitter clones um and we were never big fans but we did we did see value in um a decentralized graph but I would say now

less so so um and therefore are more focused on like cool features that could be that could become sticky products but could live anywhere right it doesn't have to be again ecosystem specific it's just you know a cool and useful app yeah to jump in there cool features that see that that could be sticky anywhere that does that sound like when I think of things that I've seen in crypto that might fit that mold maybe like a blinks or frames like is that what you're alluding to yes yeah yeah I think blinks is a good example that Salon enabled for X um and Frames is is also like a novel a

novel thing that you know helped forecaster to get some relevance and uh you know the hype and then you know on board more developers and users so ultimately these are two like very different things right because you know far foraster is building its own ecosystem that supposedly can offer all the things that X does and more whereas you know blinks just basically says look we already have a perfect social graph so why not just kind of add the commercial and transactional twist to it because you know your wallet can can do that uh while you're on X yeah um related question here uh I'm thinking about like Market sizing for something

like social thi and it gets it could be a complicated exercise right because I think about current social networks they're really not financialized and you can like you can find opin opinion polling where like people just do not like making financial decisions um and do not like speculation and you know we exist within an industry where you know it's run by speculation right like it's the it's the core driving force so like given these kind of like Tendencies like how from a market sizing perspective how do you think about these like features

these social F features that are driven by speculation financialization yeah I think it's um it's a question of like um explicit and implicit financialization right like um maybe there's a way how you can embed it into the experience where it's not um where it doesn't feel like speculating um that's one thing so I it's very hard to um understand what the market size is if um you know we don't even have like product Market fit so um I have no idea what the market can be I think I'm optimistic about it being very large I'm

you know I I kind of think that crypto will eat consumer um in um in the long run uh but I guess we don't have that wedge yet um we do have a wedge of um of sort of like of tokens which um I think um I don't think uh R will necessarily agree with me here but I I I I I do think that tokens are consumer products um and that is a that is a pretty big wedge and the question is how do we take it from here or where do we take it from here how do we how do we

keep on sort of like building on this consumer product that that we uh that we created you know this this new asset class that um uh is consumed by people not in a way that um is necessarily sustainable today but how do we translate it into um into um uh sort of applications and and just like General new behavior um uh on the internet yeah also well first I would say that you know it's very hard to see the market before it exists right like to conceive the size of the market before it actually started um so we we don't really spend

much time thinking about Market sizing for things um and then another thing I agree with mat what what he said about you know explicit and implicit things and I think think you know social media in general is actually like pretty financialized implicitly because you know like people like influencers with big followings I mean that that is their business model right like it is a financial tool for them um and then you know consumers also you know have resources that they allocate to like you know different influencers and different forms of content and uh and eventually you know they pay for Content as well so I don't really agree that the social mediums today are not

financialized at all I think implicitly and in some ways explicitly they are and I guess the question is if you know crypto products can push it along the curve towards being more explicit than you know than what it does to Consumers on the platforms and how do their relationships change among each other I would I would also add that if if I'm right and tokens are the product and there are these weird luxury goods they give this illusion of you know a stake in this bright future or in this idea and they're a game of up and down um ultimately there are new assets um that have probably not reached its best form but um um I I hope in the next couple of

months we'll we'll have some Innovation on this front and we sort of get closer to crypto um as a consumer and then you know if you're thinking about Tam I think the Tam is um uh infinitely large um I I really do believe that um uh but I think we're still you know couple of um uh Innovation triggers away from that hey guys permissionless the event for crypto natives is heading west to Salt Lake City and we're bringing the biggest names in crypto together for an incredible C Miss event join me in the rest of blockworks on October 9th to hear from more than 200 Industry Titans including Nick white from Celestia shiram from layer and Keon from Mona the

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messaging provide a new foundation for how Avalanche blockchains can communicate and how developers can easily build cross chain applications out of the box build anything you want any way you want on the eco-friendly blockchain designed for web free de check it out by clicking the link below I kind of want to talk about that um tokens Genera in culing because you talk about this or I mean you guys talk about this in your rwa versus NWA PS which I one thing that you mentioned is that crypto is generating cultures memes and narratives and that we can have new consumer products at markets can you um I guess give an example of what these could look like or potentially what you

see these evolving into because I'm maybe I'm just being too much of a midwidth but I'm having a bit of trouble envisioning this well they already I mean are we have been just talking about it right like you know these new ecosystems are essentially just people organizing themselves around a a new brand right then you know it's it's it's a it's a tech that it's wrapped into a brand and people are already building apps on that Tech even though you know the tech is not alive um but it's only internal right it's only in crypto but um I think there's a way and I maybe it's a I I'm not sure if it's a good example but the mother token

you know it was um um it is also a brand right the same way as any other token is a brand and and and you know there there were some products attached to it and I and I do think that this is this is um um this is the way um so it's um um you know what are token become more like um um you know token um uh enabled um uh sort of brands or or or just uh partaking in a specific Endeavor or culture um um you know whether they could help with like a co-creation and attribution aspect um that's another

thing um but I I do think that um you know crypto has a pretty decent overlap with like the aspiration culture of of you know Tik Tok and the social media in in general um and um I do think that this is where we could you know uh where we could um where we could find our wedge as in you know like our culture like the crypto culture is built on moving money um and and money is the enabler of the aspiration culture so uh that's the wedge and um you know that's why we have beam coins in my opinion and I and I and I do feel that already shows that okay

so people can organize around this you know Meme or a brand and I just think we need to find more productive endeavors where you know this could become like a meme coin with a utility for a lack of a better description and I think there you have you know the consumer products um you know whether it's mam coins that are uh enabling gating access or um they enabling premium axes or whatever it's just I think there's a lot of different different experiments that we could that that we could we could do uh we had this idea of culture bootstrapping pools where um you could sort of like um um try to bootstrap a new sort of um brand uh through you know Kickstarter like

mechanism but you know leveraging some U um crypto Dynamics um so yeah I think tokens are the and the distribution rolled in one in into one um um so I I do see all these perhaps abstract sort of takes on uh how how crypto is a is consumer and and and how it could conquer consumer but um um yeah I think that uh in next I don't know couple months um to you know year or two we we will see more more specific examples of that I don't know if they will be permanently successful there will be just you know another sign of

something like like you know the experiments we had before but yeah um we're probably closer to to this Vision that's and B you also have a m lady pfp so that's definely just real world asset it's NWA yeah I um I was actually just going to mention that I with tokens um becoming culture and them like allowing you to maybe token gate but also like you're kind of showing off what um your identity is and I feel like nfts were a really good representation of this because when you see somebody who's a Mady or somebody who's a board ape or somebody who's a I don't know a pudgy or

a Bitcoin puppet you have a very clear idea of who they are um and every once in a while this kind of gets gaded and more and more people get into a community and it gets ruined and then it gets fixed again um but this is something that I I don't know I was thinking about a few weeks ago we did an nft episode and I feel like that could also be somewhat related to this tokens generating culture and identity thing but maybe it's just the I guess the crypto Kitty moment of it like nfts were too obvious but it memco coins are cheaper they're easier um tokens in general are just I feel like more natural for people um so I'm excited to see how it evolves mother was definitely

a good example I feel like a lot of people this cycle are also attaching themselves to tokens um that's something that we've seen like anom and whff he attached himself very well so that's also going to be interesting to see how those Dynamics work but I guess like kind of to bring us more into reality how do you view um this is kind of going to be related to the rwa versus NWA thing but only tangentially how do you view increased attention in crypto from large Trad five funds and institutions do you think there'll be a net positive or do you think we don't really need it because your guys's takes on the rwa versus NWA

piece are very much like we already have something very cool here that we should continue building but we're getting increasingly interest by yeah I think ultimately it's obviously positive right if you want to you know the asked class to grow to trillions and ultimately tens of trillion so it's I think it's about like the old money you know learning new rules and buying the new assets that are like relevant today right and U you know it's I don't think it's bad that you know they they're trying to participate and obviously they come with their own baggage of kind of mental models that work in the past for them and you know some of those apply

here and some of them don't and you know it's it's not about like porting the real world assets to the chain it's about like you know the existing Capital owners so quote unquote trpi or sovereigns whatever you know like learning about these you know nwaas uh and um kind of buing into the culture and like into the into the new rules um so I think it's positive but it's it's not like you know strictly it's not a question of like what kind of assets they they bring with themselves because I think like what we see is that some of these funds are actually interested you know in buying

the defi tokens and um it's not like there's no interest at all I think that you know some of them want to learn and uh are willing to kind of be wrong um and learn something for from it do you think as they come in um large participants institutions that it becomes more competitive um I mean I feel like that's just a general take is that it becomes more competitive but do you think that there will always be somewhat of an edge for crypto native people people have been here for years who understand maybe the NWA a lot more than than new participants or do you think it just gets competed away I think you can also make a question whether the

people who have been around from you know like 2016 20 201 un necessarily up toate with what's happening now right it's um I think it's like it's not necessarily I think it is like more competitive right but some of those new participants will want to learn the new rules and kind of you know play by the new rules and some of them will try to you know look at bees and uh uh DCFS and uh you know maybe it will fair for them differently but um yeah I don't think it's bad or I think fair I um I have one thing specifically for you rap I um I read your wedge is the

founders Edge piece and I really like that idea of um small markets discover large markets and the example that you gave was Unis Swap and blur um I kind of want to ask you like do you think that the reason that a lot of projects now are building um to solve more abstract problems um do you think that's incentive missign or we kind of talked about this before but um or do you think it's just a natural way for people to approach problems like they want to start with oh I'm GNA solve everything instead of focus on a specific solution yeah I think it's important to realize that you know we are you know in the phase of the market cycle where we're kind of at alltime highs for

Bitcoin and so I think that the natural incentive for people is to be like okay this is the moment to you know grab as much cash as possible and you know execute on a Playbook that works because there's like much time left you know to to do this uh or at least I feel like some of them think that whereas you know those Innovation triggers as M likes to call them are you know always happening like in the depth on a bare Market where like there is no rush right because you don't see the light at the end of the tunnel you don't know when the huge outcome will uh will come for you and so you are forced to think from you know first principles and question the existing standards because like nothing

actually works in the bare market right so like you have more freedom to explore the uh idea space uh so this is where we typically you know see those uh interesting breakthroughs um and uh what was the other question or did I cover it um no that was it you covered it um I also want to ask like you said in the bear we saw some of these like new ideas and one that you mentioned was blur and how it kind of um started off by appealing to like a to solve a specific problem um and then it competed uh against openc and now it dominates volumes um for nfds do you have any or

can you either of you guys think of any recent projects that did this well as well in terms of identifying a problem that needs to be solved and work towards it um maybe I can mention one portfolio company of ours which is froots uh and frobots is basically a game that you play you know with a controller and you control a robot uh you know on a sidewalk that's placed somewhere in the world like in different cities and you complete quests uh you know you complete challenges by driving the robot and interacting with the uh with the uh pedestrians because there's like a camera and microphone and so it's kind of kind of it's fun you know uh but at the same time what they're doing is

they're collecting you know the uh the data set from all of these rights uh that will eventually be veryable very valuable for uh you know training uh of of robots and I think that they're on to something because um like such you know such data set doesn't like really exist in the real world or if it does then it's very limited and I think this is you know an example where you start with a game and you know your user is the gamer uh you just want to have fun but at the same time you're solving like a much uh larger problem that is not obvious you know just on the surface I would I would also add uh freaking hair because

balding is a is a real issue that has not been solved and uh there's a real audience for it and it has truly been underfunded um and you know they have the token they have the memes they have a clear Mission and to me this is one of the most um important ongoing experiments in crypto where it's tied to actual research um and actual studies being published and um the products being developed um and consumer products being launched you know their their shampoo uh that they also have launched so um and it also ties into Commerce so um I you know I like these

idiosyncratic um ideas more than um uh you know just a very generic products because with these idiosyncratic ideas you're um you're more likely solving um a a real problem that is not necessarily only sort of like um Crypton native problem yeah that's I mean if they can solve baling that would be incredible um yeah also what I what I just realized you know when Maddie said this is that you know like a lot of the products that are built today are actually you know for people who are already on chain and it's fine but I think we also have to realize that like the people who are already on chain they're not going to

leave ever right because it's almost like an addiction for them it's like you know part of who they are and so like whichever product you will throw at them they will use right because there's like the incentive there's the intellectual stimulus of you know trying something new and like being early to something but so maybe at the same time it's like not a high enough bar right because like you know these people will use this app like however crappy they are and so you know going back to what we talked at the beginning of the PO about you know like raising the bar for execution I think this also goes back to that which is that you know we have to like set a bar higher and so I think here is you know instead of looking inwards which is kind of the the core users of onchain today

they're looking outwards and saying you know crypto is just like means to n to to solve some problem yeah that's fair I um I actually have one thing that I wanted to talk about since the very beginning is um the optimistic crypto piece um the optimistic crypto pitch piece um which I Echo like a lot of the thoughts mentioned in it one thing that I wanted to bring up is that I feel like crypto's having kind of an identity crisis like you guys are approaching it in my opinion very well is like we're just trying to build some at to an extent like silly stuff but also to an extent like actually interesting and cool things that might be able to solve issues that are either

related to crypto or are not related to crypto and I feel like in the past we had this idea like oh we're kind of stumbling to success um but we're like we have very clear values it's decentralized it's less tyranical it's like it's crypto um from the very Beginnings like what people have but now this cycle or at least like over the past year I feel like everyone's been a bit jaded um it's become like let's just gamble a little bit make some money and leave do you think that um this is a theme at all or is this like me reading into the timeline too much as we get a pullback or how do you think it's going to get resolved um in interestingly enough this

week uh we sent our um investor letter and I wrote it I think that currently uh we're in the uh I call it embracing our shadow part of the the crypto Evolution and this is like a union mythology of us sort of like confronting our sort of Shadow you know and it's sort of like an end of the self side that um you know we're kind of admitting we're Jokers nothing works and let's just find a new marginal buyer for this token or mcoin whereas you know last cycle we really believed or you know maybe partly fooled ourselves we are rebuilding Finance with with defi right we found this magic pmf and and the Deion were

more like a fringe part of it but today they are us right today deons are are embraced and I and I think that um it's a it's a quote from y that only the man who goes through this Darkness can hope to make any further progress um and and mem coins are this um or this people call it finan nihilism I don't I don't agree with that definition but um or or even term but people know what it refers to and I and I and I and I think like this is us on the rebound right like we were hurt this by this beautiful idea of of Defi and we're jumping on this meme coins K and uh you know the financial degeneracy is

unraveling and uh the shadow our shadow was playing out in the open and it's like the true confrontation between you know the vision of the future human nature the expectation and the failure to achieve it and you know on one hand uh is the you know expected inflow into ETFs and the normalization of crypto investing and um it's a it's a wonderful dichotomy of this degeneracy on on on one hand and institutional adoption on the other um and I could go on um uh sort of you know I'm asking myself uh with regards to crypto edfs like is

this a trojan horse or um are we admitting defeat and um uh since you asked about like sort of reconciling this and I'm looking at crypto today and I'm thinking you know this is you know we're at a at a stage where this is either a one revolution to a reformation and free potentially normalization um you know if it's a revolution it's Revolution by Trojan Horse Reformation you know by admitting that you know crypto is important and and has a right to coexist uh with you know the the um standard of financial markets and system and you know normalization you know of Boomers just

you know needing you know more things to sell to people but the credibly neutral money aspect is somewhat decapitated right and and if you look around there are no revolutionaries here and um if they are they're they're they're silent minority and um crypto has lost this Anarchist period right it's it's opportunistic to the Bone and and almost you know it's a zero sum game as we've been discussing and bankers probably love it more than than your average techie um and if it becomes a revolution then it's probably only by Serendipity at this point um that would you know include implosion of the existing system and and um I think revolutions only happen when the idea is stronger than

the payoff or when you have nothing to lose right and I think ideas and ideology and crypto are getting weaker and and people have too much to lose these days right so so you know the reformists Among Us you know the um the lobbyists the big exchanges you know the big investors I think they favor the outcome of the Reformation right like so it's more of a negotiated um negotiating with the incumbent um and I think that crypto is not going strong because we are so brilliant at the moment but because you know the opponents or the incumbents are even more dumb and and corrupt and on a bureaucratic

autopilot um And in regards to normalization I think you know black rock is on the side of the money and does not have true ideology so I think we're not or will not get decapitated by Direct Hit um although you know like the government attacks and related genes make it difficult for us but um I think now we're fighting for reformation and hope we don't get normalized um I still think despite the fro and the lack of product um just by the virtue of the permissionless access to markets we're we're ahead and so so money will flow for the path of Le resistance and and and most money is Dum money um you know just like those schools of fish swimming

in the ocean you know and if it's easier to uh into crypto they'll they'll they'll flow here right and I um I think it's getting so difficult to operate under this you know sort of kyc AML authoritarian regime to open even like a broker account and uh account and it's just governments are taking away access to the markets while while crypto is adding more right it's like more ways to access more markets for more people and yes it's mostly dumb things like meme coins um but the agencies you know the the government agency that take away access to markets are you know are even dumber than these mcoins in my opinion like banks are not businesses anymore they are government bureaucracies uh in the way they operate and then you know

in terms of their dependence as well so um all in all I think that despite us being in this weird stage um I think we're you know sort of like reforming um and um I think we can still grow you know 10 eggs in the next months and years um um to the diservice of major majority of insiders by the way but um because everyone just feel like they're Geniuses but they're but they're not um it's just you know that our you know competitor opponent it's it's it's ruin itself so I would say price action wise I'm probably more optimistic in the short to midterm but in terms of actual substance you know technological innovation that leads to you know better Commerce that we discuss right now um I

think that's that's that's further in the future wow yeah I um I'm I I don't even know what to add because that's exactly kind of what I was looking for um and I mostly agree with you I think money will flow into crypto I I also agree that we're kind of like in a weird place but over the next let's say five 10 I mean I'm always optimistic that's the issue with me is that I'm always a Believer and it's very good right now but at some point it might not be as good but we'll see we'll see how everything develops um Ryan do you have anything that you want to add Maddie I thought that was a fantastic answer um that that was awesome um I I just I'm I'm scrolling through your

portfolio here um and I just like wanted to ask one kind of highlevel um question from an investor perspective I see like a very wide um array of bets across um like disperate themes right like they're is like decentralized training via Jensen there is like prediction markets via poly Market um ceramic is a super interesting primitive flash Bots Mev like the um there there's a lot of expertise here embedded in your portfolio portfolio and

I'm wondering like how do you guys attack that from an investor perspective um it seems like nothing's off limits but in my mind like you kind want to like zero in and specialize on something like how do you how do you guys handle tackling so many different markets here yeah I think I you know first I would say that you know we've been around from 2018 so there's like multiple funds that we invested from and uh you know the thesis that we have they they change um and our I guess preferences and and Theses are fluid and uh you know we just always we don't necessarily you know

like put out the thesis and uh only invest in the founders and projects that do that thing but we just actually look for you know people who think genuinely and are generally interested in let's say you know a fees and we kind of try to just assess whether the idea itself is um original and the kind of out of the box and you know you can be like you can have a great idea regardless of which crypto vertical you're working on uh and so I think that is that is kind of like our reflection of the wi portfolio that we have um and I

think I I don't know like any fund [Music] who like over a long period of time managed to have Stellar performance by just like zeroing in on on want thing right um I think like these these crypto ideas they have cycles of their own it's not just like you know like one big cycle where everything goes up in Tandem and everything gets proven at the same time uh they actually have their own Cycles um and they have like idiosyncratic things that work for them um and so yeah I think that's that kind of summarizes it I don't know matter if you

have anything to them I don't know I maybe just if you know like um if like three years ago if you put together like the you know the best math me experts and give them money to invest in me related stuff I don't think their portfolio would be would be that great so I don't I don't necessarily think that um you need to have like a 100% expertise and understanding all the new ones because first of all they change real fast and sometimes if you're if you're you're if you're too zeroed in on something you're missing the bigger picture um so that's why we we want to maintain generalist uh because I think that we like the idiosyncrasy of it um and yeah

I guess the incentive is to become more more focused I think uh the institutional investors um talk about like crypto funds being you know like like like theme oriented is better you know because they have true expertise but I think it's just an illusion of an expertise like this is so Dynamic so so you know it's changing so much you know if you're expert in something to today probably you know you don't even understand a single thing about the topic in like three months because um yeah so um I guess it's also you know a way how to sort of remain fresh and to be always on the lookout uh for a new thing when you're doing uh you know various

niches and verticals in crypto so um for us it's it's been very productive to be challenged by different um themes and uh crypto verticals and also you know as an investor you have to learn from from the mistakes that that happened in the portfolio and uh you know crypto different crypto verticals and ecosystems you know they they die fast as Maddie has explained right so you know I don't think it Ser serves anyone well just to you know kind of not like not Tak in the learnings from the market that you have especially if you invest over long periods of time and so yeah

that I think that is a good representation of uh you know someone who learns from from things and then Builds on them yeah I also think that um you know we're at the frontier um here in crypto and I don't think anyone needs any sort of credentials to do anything here because it's it's a frontier um and it's a actually sign that you're at a true Frontier that you um that you can just even as a Founder you know you you don't need anything just you know write a couple lines of code and suddenly you have a a product that um it's it's it's adopted right so I guess that's a true

sign of a Frontier where you don't have the you know sort of like a you don't need a list of credentials to be successful or to you know make a decision or to deploy capital or you know anything like that because uh it is truly mostly experimental than than than anything else I agree I think that's probably my favorite bit about crypto is that there is no need particularly for any credentials that you're encouraged to go in learn um and just build and do research and there's nobody's like oh actually are you like allowed to do that um which which I feel like is kind of the look and trafi yes exactly and even you know if you look at for example dii

decentralized science so so so who should be investing in this or building only scientists like I I think it's exactly what it's trying to undo is you know unbundle you know sort of like science from Academia from like the bureaucracy from the credentials um so yeah I think it's a um to some send a um I think I wrote it it is like uh the frontier uh like the the the frontier of the old west and meeting Las Las Vegas this is this is crypto so good luck like um I'm counting cards there yeah I think this has been my like

General whenever anybody's like oh like why would you care about the centralized AI or why would you ever care about um like decentralized gaming like fully onchain gaming and the general take is that like why would anybody who has the credential just come and work in crypto why wouldn't they just do something for some established traditional company and I like I think crypto has such a unique way of a like you have a hyperf financialized platform where you have guaranteed at least like let's say five to 10,000 users day one who just want to try out stuff because of various Financial incentives and two is that you can just come in and just build even though you like as long as you follow a specific IDE not ideology but General

theme like you have to want to build for some form of decentralization you're happy to just you can just come in and build whatever you want to build which I always find really cool um I have one last question but and I don't I like I'm cognizant of the time here but the fat app fees that you guys wrote about in 2022 late 2022 um how has that evolved is that still your view um and to kind of after that as a secondary bit how do you see it apps in general um evolving over the next year how do you see the app landscape changing I would just briefly say that I think that the

the the FED application is kind of just start to play out or maybe it's becoming sort of more validated um than in the past I think that the um um last couple of years infrastructure has been the dominant play and now the market is um saying okay we need more apps um so so so in that respect that's a beginning of of validating it I think the idea that if you own the users you're going to build your own stack um you know that one um is also playing out and I think that um that has not changed um and yeah rap do you have you probably

have something else to add here yeah I would say that you know since end of 2022 we just saw more apps you know building their own chains their own rollups uh building their own wallets abstracting the chains um so I think we it kind of it's playing out as as we expected I think on the on the fat app pces um in terms of what's going to happen over the next year um in in in you know in relation to the apps I just expect that we see like many more experiments that as we like to say you know they they happen fast and then they fail fast

right because the feedback cycle is very short very quick um so yeah we just kind of want to see more experimentation and not necessarily just like in one ecosystem but like across many many different vertical and ecosystems uh and I I'm I'm not entirely sure I I don't think that any of the products the crypto products that we have today are necessarily winners in the long term in the uh crypto consumer space um I think you know it could all change very quickly U as we saw in the past you know uh for example like p. fun uh you know came came out kind of out of

nowhere and uh created a market for themselves and and uh I just wouldn't discount crypto's ability to produce these types of outcomes uh when no one expects so it's very hard to like extrapolate the current traction and be like okay these apps you know are going to succeed in six months perfect um guys thank you so much for coming on this was incredible thank you for for for having us yeah um Maddie is MADD gags on Twitter and rap is actually long Solitude on Twitter um I'll link both of those in the notes either way but MD Rus do you have anything that you specifically want people to look into is

there any like source that you would guide them to or is that it um you know we have our we have our um blog uh some people um sort of glorified by calling it research um but we do have our our writings on our website um we do have a newsletter um and you know it's a it's a fun read but I don't think it's for necessarily for everyone uh but yeah I think that uh that's the only thing that comes to mind yeah I have nothing else to add fantastic yeah make sure to check out the writing because even though MADD is being very humble it is very good um and their feces are often quite different to what other people write about and I

always find them like very insightful and well written um thank you to the listeners Ryan have anything to add or no are we done great conversation guys thank you for being on all right fantastic have a good one are you currently building on polygon or interested in migrating season one of the polygon Community grants program is live right now and features 35 million in madic to support the next generation of polygon projects builders on polygon these grants are for you join the aggregated future today by applying at polygon.net o [Music]