Internet Capital Markets

Transcript

Fantastic. I feel like we could talk about AI um for the rest of the day. Unfortunately, we have a very packed agenda, but actually the topic still remains technology. um the future of blockchain combined with AI and we are really really lucky to have one of in my opinion most influential and interesting female leaders from Switzerland, Lily Leu, the president of the Solana Foundation here with us today um giving us her view on what's the future looking with Solana. All right.

Hi everyone. All right. Uh so I consider this to really be back to the future because I think this is what crypto has always been about. I think that all of crypto there is the asset uh applications. There's the asset based use cases and then there's the infrastructure based use cases. I think Bitcoin is the asset and the question for everyone else is who's going to be infrastructure for global financial markets infrastructure? Who's going to be who's going to provide the infrastructure for that to do for finance what internet did for content which is everyone all in the same place all the content on the same rails and the analogy being all of the money on

the same rails. Uh and so there's so many things that go on in crypto so much research so many white papers so many modular architectures so many all of the above. Uh but if we get back to basics and what we're here to do now that we understand what Bitcoin's role is, who's going to be that global financial markets infrastructure? Uh so what we've been talking a lot about is internet capital markets. Um so let me get into this. Uh today's capital markets don't work for everyone. Uh you've probably seen this fellow before, Larry Frink. Uh one of the science of US and therefore global capital markets. uh and he hears it from nearly every client, every leader, every person. They're more anxious about

economy than any time in recent memory. Understand why we've lived through moments like this before. Some of the long run we figure things out. Well, easy to say if you're sitting at the apex of the pyramid. Um but if we just talk about America, uh there's been a precipitous decline in people's faith in the economy and the future of the economy. 50% believed in the American dream in America in 2010 and today that's 27%. So 50% decline in 15 short years. So what's going on here? The takeaway here is that your freedom is hyperinflating.

You what do we do? You invest your time in order labor to get capital and then at some point you want to invest your capital to reby your time. That's how we live our lives. That's what we invest in ultimately. you invest in improving the quality of your life and the freedom with how you spend your time. And in 1971, about 50 years ago, it took 25 hours of work to buy one share of the S&P 500. And what's happening now is in 2025, you have to spend 200 hours in order to buy one share of the S&P 500. So when we talk about, you know, why is it that now you all all households need to be dual income? Whatever happened to a house, a car, a suburb, one income?

Literally cannot do that anymore. Even in some of the most elite and prosperous places in the world. Uh and uh so what has happened here is over time labor just decreases and decreases in its purchasing power, not just of goods, but labor decreases in its p purchasing power of buying your own time back later in life. uh and um what's happening here is uh you know why is this happening? Where is this coming from? Why is there so so little upward mobility of labor these days in the ability to convert labor into capital to then at your leisure convert your capital back into your own time? Uh well, one of the reasons is because the sources of upside in the economy at large are increasingly only

available to uh to folks that have large capital bases and can invest in private markets. Uh so Bill Gurley, one of the science of the other coast of America, uh Silicon Valley, well he talks about uh IPOs being delayed. Now it's typical that companies are private for 10 years. And so what happens is all that upside between day one and year 10 goes into the pockets of someone like Bill Gurley. got nothing against Bill Gurley, but if you look about if you look at Uber uh and you look at the capital distribution that happened there, how is it that the first hundred drivers of Uber Black at the time, they literally just got paid 20 bucks an hour and that was it. And they did a lot to build the network, but that labor never converted into capital.

Uh and so what you have here is 8x, right? Uh S&P 500 has grown 8x faster than the hourly rage. And to translate that into another number, it you'd have to be earning $250 an hour working 40 hours a week as well, uh, in order for your wages to keep up with the growth of the S&P 500. And this is why labor no longer converts into capital, which means later in life, fewer and fewer people can convert their capital back into buying their own time back. And what makes this worse is that uh, gains are privatized while losses are socialized. And so we all know what happened in 2008 and 7 what50 billion dollars at the time was considered uh uh actually affordable and then we did 2.1

trillion dollars for COVID in 2020 and 2021. Uh and so as uh capital markets appreciation becomes available to a fewer and fewer number of folks. We also have um as we all admire today exploding public debt and the socialization of uh of those market failures amongst an entire tax base. Uh this is not a pretty picture and um going further on this what you have over a broader period of time is increase in national debt 840x. I mean these numbers I don't even know how to comprehend them anymore right they if you look at these numbers you just think what am I supposed to do I mean I guess a number of people in our industry have come very simply to the conclusion that you just buy bitcoin um and uh and so labor you know doesn't

convert into capital very easily even in the most robust innovation market where if you've ever tried to do business and give out stock options in America section 701 I mean you know have fun with your lawyers and this is why folks like the first hundred drivers at Uber they just got paid 20 bucks an hour and all of the folks that actually built the network had no way of getting upside in that network. What's worse, we spent years and are still continue to spend nearly a decade fighting over contractor labor law. Okay. Um All right. So, uh I think a lot of people recognize that this is an issue. Uh and but then you have an incredible divergence in how people ascribe a solution to this. Uh

you'll all be familiar with the folks that talk about universal basic income as a way to compensate for the fact that labor, this labor to capital conversion uh is no longer working as well as it has. Uh and particularly many proponents of AI are going to say, well, you know, you just got to pay someone airdrop $5,000 a month and we're all going to be okay and pursue our passions. I have a different perspective, which is UBI, uh universal instead of UBI, UBO, which is universal basic opportunity. So recalibrating for an equality of inputs rather than equality of outputs. uh and I think this is one of the broader ideas that cryptos talked about from the very beginning which is uh how do you create and scale new ownership models community-based capitalism right uh and

I think this is what is even more topical now as we're facing this choice as the western world do we want to go down the path of a welfare economy or do we want to go down the path of an ownership economy and try to re back in this inflation of labor versus capital so two ways we're talking uh two ways to talk about this. Uh and you know when people have typically talked about financial inclusion in crypto, they've always talked about the buy side. The buy side is the typical narrative is you know out of the five the five and a half people five and a half billion people on the internet uh the vast majority of those folks probably four to four and a half billion live in uncertain economies with questionable monetary policy high inflation. Uh and so with uh with

broadly available internet-based uh uh bank accounts, if you will, anyone can have access to assets that are not their local uh somewhat unstable currency. That's the buy side. We call that financial inclusion. We've all heard that narrative for about 15 years now, and it's a pretty good one. The other part that people don't really talk about is sellside financial inclusion. uh and the simple fact that many issuers are completely locked out of global liquidity and even in the most robust capital market which is the United States. All right. So let's talk about the both both of the sides uh both sides of this when it comes to investment assets. Uh so lowering the barriers for invest investors on the buy side. Well private markets are private uh and the

IPO backlog is very real and uh and the kind of direct S1 path is very limited these days. takes about 10 years, $15 million. Uh, and that's part of the reason why you see a lot of energy around RTO's and spaxs as sort of an indirect way to get to that thing that everyone wants to do, which is have tap into broader liquidity, global liquidity. And uh what this also does is it concentrates the demand for investment assets into a relatively few uh number of assets. And so this is why the MAG7 is one-third of the S&P 500 because the supply of assets available in this most liquid uh list the most liquid capital

markets is the supply is not increasing with the amount of demand that people have for those assets. So what you have is the assets that people can get they're all getting maxed out. And so where is that money going? Well, one of the ways one of the places it's even going is into crypto. uh and that sort of that demand, the liquidity is so great that you can even imbue things with zero value like memecoins with price. Uh and alternative assets aren't even an alternative anymore because folks want to get access to so-called private alternative assets. And that's why with tokenization u one thing you'll hear often is one of the biggest opportunities alternative assets and private fund tokenization. Uh there is one public market however which is widely available. It's called the

blockchain. it's on 24/7. Uh and uh there's a whole range of assets that you can't get in the traditional world. We can talk about everyone will have their opinions about asset quality. But if you project beyond that and think okay as infrastructure uh as access to capital markets as global access anyone on the internet can have access to capital markets that's actually very interesting. Uh and what you have here is the uh traditional kind of stack of how you get onboarded into capital markets has now essentially been replaced with download an extension uh whose icon is a ghost and in one wallet you can have everything from your memecoin to your money market fund. And

this is what it means global global capital markets all of the assets and all the ways to use those assets in the same way that we accept now on the internet you'll have the full range of content on the internet and you can choose the applications and the content you want to interact with. So what this is doing is it's taking the whole range of different ways that assets are issued oftentimes actually on paper. Uh, so fun fact, uh, Enamoka you've probably heard of before. Uh, they were at one point listed in Australia and now in order to trade their shares, you literally have to take a pink share certificate, put it in the mail and mail it to the person that wants to buy it and it's still very actively traded. So again, indicator of demand looking to looking for better

infrastructure. Okay. So now let's talk about the sell side. Uh, this is what it takes to IPO today. Um, so if you are going to IPO in the United States, uh, be prepared to pay 10 to$15 million. That's in direct costs. There's also all of the indirect costs. Um, who gets rich off of this? Ultimately, the lawyers risk adjusted. Uh, and there's many folks who are competing for this exchange business, right? We see Texas starting exchange. There's myriad small exchanges here in Europe, but you have liquidity fragmentation, asset fragmentation, and as a result, what's still happening, the best companies in the world, they typically go IPO, wrap themselves in some sort of overseas structure through Caribbean islands in

order to go list on the US stock exchanges, NY and NASDAQ. Uh because that is where you have uh the uh most scale capital markets. And so the answer of well you know I'll try to uh attract more companies to my country and get them to list it's it's not a you just can't compete on liquidity and we've seen that over so many years uh and the the power of liquidity is something that transcends uh really even uh even kind of national competition right if you think about China versus US how is it that the best entrepreneurs in China they all want to go IPO in the United States right just think about that for a Uh well there is kind of an answer actually. Um there are in addition to S1

there are other routes for being publicly listed. Uh there is you know of course uh compliance legal various regulatory work to be done around this but there are already other pathways to raise less money do a more simplified offering to different set of audiences. Uh and so you know how do we make these routes more accessible for folks that are a maturity of less than I've been in I've been in business for 10 years with global scale. uh and to an extent people have tried doing this direct listings you know how do I do something other than the Goldman Sachs le 5% IPO uh there are some companies that do direct listings uh but these are companies that already have such broad retail distribution in their customer base that effectively their products have marketed themselves to capital markets indirectly

and implicitly. So the question is how do we do more of this uh direct listings using different frameworks uh that open up the IPO pipeline. Uh and that is what we are working on uh with Salana. Uh you know I think that crypto has never just been about launching more tokens that fly and then they die. It's always been about financial markets infrastructure for the whole range of assets. And that's going to be from the things with all price to no value like memecoins to the things that are all value and no price which sorry is most of Tradfi. Uh and uh and the thing that is really in the middle uh if you want you know the the one time you want to be mid-curve about this is equities has value can command price. Uh and that's what we're all about. All the assets and all the

ways to use the assets. Uh and so you know what we see today is most of crypto the $ three half trillion dollars is on this end of the spectrum this end of the spectrum all priced in no value. Then you've got uh with the over the last year with all of these different RWA tokenization uh plays coming on the market and into public chains which is a huge evolution from even a few years ago. uh you've got uh really loved assets from very trusted issuers such as the Black Rockck, such as Franklin Templeton uh who is here at this conference as well uh to uh really sort of create a pipe between traditional markets and liquidity and the blockchain. That's fantastic. Uh but then what about all the other things in

between? How do we fill in this asset spectrum? And those are the types of types of things that we're working on uh to uh and and so we're sort of targeting the middle equities and then uh if you can get that right, we'll expand from there. and equity is not just in terms of uh you know listing of existing stocks also being able to do direct IPOs on chain I think is really the uh the near-term uh near-term ambition here. Um so ultimately I think why we're here is there's no superset of liquidity which is larger than the assets of five and a half billion people on the internet. uh and when engineers will talk about single state machine uh I think what that means to markets people is unified

liquidity uh and the network effects the power laws you get um by uh by doing that creating an architecture that supports the number one thing that all financial markets thrive on which is uh which is liquidity uh so where I think we're going to be going from here is look I think tech has always been about uh about unleashing longtail supply and demand and being able to match those. Uh and that's what we saw with, for example, Uber. There's always been longtail demand at any moment, at any point in time for riders and drivers.

And then new technology helped match those folks. Uh and I think that's where we're also going with uh with markets. Uh capital markets are now going to be a commonly embedded feature across a number of different consumer applications. Uh everyone is going to be a trader. You already see this as being a phenomenon. many parts of the world uh every app is going to have an embedded wallet. So every app is now going to be a finance app and also anything can be a financial asset. So why is it that uh gold mines that are in for example Kazakhstan cannot directly uh tokenize issue their gold as a commodity or equity around their gold miner uh gold mining companies as uh as an equity that's accessible to global markets. Um

so you know the end state here is uh uh bring the fund back into finance. Uh tech finance has been very vanilla. Um we got uh LBOs, we got junk bonds in the past. Uh but recently the greatest innovation has been YC safeotes. Uh and what you see in crypto is you have that convergence of uh finance and fun. Uh and I know it doesn't always work out. Uh but that is part of the process of innovation that we are all undergoing. there's going to be some winners and some non-winners as well. Uh and this is this is the end state all the assets all the ways to use those assets. So that's what we mean when we talk about internet capital markets.

Thanks.