Joseph Chalom: Ethereum Will Eat Finance (Great Entry)

Transcript

Ethereum has the license to [music] win, but it needs to go on offense for the first time in years to actually [music] win. >> I think we have a possibility of onboarding about 10 to 20 trillion dollars or more [music] of real world assets and tokenized assets on chain. >> If you look at the scoreboard, it is dominating across every category of crypto and real world activity. The US government believes that stable coins are a strategic national imperative. >> [music] >> There's something missing in the ecosystem which is what I call permanent benevolent capital. And the foundation of my whole career [music] was building trust and solving hard problems. Why do we need a new financial ledger? And what will Ethereum's role be? The only decentralized platform that intermediaries and participants can

trust. I'm not lowering our standards. [music] We're going to raise the standards of the industry. Just like the streets of Manhattan. I'm going to keep this quick. Over 70% of our viewers [music] are not subscribers. Yes, you. Every week, we interview some of the best entrepreneurs and investors in [music] the financial industry. The easiest way to support our channel is to hit the like and smash the subscribe button. Now, sit back, relax, and enjoy [music] today's show. All right, Joe. Great to have you back. Um, it's a beautiful day in New York. If you prefer the rain and the clouds.

>> Uh, Andy, great to be here. I would take rain in New York City over 100 degrees any day. Uh, I'm bullish. >> Well, Joe, the kind of theme of this video today is Ethereum going on offense. Um, and I think, you know, given some context of Ethereum Hero over the last two years or so, there was this there was this consensus amongst the community that a shift was needed. Um, there was the Ethereum foundation, there was the institutional route of Ethereum, there was marketing and many other kind of aspects of the protocol from the tech side all the way to the community to the social layer that almost just felt tangled and a bit all over the place.

And when we look back in that time period compared to where we are now, it feels like the community and what has happened as of late have made this shift. Uh, some could call it a pivot, some call it a turnaround. Whatever it is, it feels like the Ethereum redirection is in full steam and is looking stronger than ever. Joseph Shalom, you run, you are the CEO of Sharlink, one of the largest corporate treasury holders of Ethereum and we're here today to talk about this new direction in Ethereum going on offense.

Great to have you as always. >> Uh, it is great to be here and you're right. I think we had uh a bit of messaging challenge. I think we had a bit of a leadership malaise. Um, but that doesn't mean that Ethereum wasn't working for the last couple of years. It's just kind of ironic that in the past 2 years, it's seen its greatest institutional success. You know, 50 plus% of stable coins, which are growing rapidly, dominating tokenized assets, dominating DeFi, building the bridge for Aentic. But you're absolutely right. The message was not coming through because you need both the facts which is that Ethereum is the most credibly neutral decentralized protocol, but you also

need narrative and you need sponsorship. And I think what you're starting to see is very intentional ecosystem stewards, not controllers because this is going to be decentralized, stepping up to fund, stepping up to provide support, and stepping up to be louder voices in the ecosystem to just tell the truth of what's going on and what the forward opportunity is. So you're right, the messaging wasn't great, the narrative wasn't great, the vibe wasn't great, but it was actually building and attracting market share.

Yeah. Yeah. And I think this this redirection I would say we are uh at the end of the beginning of that redirection and we are very much in the meat of that move. Ethereum going on offense. Joe, what does that mean? What is going on offense truly mean for the investor community? And from your perspective, what are some of the most important offensive moves that the Ethereum uh community and protocol and builders and developers are currently uh currently taking? I think there was just this assumption in the ecosystem that there are certain assets that don't need messaging and don't need uh stewardship because they speak for themselves. And I I'll go backwards. Bitcoin doesn't have a foundation. Bitcoin just has this

singular no one's competing with it. It is the first cryptographic decentralized store of value and it had a message and the narrative took over. Um, Ethereum also had that view that it's the first most decentralized, credibly neutral smart contract platform. If you look at the scoreboard, it is dominating across every category of crypto and real world activity. But there was almost a feeling that it spoke for itself. But we're living in a world where there actually is incredible competition from other L1s uh from uh corporate chains from other chains who are might be bank-owned who actually have foundations with tokens.

They're willing to spend they're willing to put on large uh educational conferences and they have large marketing and BD budgets. And I think we have to be more realistic. Ethereum has the license to win, but it needs to go on offense for the first time in years to actually win. Uh, and in some ways it's Ethereum's to lose, and we're not going to lose. >> Yeah, I completely agree. And I think that, um, it's it's funny when you go from being some, you know, kind of the underdog to being the, you know, top dog from the smart contract platform perspective. Perhaps Ethereum was never the underdog. Um but the I would say that there was a bit of complacency almost in in the 2022 2023 2024 era that led to market underperformance. A lot of

people kind of got pushed away from the Ethereum ecosystem. I think they're coming back. One of the things that you and Joe Luben from Consensus spoke about on a recent podcast [snorts] was and I think the quote was something along the lines of if you knew what was happening behind the scenes you'd be insanely bullish. And so Joe, maybe just shed some light on this offensive. What is happening behind the scenes that the community should be aware of and you know can get excited about. >> Yeah. So everyone sees what's on the scoreboard around stable coin adoption, tokenization um and DeFi. And you can see the league tables, who's winning, who's losing, who's gaining share or not. I think the most exciting thing is category 2 which

is tokenization of real world assets. It's actually the smallest of these ecosystems between stable coins and DeFi. And uh what you're actually what's actually happening behind the scenes is people are planning some of the largest launches of tokenized projects that we've ever seen in history. And to give your read your your listeners a bit of context, we're about 7 to 8 years into the tokenization uh story and project. You know, Securitize, which went public last week, was founded in 2017 to be a tokenization platform, but here we are 8 years later, uh, and we only have about 30 billion of

tokenized assets. I think what you're starting to hear behind the scenes are some of the largest asset owners not launching new funds on tokenized rails. They're talking about tokenizing existing multi-billion dollar funds. Black Rockck filed for two funds in the money market space to be tokenized with a with over $8 billion. These are existing funds. You saw Franklin Templeton announce tokenizing five ETFs with Ono. But I think what you're not hearing are the things that are in BD right now around whole fund complexes being tokenized or look at the acquisition announced uh in Miami at Consensus a few weeks back uh actually

in May. We're bullish. A publicly traded uh exchange uh is spending four plus billion dollars to buy Equinity. For your listeners, Equinity is the most boring analog transfer agent. Why is a crypto exchange spending billions of dollars? It's because it gives them immediate access to about 2900 public companies that can be tokenized. And I'm not talking about tokenizing one issuer at a time, one project at a time. We're talking about step function capabilities. So I think behind the scenes there are announcements being prepared with some of the largest banks, asset managers, sovereign wealth funds ready to tokenize very large step function type increases in assets and

types of assets. And it's not just treasury funds, it's across the board. I think the next major um step function increase is going to be the tokenization of large swaths of public equities in the US. So that's why Joe is bullish. He's a part of many of these conversations as I as am as am I. >> Yeah. Yeah, man. I mean, we have just been hammering that per tokenization and stable coins are three mega trends and it is objective to be bullish on these three based on the past and based on the information that you've shared as well as through our conversations.

Undoubtedly, these three categories are going to explode in adoption, in users, in liquidity, and in flows. And so, we've been consistently asking, what is the best way to express the bullish thesis on per tokenization and stable coins? And I venture to I would venture to say you would argue Ethereum. And so, maybe defend that position. Why is Ethereum the best way to express the bullish thesis on the three mega trends of per tokenization and stable coins?

>> Sure. So, first the thesis we laid out is that there is an institutional super cycle not coming. It's here. >> And uh we're not talking about going from the middle innings to the late innings of a technology transformation. You can make an argument that um stable coins are probably in the third inning. They're the first and most successful case study on tokenizing. Uh, and this is money. It's over $300 billion. I would argue that we're in the bottom of the first inning. And for non US investors or people who don't follow baseball, it's like the early part of a match or a session. We're probably in the bottom of the first inning on tokenization. It is so small relative to

its potential. Um, DeFi would be the execution layer. Defi's gone through some hiccups, but look at these projects that are being successful. The Morphos, the Aves, Compound is back. This is going to be the execution layer uh of what's coming. And Ethereum is dominating in terms of market share, in terms of real transactions. Uh we're starting to see competition from the the corporate stable coin chains, from new L1s. uh we're starting to see competition obviously there's always been competition from Solana but also from Canton and I think there's room for all of these players to win but the bullish thesis on Ethereum is that it is

winning it has the market share we've had um uh I I would actually say the news has gotten ahead of the price and um the price has been lagging across crypto in general but particularly in ETH and if you believe that there's going to not hundreds of billions but trillions of dollars of stable coins and tokenized assets and DeFi activity even before Aentic. You want to own ETH. ETH is the trust commodity. It is the gas payment uh mechanism. And there's no ETH without Ethereum and there's no Ethereum without ETH. It secures what's going on.

I'll give you a case study. The announcement that Robin Hood chose to build on an Ethereum L2 arbitum >> and the activity we've seen only in the first week has been tremendous. I think over $500 million of activity just in the first week. That's about a third of all the activity in in this space almost like an onchain DEX that you see in Solana. And they're using ETH to pay the gas fees. So um I think that's how I would express my view on the institutional super cycle. Um I believe when it comes to per there is a number one uh out there. When it comes to prediction markets there's a number one

and number two. I think you're going to start seeing many of these uh migrate and leverage Ethereum more but it's not going to be a monopoly. There will be other winners. But that's how I would express my view. That said, I want to caution if you're a trader or if you're a sentiment speculator, this doesn't happen in a day, and it certainly doesn't happen within a trading session, but you're if you're a holder, which is how people make money in crypto, now is a great entry point into ETH, the riskreward has never been better. >> Yeah, I do agree that uh we find ourselves again in an asymmetric opportunity. It's my third bare market and Joe, I tell you what, every every bare market we're early again. I just keep time passes but we get but but we

somehow are early again and so I I do agree that the fundamentals across several crypto assets including Ethereum have not or have outpaced the price and and I think it's mostly a sentiment thing. It's mostly a four-year cycle thing and so just kind of like over over the next 5 to 10 years I think we have a possibility of onboarding about 10 to 20 trillion dollars or more of real world assets and tokenized assets on chain. I think there's, you know, up to 200 to 300 to$400 trillion dollars of available potential. You know, in this case, in in the case that this happens, right, we we've simultaneously in that time period, we've we've seen the launch of Ethereum institutional as well as ETH Labs. I'm curious on the this offensive,

right? when you when you're talking about capturing a lot of value deals, integrations partnerships launches from the perspective of tokenized assets on Ethereum, how do these new nonprofits that are almost like auxiliaries to the Ethereum Foundation, how do they contribute to the value capture, to the growth of Ethereum in this tokenization kind of mega trend? >> So, I think we have to start with just a basic agreement, which is Bitcoin doesn't have a treasury. Bitcoin doesn't have a foundation. It's singular, you know, it has a narrative. It has stewards. Michael Sailor you can argue is the biggest voice for Bitcoin. On the other hand, you have the Solanas of the world who have a strong foundation. They have a BD group. They have a token value. Ethereum actually has something

that's more important, but it's below the radar, which is it has the longest history of trust, building, security, uptime, and it has the principles that you need for institutions to onboard. Unfortunately, you know, the Ethereum Foundation has chosen, and it's not unfortunate, the Ethereum Foundation has chosen to go narrow to build multi-deades of consistency around censorship resistance, around privacy, and the like. They've they've essentially taken the point that there should be no controller of Ethereum. There should be no one person. There should be no one foundation. And what that's required is to make sure that some of the most talented people from the Ethereum

Foundation who are focused on the protocol scaling quantum um all the capabilities that institutions are waiting for that there be a talent magnet where they can live outside the foundation and that was ETH labs. We announced it two weeks ago. Bitmine and Tom Lee, Sharplink and Joe Luben personally funded this group of initially five very senior talented engineers who were focused on ETH as well as Ethereum and that is just the starting point and we gave them a runway. We gave them a foundation.

They're hiring significantly and you're going to start seeing concentration of builders and deliverables coming out of ETHLabs. The second thing was uh what's called Ethereum institutional. It was the fiveperson go-to market team that Tomas had brought on uh at the Ethereum Foundation. The Ethereum Foundation has chosen not to be that front door go to market for the use cases. So we needed to make sure that this group of people who are very talented who spent over a year building 500 plus relationships with institutional who had who have forward engineering capabilities can be a standalone not forprofit not to favor one L1 versus the L2s or within the L2s

but to be that voice piece to help institutions as they're going from education to experimentation to proof of concepts to production to be that front door And I believe that the stewards and the largest holders of ETH have an obligation and an interest in funding these groups. And that's why you saw Tom Lee, myself, and Joe Luben be intentional, strategic, and forward that we needed to add uh nodes around the Ethereum Foundation who can bring this to market because again, it's Ethereums to lose. We have the license to win. We just needed to be a little bit more organized and be louder. And when you're organized and loud, that's called

offense. >> Yeah, most definitely. And and and I think, you know, I think the the community will agree that there was a, you know, a lot of defense or a lot of kind of lack of offense, one could say, for a a little bit of time, but it really does feel like it's coming together with these kind of new nonprofit groups that this focus. And honestly, Joe, just you, Tom, and you know, Joe, too. um just thinking about okay how can we leverage what we have in terms of holdings and in terms of influence to kind of shape this network the three of you amongst you know Vitalic and other core contributors there's kind of started to become this new leadership of Ethereum and so the promise of Ethereum that I think will be

appreciated by the market is what you said off the top here which was it's the best credible credibly neutral decentralized econom eomic layer for the internet. It's just it's going to be appreciated for that for a myriad of reasons over the coming years. We we don't need to get into all of the whatifs, but there's a lot of uh hypotheticals that, you know, may or will play out that will force the world into this or or or push the world further into this direction, as well as just general technological improvements, AI, etc. And so when you're thinking about this core group of leaders in this new Ethereum offensive while also balancing this credibly neutral decentralized trustless network, those

you know one could argue that those two are are there's a centralizing force of leadership and a decentralizing force of the network. Those two are almost at odds. Mhm. >> So Joe, how do you balance that and what is what does the perfect balance look like for leadership while maintaining that neutrality? >> This is going to be the simplest answer, but it's a really important question. >> Those of us who are funding ETH Labs or Ethereum institutional, we will not control it. So for example, ETH Labs is going to have a completely independent rotating board. Uh and Tom, myself, and Joe aren't going to be board members. um they're going to have completely auditable uh books when it comes to financials and most importantly

everything they build and deliver to their roadmap is going to be open- sourced and available. So if anything instead of it being a conflict of interest it's an alignment of interest. Ethereum institutional is slightly different. It is a gotomarket group. It's not the core protocol. These are people who are doing education who are doing marketing. there. Tom and I will have a role. Um, why wouldn't you want to have two older TRDFI people with, I don't know, 75 years of experience help you go to market? But that's very different. Um, the the protocol is entirely decentralized. The Ethereum Foundation, I think, owns less than half a percent of all ETH, and none of us have any control over the Ethereum

Foundation its mandate, its roadmap, nor over ETH labs. So I think the way I would think about it is Ethereum is going to say completely decentralized. We are going to be people who are going to be advocating and funding the Ethereum ecosystem but we have no control mechanism and that is the right answer. Uh it would be a big mistake to have any one person try to call control Ethereum. Ethereum is other than Bitcoin the most decentralized platform. a million validators, over a million contributors to date to the Ethereum code, diversity of software clients.

Like the worst thing to do would be to have any individual step up and feel like they have control. We're stewards. We're advocates. We're narrative providers, but this is completely decentralized and the protocol runs the way it runs. So, I want if anyone's concerned about that, please don't be. >> Yep. Yep. >> I have I have two day jobs. I don't need a third. >> Do you and Tom talk often? >> Um, so it's it's really funny. We actually have a [clears throat] very good relationship. When we started, I used a word on Bloomberg that I believe in this idea of co-opetition that you can compete with a highquality competitor on your merits, but at the same time, you can cooperate. I think

we're at the point where we're a year into this DAT process for both Bitmine and Sharplink. Um, we probably have 90% of our interests commonly aligned. We want to provide an exposure vehicle for both institutional and retail investors. We want to accumulate ETH. We want to make ETH productive. We want to be benevolent capital into the ecosystem. I think we have slightly different personalities, but um, we speak uh, at least once a month, sometimes a couple of times. I think this idea of bringing uh more stewardship to the ecosystem, funding ETH labs, funding Ethereum institutional and there'll be more announcements to come. If you've noticed

the press releases are triparty, >> you know, we're we're on the same uh letterhead and master and headlines. So, I think the the relationship's as good as it can be and I have tremendous respect for what Bitmine has done and for Tom himself. So I think we have more cooperation than competition. We have a different diff a slightly different voice. I think sharplink has been more institutionally oriented. We have a higher institutional ownership. Uh Tom has been a little bit more retail sentiment and owned um but much more in common and I have a tremendous respect and on these type of projects it's pure cooperation.

>> Yeah. I mean you guys have taken off in a combined fashion. I don't know the exact figure. I'm sure you know you would know it's probably what 7% of the supply 8% maybe in that range. >> So Bitmine and Sharlink uh are the two Ethereum digital asset treasuries that were able to raise billions and billions of dollars. Tom has done uh even more accumulation than Sharplink has a larger balance sheet. But unlike Bitcoin where there's probably 50 to 75 Bitcoin DATs around the globe, most subscale in the Ethereum space there were only six or seven DATs that launched. Uh and Sharplink and Bitmine are the two largest. I think the ones with who got escape velocity, the ones who have a

voice and some of the other ones either didn't launch or or complete their spa mergers. And there's two that have just started selling ETH and have pivoted away from being a DAT. And that's okay. Um, but I think there's a couple of us who who have large holdings uh and and have mouthpieces. Tom is much more retail oriented and he has an incredible experience uh from his days of being a macro uh researcher. >> And on that note, Joe, I mean, thinking about the supply sync here, right? A lot of people, a lot of people think, you know, a bit a bit short term here, but really where the supply sync that is occurred via Sharplink and Bitmine really hits is in any sort of bullish

condition. There is simply far less sellers, far less supply on the market. In the bare market, it doesn't really matter. It's still just, you know, you're just chipping away. But when things turn and I think we're in the transitionary period now into Q into the end of this quarter. Um I I agree it is a great entry point. I think anything with a one handle on Ethereum is going to be seen as genius in the coming years. Um when you think about that supply sync longer term, walk us through your like economic model or your mental model of how impactful that supply being off the market is in a more bullish uh market condition which you know I think

we we on the show have been saying and I think the broader four-year cycle is lining up for for basically next year and the following year. [clears throat] >> Yeah. I I think the way to think about it is the combination of the digital asset treasuries, the ETFs that have been launched on ETH and the fact that you now have uh ETH staked and locked up a bit. Um I think we're at the point where we have 33% of ETH is staked. Just compare that to when it started as a proof of stake at the at the big for uh fork and with another 2% of ETH ready to uh in in queue to be staked. So you have this buy and hold community. Um especially the digital asset treasuries.

We are long-term stewards. We are we have we think of this as permanent capital. When I deploy my ETH, it's not just to staking. It's to multi-year DeFi projects to funds like we announced with Galaxy. Tom is staking virtually all of his. It it's a buy and hold type community. So there is less supply um in a downturn. uh and in certainly in in an an upturn. What's funny is how we operate as a digital asset treasury is exactly the same whether the sentiment is good or not, whether we're in expanding or consolidation on the token.

We make it productive. We go out the efficient frontier first staking, then some liquid staking, uh then we participate in DeFi within a qualified custodian. um you're going to start seeing again steps along the efficient frontier and we're getting higher returns because we're able to commit our capital on a multi-year basis. So, uh I am bullish when the sentiment turns. I think the deleveraging is out of the system. We need net new buyers to come back into the system and I think the net new buyers are not going to be here for memecoins. Those institutions believe in the thesis of Bitcoin and ETH and they'll come back and buy and hold. Um, I think right now we need to get out of

the AI uh buzz and bubble. Um, I spent a lot of time in Asia. I've been to Korea five times since September. They were the most active on a per capita basis in the crypto markets and they pivoted entirely to AI. They buy Samsung, they buy SpaceX, they buy SK Highix, they buy Nvidia. That will turn around at some time and you'll have net buyers coming back to crypto. and I'm bullish for the position that we're in. >> Firmly agree, Joseph Shalom, Ethereum going on offense. Um the turnaround has has begun. We are in the the bottom of the first inning. I believe that the successful Ethereum community realignment and

reorganization will go down in the digital asset lore postmerge as especially if we can execute Glamsterdam in this quarter. um and some other upgrades early next year will go down as one of the most uh important reorganizations of any digital asset in history. I'm glad to be a part of it. Um you're playing a massive part of it. Thanks for your time. Thanks for being a part of the show and we're going on offense, baby. Let's go. >> Uh thank you. Uh I am excited. I'm bullish and uh I look forward to catching up at the end of the summer and we'll share even more progress. There's so much happening behind the scenes and more announcements coming over the coming weeks. We're gonna compound uh these announcements and compound the

excitement. So, thanks for having me again Andy. >> Thanks, Joe.