Ryan Zurrer: Dialectic AG - A Decade of Crypto Ventures: From BTC mining to P2E gaming #490

Transcript

welcome to epicenter episode 490 the show which talks about the Technologies projects and people driving decentralization and the global blockchain Revolution I'm Sebastian Cujo and I'm here with my trusty co-host Felix Lutz and today we're talking with Ryan zurer he is the founder of dialectic and also a super early epicenter listener he's OG epicenter listener what a few uh that I've stuck around all these years and was on the podcast believe it or not 250 ish episodes ago so about half of the life of epicenter but uh yeah so today we're going to be diving deep into a whole bunch of topics uh including nfts uh psychedelics and maybe talking about some investment strategies a

little bit uh beyond that we'll also talk about defy and uh you know what he sees uh coming coming down the pipe in the future hey Ryan thanks for joining us uh thanks very much for having me and you know as I mentioned before uh very sincerely thank you for all the work that that you guys have done over going on a decade now um I remember that epicenter became an outlet for me at I think around the 2014 era in in recognizing that like ah this Bitcoin Community wasn't really the thing that I was after and that there were other people who were who are thinking about things Beyond Bitcoin and and how this technology could be used

and you guys were really the leaders in in going Beyond Bitcoin you know at that time it was called epicenter Bitcoin and and and then you generalized it and that important ecosystem building uh you know I can't overstate how how fundamental that has been to to the growth in the education of the space overall I'm so very grateful for for this work that you've done over all these years oh thanks thanks for saying that and uh yeah I mean it has been almost 10 years it uh sometimes uh difficult to Fathom how how long you guys should throw like a huge party for the decade and like have I don't know all all kinds of guest comma or

something like that do a big live like multi you know uh uh like multi-person podcast or something it'd be great it's important right the work that you guys do is really important no thank you um yeah but uh so you were on in 2018 on episode 249 so maybe for our listeners who aren't familiar with your work or you know who haven't been listening for as long as you have can you give us a bit of background about yourself and uh you know how you got here sure um actually in November I celebrated a decade in the game myself you know early investor in ethereum makered out polka dot filecoin dfinity file or

um Solana near Rowdy Capital um actually Infinity many others um I came into polychain Capital um in the weeks after Olaf founded the company and led a lot of the early stage private Investments at that time um we created a document called the Saft um and and that was a really good um a really good mechanism that that we use and I continue to use and so at this point I think what I'm most known for in the Space is having been at the eye of the storm of all three major Cycles so mining in 2012 2013 you know icos and SAS in 2017 and then later in gaming and

nfts in 2021 um been grateful to just be in the mix and and be doing my thing all these years um just love it and couldn't imagine anything else crypto is a strange addiction yeah how did you um I don't remember the story there was how did you uh meet Olaf and and become a partner at polychain okay I'll tell you the real story uh which I don't think I've ever mentioned publicly I was talking with Pantera about putting investment into them and I said I'll I'll make an investment in you guys if you make an ethereum fund rather than a Bitcoin fund and this is in 2015 and

they literally scoffed at me they're like I was just like you know what like I'm gonna go and do this and so the Dow came out up and I participated very expressly in the Dow was fortunate to be to be called by by Jordi bellina on a strange day um to to contribute to the the Dow white hack attack and then after the Dow blew up I was like okay well I was gonna work as a venture you know partner for the Dow um this didn't work out so I went around and and looked for who are the smartest people doing you know Venture style crypto Investments because I have been doing some angel stuff I had already written a check to make her dial and and obviously put into the ethereum

crowdfund a bunch of others um and and met Olaf and we we hit it off right away um and uh you know and and we got going with with polychain and you know that that's an example of something that what you look for in startups is for what I call a company getting slippery where it's growing at a pace that you kind of can't keep up with um and we felt like that in in polychain there was this one moment I think it was actually the bancor um Ico where we had just passed 100 million AUM and it was just two of us in a an apartment in San Francisco and these guys raised a hundred million dollars

and we looked at each other we was like geez these this is probably five people an apartment who just raised all this money this is crazy then we kind of looked at each other and realized like where we were of what we were doing and we're like uh okay back to work um and so yeah it was it was a really fun time we remained good friends um but I'm I'm happy to be doing what I'm doing with dialectic um you know automating yield in in Market neutral uh and uh and just taking a very a programmatic approach to to investing in the major categories of crypto here in Switzerland and being here in Switzerland I think is is starting to pay off as a as an

important strategic decision yeah we definitely want to get into that a bit I think for me personally one of the first things I think I read from you was around like keepers in in blockchain networks I I see you like sort of evolved that topic over time can you maybe explain to us a little bit you know what what you were thinking about there and maybe also how it your view has changed since I think initially you were thinking about this like in 2017 and obviously we're like six years later now so yeah curious what your current thoughts are so originally we were thinking about that in terms of maker doubt because I I co-rew wrote the white paper with with with roon and Mandy and and Nikolai um

and shout out to Nikolai who who we tragically lost last year he was so important for our space and um I miss him tremendously uh and it you know because we're generalizing Beyond just Bitcoin and Mining I started to think about it in terms of okay there's a resource provider layer that provides some important resource and then there's a user layer that uses this resource I'm you know one of the better examples or cleaner examples to describe is filecoin where that instead of mining or transaction confirmation it's storage that is the resource layer and that's like the keepers and in defy it wasn't called defy at that time but in in

liquidity networks in financial networks the key resource is liquidity provision um so people who provide the market making and liquidity are kind of like the miners of a of a of a liquidity network but we didn't really want to call them miners um so Keepers became the term uh that came up in a in a long late night conversation between Nikolai and I uh and that and really was just about describing these networks as the resource provider layer and the user layer and the user layer is subsidized by the inflation that the resource provider gets over the bootstrapping era which we're kind of coming to the end of

an in Bitcoin but we can see we're still in the bootstrapping era of many other resource networks and this can be applied to to many many things Beyond just you know financial transaction verification like in in ethereum and Bitcoin you know file coin with storage but I think there's a good argument that it could be done with isps with energy networks with you know anything that was a Marketplace can be turned into a protocol with these two layers where the user layer is subsidized and that's ultimately the concept of Keepers is is that there's a there's a resource provider that subsidizes the users to get the service for free or nearly free how is your thinking evolved then like

from when you wrote those first articles uh which I believe was a couple years ago has that thesis changed over time uh now that that resource providing networks are are a little bit more mature and and also since these networks are no longer operating in isolation and increasingly operating in in a sort of network of their own right with interoperability I think like if you broaden the definition enough we actually see it continue to replicate um with fairly High Fidelity so for example the newest types of networks that we see are in Play-Doh and gaming um where the resources incidentally are

eyeballs playing a game and they are subsidized by inflation of an underlying token with that game so the first example that we saw of that was success was axi Infinity um and and generally I just think that that's a really powerful like fundamental mechanism of crypto is that we can use inflation over a period of time to bootstrap Network effects and then once Network effects kick in we can modify the you know the economic trade-off such that transaction fees are are are more Paramount and and it's less about inflation so I think as games games evolve what we're going to see

next is we're going to see Zero Sum right which I've actually been wanting for a while so today it's it's inflationary so if I play you in a in a player in gaming context you know and you win I don't lose you just win and and the cost is socialized across the whole network via inflation where it's going to flip is is you win I lose now there are some questions of whether that run runs in to gambling and gaming regulations and things like that and I think you know we'll sort those out over time but I'm actually quite encouraged that the general concept of Keepers continues to to you know be relevant in the space

there's been you know I see it be used all the time which is really heartwarming like there's been like Dows called keeper Dao and keeper this and so it's it's been nice over time to to see that and see other things that that I've tried to make a contribution to the space and um be relevant and be used by by folks and so it's great right I I think I mean yeah maybe would be curious to hear I guess you know like actually Infinity was successful I guess for a little bit in the bookmark then sort of the engagement I guess dropped off to you so you you think that's gonna change in like future future iterations or like sort of where do you do you think maybe these first play to earn uh games sort of failed

or what's what's there to improve yeah so I think the lesson learned that we take away from from axi is um and just be clear it's like it's a lot of the same lessons that we that we've had in previous you know iterations in crypto is that that crypto economic design um is really important and changing it in the middle of the the road can be catastrophic you know the allegory that I would use is that in layer ones the crypto economic design of the initial team distribution and how rewards are doled out over time either

to validators or or to team or to community or to investors those can those decisions can be catastrophic to a project I was part of the debate around ethereum's choice where they ended up going 9.9 to team 9.9 the foundation and I thought that was a great precedent but then we saw many other projects deviate from that precedent over time and really do themselves a gigantic disservice you know these you know they started to be calling VC coins they lost Community uh from that and you know and ultimately these things rest on on on a community with axi you know we didn't know

um how how these things would evolve and and then the change I think created a somewhat of a mistrust because I I think we underestimate the fact that like very literally millions of people were doing this as their job and there was this Narrative of like oh no they'll play the game because the game is fun and I was like nah no it isn't like like they're playing this for a job and guess what that's fine Financial incentivization is okay and if that means that they're playing a game that they otherwise would not that's that's fine because you get to bypass the hundreds of millions and even billions of dollars that it would

require to to acquire customers to acquire eyeballs in Instagram ads and TV slots and and all these other things you just go right to the customer and you say hey we'll we'll incentivize you to pay this game play this game and I I think that's the powerful thing not how great the game is and so what I look for today you know we get we get tons of pitches of like we're gonna make a triple a quality crypto game I'm like a 99 and B uh you don't need to you can make a pretty break bones game and just build community bootstrap that through the financial incentivization the other thing is I think games will get more

elegant in their crypto economic design so you have to balance the like you can't have pay to win where I can just like pay to have like the greatest swords and just like be running rough shot through a game like I'm I'm some kind of monster right so the the game play has to be ha has to be High Fidelity to talent and skill however you can have economies that kind of support the game in you know whether it's like like providing resources or or like re-ups of energy or various things like that where you can make for a more epic experience that is supported by an economy and again that's where you have like user layer and keeper layer right a

keeper layer could be like the providers of of resources swords wood whatever it is and they're going around mining that in the game and consolidating it and selling it in their shop whereas the like the Warriors the game players they theirs is is one based solely on skill I haven't seen a model that has completely solved that but the good thing is there's lots of experiments and I'm very confident that we'll solve it as a community over time so one of the reasons why I wanted to get you on was because you know you're so plugged into say like the nft space and also the gaming space and this is these are verticals in crypto that I don't have very well formed Theses about

and I'm sometimes a little bit skeptical of and and you just said something that sort of opened my mind to this concept that I think uh you know it overlaps with a lot of other uh verticals in crypto and that is that intermediary elimination so essentially with gaming you know as you said you the the um a game developer can bypass you know the the the intermediate areas that they would usually interact with so like marketing for instance uh uh in order to or like these intermediary costs in order to attract uh players but by directly incentivizing players they don't have to have sort of that like intermediary uh actor or cost uh uh

Center to to attract the players they just attract the players directly and so it's sort of like eliminating the need for for that intermediary that middleman in the same way that you know Bitcoin or other cryptos eliminate the needs for other types of intermediate areas um with uh with regards to gaming what do you think is necessary for say like this this style of gaming to have its um it's kind of mass Market uh moment I ask you this because I'm you know I I know folks that works at Ubisoft or you know I've I've talked to say Innovation departments there that are looking at crypto and and from from the perspective of like traditional game um uh designers or you know game studios

there's this I think uh this notion that the business model of the crypto business model doesn't make sense for the economics of of building mass-market games that costs you know millions of dollars uh to produce um is is crypto gaming fundamentally you know um orthogonal to the traditional way that we think about building games or or do you think there's a there's a middle ground here that that will will that we'll achieve at some point I would say my observation in in these interactions with with like epic and Ubisoft and and certainly like the drama around Discord and things like that

is more that you know the innovators dilemma continues to to Prevail and that very rarely the incumbent uh will be the leader in a new like in the new up and coming category um you know this is true across technology in in so many fields and so I don't think that you know Ubisoft or AAA game manufacturers with with armies of teams and and the corresponding drama and politics that are inherent in in those size of teams will be the ones that that catch fire here

I think that there it's easy to dismiss some of the core tenants and the power of of crypto communities until you see it unfold and I think that that's what's going to happen and so like you know they say well you need all these millions of dollars and and upfront cost and you know and you have to build you know Mass Market user base it's like well you could actually kill two birds of one stone and get you know like by funding it through the crowd and getting your community on board both as users evangelists as well as as you know asset holders that's a great way to bootstrap

all of this together um and and so crypto uniquely enables that um the other the other component of of this is I think it would be important to set a parameter for what is like Mass market adoption there is a point in 2021 where there's about 480 000 daily active users of ethereum addresses and about 410 000 daily active users of X Infinity uh Ronin addresses and you know it it it's really inspiring in fact being like in the space as long as I I have been there's two stories that I

find the most inspiring in the history of the space the one is all the people in the Philippines who were able to to replace their job by playing axi Infinity uh during covet right they you know there was no you know there's no government bailout or handouts during covet like they had to figure out a way to survive and they were able to replace their job if they lost in tourism or manual labor by playing this game and it became so culturally ingrained that like people would buy houses in in the in-game currency and like the like cities were operating using this crypto asset and I think that that's really important especially as we see AIML you know take the World by storm we're going to have to get real about alternative

approaches to um to effectively Ubi and and for me these games could affect a best first attempt at Ubi um and and we've had glimpses of of that happen and so and just conclude the second really inspiring story and and I think that this may be the the next topic that that we can discuss are these artists these digital artists who for so long didn't have a way to commercialize their work because if you bought a piece of digital art and somebody copied it you didn't know who who had the original who had had the copy uh and so there was no like scarcity of it there was no

collectibility there and with the Advent of nfts these digital artists were able to to commercialize their work for the first time and and and that was really amazing like I we saw all these Rags to Riches stories that in a in an industry that had been broadly based on the speculative use case until now this I found these two stories to be really amazing that that that artists and the individuals in emerging countries could bootstrap themselves and and and sort of you know take a step forward and be able to provide just a reasonable income um it you know in the case of artists Mike uh you know more commonly known as

people he he jokes around that the highest he ever got for an everyday before nfts was a hundred and ten dollars right and and that's like shows that like Crucible moment of digital scarcity conferred Rarity to his his work and then that conferred collectibility and that then conferred value and and ultimately for for an artist Like Mike conferred really life-changing value um and and those I just find to be really inspiring stories and where I want to spend my time my capital so yeah let's let's maybe talk about nfts a little bit and and again you know this is a space that I've sort of oh

dabbled in a little bit like within crypto verticals you know like D5 and ft's gaming Etc and um you know I there are moments where where I felt like yeah like this is this is like super empowering for artists Etc right you know like this this narrative that you that you just expressed but then there's other moments where I'm like this is a hot show and there's nothing good will come out of this and you know most of this will go to zero can you break apart like break down your thesis for you know how nfts are you know fundamentally like a game changer in terms of how artists Express themselves and you know how do we reason about what is actually of cultural significance and what isn't you know I

guess I guess like one thing I think about a lot is with with with the 2016-2017 cycle 2018 you know icos were a big part of the narrative and what came out of that I think you know are things like saps or more structured regulated um funding mechanisms like coin list coin list yes thank you so uh so I think that you know from from that exuberance uh came out like these interesting funding mechanisms now with nfts I don't know that we've yet uh maybe maybe I've missed it but like I don't know that

we've yet really see like what what will we look back on and say oh this is what the nft uh summer produced right and so yeah maybe um maybe if you want to expand on that yeah it's interesting I think as Venture capitalists we we're at peace with a cycle where where 90 something percent of something writes to zero because because that that few percent that survive often go on to be incredibly valuable um and so whether it's icos which is a really important funding mechanism or whether it's you know nfts which is a really important representation of

digital scarcity for a variety of use cases and I'll talk about the taxonomy in a minute I recognize and have gone on record like in the height of the the the bull market of both of those saying yeah of course 95 percent of these will will go away and that's fine because the five percent survive will create such extraordinary value that it won't matter nobody you know nobody will care and so I think it's really important to to separate the taxonomy of of nfts because as a technology it has such wide sweeping applications right like today it's being used for you know digital art

and gaming and and some like Social Clubs and and you know different things different things in like that tomorrow it will be your house deed you know your your University uh diploma look the nfts will Encompass eventually all capital assets um but for for today's taxonomy what the way that we separated is we look at digital art uh that is somewhat and So within digital art there are some subcategories so you've got algor like Rafiq anadol um you've got you know pop culture art like people you've got generative art generator it's kind of cool because

that's where a platform a artist and a user come together in in a critical moment to create something that that they've all participated in that creates a certain bond between the collector and and that that outcome and then you know you can kind of go down down the list from from there in in art but that is different so digital find digital art is different than say gaming assets that are supposed to have utility and that's also different from what we consider to be Social Clubs so something like board Apes in its current iteration is more like a social club right people are signaling to the world that they you know can afford to spend six figures on

a on a monkey JPEG and in over time it will it will evolve into being a gaming asset we we think we hope and so those are those are very very different categories and then you know we'll see music nfts which there's been some early experiment and so on and and I think there will be some more we'll see full feature films um you know especially like Choose Your Own Adventure films where like you can compose like six nfts to get one outcome and compose like you know 13 to get a totally different film outcome than than you otherwise would have um write down the blind until again all all capital assets are nfts in the

digital so we with one of one our our collector pool we focus just on fine digital art and not only that we focus just on fine digital art that we can interface with museums because our mission is to help digital artists find their rightful place in art Canon because again digital artists have been completely dismissed in our in the our world in our Canon for Generations in part because there was no collect in large part because there's no collectibility of their work and that has changed and so that's the that's kind of the interesting thing in the digital art category and and from there you know my friend Amy capalezo has this very famous

I've been spending a lot more time in in the art world because just got you know hurdled face first into it with purchasing both the rafika and adult moment piece as well as as human one by people and I'm you know met some just unbelievably brilliant people in in the art World it actually caught me by surprise how many thoughtful remarkable people um spend most of their their time and and capital and art um and my friend Amy capalezo told me this one piece of advice you said look in all categories of of art across the ages only about five to maximum 10 artists survive a decade and matter and

everybody else uh basically writes to zero and I was like that's interesting because that's kind of like Venture right and so I take a venture approach to to Art but what we see is that Upper Crust will survive right that those very important these like cultural monikers these these um you know these things that we we identify as representative of our time they will survive and be very valuable um I'm cautiously optimistic that that that both the works of of her free Canada and and people will will be among that that discussion but I don't know you know and that's why I take a

portfolio approach and we've got more than 50 artists including um 20 female artists in the in the portfolio um and and I find that that just is really exciting that very clearly digital artists Merit Bean represented in art Canon very clearly they have not been properly represented in art Cannon until now and that will that will change and we can benefit and you know and capture growth in that regard so do you think there's like a um also maybe like a a generational component to this um I'll give you like an example that something that happened recently like I was in Amsterdam and I went to this this

this Art Gallery it's this place called the Moko Museum and and they had a bunch of nfts there and actually I sent you a picture right there was this there was a people there and I sent you a picture of it and uh and so I was you know my fiance and I were like by far the oldest people in this Museum and like you know we're in our late 30s and so uh and um and there was just like in the nft room everybody was like clamored in the nft room trying to take pictures of the nfts um and then and then we had a very different experience at the Rick's uh Museum which is like this you know this world famous um it's kind of sort of Fine Arts Museum in in Amsterdam where you know it's it's an institution

um but you know no nobody's like clamoring to take you know pictures of you know you know Van Gogh or something or maybe a little bit but like not as much as like this people um so I wonder if there's this if there's like a very kind of generational cultural significance that that this this digital art has to a generation of people that Associates more with like this digital component and and this sort of very modern contemporary component absolutely I think uh this definitely resonates with a millennial and gen Z audience much more than traditional art now one of the interesting things that have come out from that is museums major

Global institutions are recognizing this far faster than we think far faster than I imagined like if a year ago today somebody would have told me that we'd have a piece in both M plus and Moma and by the way the one in Moma the rufiq annadel is shattering records has completely broken the record for the longest period of time on average that people spend in front of a work at the MoMA I can think about like this is the moment like ever like this is in front of Starry Night in front of you know water lilies in front of all the picassos all of everything ever the Rafiq anadol is tracking is you know is having the highest engagement and and

you know museums are waking up really fast to to the fact that this matters because post covid museums are having to get I think more more more creative about how they get people back to to museums and and as a result like I I what I'm seeing is again I can't speak broadly across nfts but in the fine digital art category major institutions are filling the hole where the crypto Community has has sort of like lost lost the narrative and kind of you know are sort of missing the forest for the trees right like we're too many people are worried about like floor

prices and air drops and utility and we got pompidoux Mom Moma You Know M plus like all these Global institutions acquiring fine digital art nfts like this is a really big thing and again if I would have told you this a year ago you would have said categorically impossible like if you know if you know the art world you said no way pompidou is going to announce a major like collection overhaul or the MoMA is going to announce the sale of 70 million dollars worth of their all-important um art collection in order to lean into digital right like

that's a huge huge movement um and so again like that's kind of the thing that I find the most compelling the most interesting and that will Will Survive and Thrive and create Great Value over time right I'm I'm actually sort of curious I think what you mentioned super interesting that you know we're worried about these airdrops floor prices do you think there's some sort of like I guess there's a big difference between you know bootstrapping a keeper Network let's say and the way to incentivize and like the the kind of crowd you you get and maybe in the nft space like how you become significant is probably like a different mechanism to you or do you see like some overlap of how you would like sort of bootstrap these different

communities through the incentivization or is it like um something totally different yeah I think in in the fine in the Fine Art it's fundamentally different um because it's not about like creating Network effects because you have like scarcity that drives drives the value and and and you know you you actually don't want like velocity in the in the network so like let's look at you know let's look at a great collection which is both very high quality Fine Art and um and also has great community in in digital art which is squiggles right snow fro creator of this idea of of this

generative you know um Trinity that comes together where collectors feel a really deep resonance with that there's no velocity but you can't you know you can't get up a rare squiggle like you can offer whatever you want you just can't get it like there's just no like people are like no this is mine and it's always mine and that is kind of what you're looking for in in finer that's a bit that's very very different than what you'll look for in like gaming or or in in other categories and that was you know I started out like being like okay I don't know what is going to be cool in nft so like let's

experiment in all the different categories and then from a collection perspective kind of narrowed things down over time to focus on fine digital art even though the fund continues to do a lot of a lot more things in gaming I think you know the size of the gaming space will dramatically eclipse the size of the the Fine Art space like you know gaming will be multi-trillions or where art will will stay well and well into the to the like low billions um and so those are very different I think you will see like these interactions of bootstrapping and inflation driving things and gaming in Fine Art it's it's a fundamentally different mechanism um the art is the utility right

right thanks yeah we definitely have so much to cover like topics and like vertical so like we're gonna try to make like a bit of a hard cut here I think I read like on the dialectic website is like says dialectic is a machine that solves ciphers to unlock exceptional value for our members can you expand a bit on what that means so we are a group uh built by crypto natives for crypto natives so the vast majority of our our members member families are LPS uh are you know entrepreneurs that I've done well with over the years or friends in the space and you know and and there are a set of of challenges that that that

you face managing significant crypto wealth um and so everything we do is very crypto native you know on chain and and we look at the architecture and portfolio construction from a crypto natives view with an understanding of the nuances the difference between investing in crypto assets that have you know shorter timeline to liquidity higher volatility you know some advantages some disadvantages that that you can manage and then we take a very technical approach to those and so um you know one of the one of the things that I think I'm most proud about and and is very emblematic of what we do is our Market neutral fund so ever all of our vehicles are named after Swiss watch

complications and our Market neutral fund chronograph um which as of today is yielding 18.36 percent um annualized I think that's probably around 4X um outperformance of of our peers and the way that we're able to do that is that we have this software suite called Medici that automates harvesting compounding it automates a bunch of the the analysis of like how to balance pools how to balance between you know what we've done is we've stacked taken regular defy and on top of that stack delta neutral and then on top of that stacked Mev

um and Mev isn't like traditional Market neutral but you can make it Market neutral and it it sort of Pops once in a while when you hit a strat and that's like you know winning lottery every day for for a week until it gets armed away but it's still good um and the combination of these things and then having a a software suite that that delivers more security and and delivers a programmatic approach of balancing you know when D5 is down we balance more into delta neutral when delta neutral is not available um without risking going below zero

percent in a month so we still remain Market neutral up every month but you can go and take like Deacon risk on some things if you're if you isolate it enough and if you have the right infrastructure around you and so that's like you know that's the kind of stuff that that we do that's very crypto native that's very technically um driven and um and we're really satisfied with the returns right yeah it's super interesting and I I guess I wonder is this something that you have to do like proprietary or is there also like a way to like sort of build this also fully on train or are there like elements that you just because of the I guess mbv nature of it you you can like build this into like a network type

thing or it has is that something you thought about so there are parts of it that but we do feel compelled to maybe in the not too distant future release to the world for Community Support so for example like you know we have this thing like a bridge Watcher and and also like pool Watchers where what they'll do is they'll watch for specific signals and imbalances in a in a pool or a bridge and then automatically remove Capital should any of those signals uh occur uh and it and does it in multi-cigs on chain and like the amount of money that would have been saved by people and in

exploits over the last year if you know if the bridge Watcher was widely available would have been really significant you know we've seen it play out for ourselves where we've been been able to get out of a pool um when it was showing these signs and and you know a lot of other people got got burned um so I think there is a moment where we we open source some of this because it's just important infrastructure but then we have to balance it because like you know we're not like we're not a foundation we don't like we make money by making money for our members and and and ultimately we we have to do that first and foremost and and and while these things are producing really compelling out

performance on the yield uh you know we're we feel pretty good with with where that is especially in a really highly volatile market right like people running you know like hedge fund strategies liquid tokens or even Venture strategies I can empathize with with that this is a more a very difficult Market to say fundraise in as well as deploy into because of volatility and uncertainty around a whole bunch of different topics like regulation um and so our Market neutral feels like just like home base right where we can like revert back to we know we make great money for our LPS we know we return great money to our our

shareholders as a result and and that that just feels really comfortable right now in this on in these uncertain times tell me a little bit more about this this bridge Watcher what kind of things are you looking for uh in in order to detect you know these these signals like what signals are you looking at to detect when like there's a there's a bridge hack going on and what have what have you learned from that in in terms of how these exploits go down I mean there's some really like simple ones just like Capital imbalances that you can take there's a bunch of social signals that you can also uh be drawing on um there are

uh you know there's a rank I suppose I shouldn't get too far into this but some of it is sort of uh what what would be called like a defensive Mev so you're kind of like me being the bridge to not be Emmy Ved um and uh and that like that you know Mev broadly is is I often refer to as like Inception for crypto it's like math Olympics and so that that goes right down the rabbit hole but there's a bunch of Mev strats that that that have second order implications and indications that that

are certainly important and then Capital imbalances um social notifications and a bunch of things like that because again like if somebody is draining from the bridge it's always going to be like one side of the bridge it drains right um and so if you see a delta in that uh very quickly and it's to the negative right it's not somebody's come in with new capital it's like someone has taken off Capital then that can be a first order certainly A first order um signal and then you can compare it with all the other signals to then automatically execute the multi-sig transactions to to remove capital from that pool okay so how are you guys engaging in the

Mev space uh more broadly I mean you guys have been a pretty prolific uh participant in in that ecosystem what types of things are are you uh are you doing to engage with the Mev space so my co-founder Dean spun out a separate organization which we you know which we seeded and incubated called project Blanc and together with a bunch of math phds they run Mev across a number of different networks and that is about sort of like building infrastructure that goes beyond the simple sandwich Tech um and uh and he will he will literally

shoot me if I if I get too deep in the Weeds on on his strats but um what I you know what I would say is is that I think it's really interesting because I'm what we did internally so he had spun that out that's been spun out for over a year um and they do and they do really well it's a cash flow business it's less of a venture thing but they just run run great cash flows um and then the funny thing about Mev is every new layer one and Layer Two that pops up presents a new set of Mev opportunities right and so um people are like ah yeah well you know you're going to get you're gonna get armed away

um in Mev and that may be true in ethereum and certainly with like uni V4 I think I think Mev and ethereum will be certainly a full house at best and probably just like you know done not maybe not done but a very Full House very competitive environment but the thing is there's so many new layer ones popping up every single day that like you constantly have green fields where you can reapply um infrastructure in in other categories um and so we really like what they did yeah you know and then what we do is we use some of their their data and their their infrastructure to do this defensive Mev and our Market neutral and

and that helps just like pop pop the yields and take them from you know like mid teens to mid-20s and in this environment when things are going well and overall I think it's it's an interesting category you know when when I explain Mev to people who have no idea about crypto I often say like have you read Michael Lewis's Flash Boys it's kind of like Flash Boys for crypto and if you take it to the second and third order implications you know the Advent of of Flash Boys and and algo trading at that time ended up making for more efficient markets and I am firmly of the belief that Mev makes for more efficient markets in crypto um even though and the funny thing is

today in the Mev space I'm going to preface this by saying uh this is speculation and not confirmed uh rumor but our understanding was the top sort of four players in this base were um Alameda um uh CZ binance um who may or may not have been doing very heavy Mev on their own chain which I think I think there will be a a long discussion about that if that does end up being the case um Justin Sun uh and uh and jump and the three of those four are now gone

right they're out the door and Mev is something that like accrues to the and so we're kind of like number five number six sort of thing and it's it's one it's a thing that accrues to the to the Upper Crust like many things um and so like top two capture the Lion Share um on on a given Network and now that you have the most like the largest most resource intensive players out of the game it's really like you know it's a it's a very interesting new day in Mev I would say actually I I want to like sort of take it back also to what we said about gaming and like the woodstrap networks and do you sort of see a world where like these sophisticated actors I guess

like you know Mev participants being like sort of more automated than you know like a person playing a game do you do you see like an issue there where maybe you know all the players end up being bought uh instead of like real players and and how how does the future look like or is this something that's just like inevitable or how can like projects kind of defend against that let's say or so I do think that that will be you know that will be uh a thing there's a a really interesting project called altered state machines that makes autonomous agents for player and gaming games and there are a bunch of other people thinking about that what my hope is on the other side is that uh play during gaming will

represent uh um an opportunity for effectively Universal basic income and so people will play against the Bots to like to earn you know to earn income and and then like more sophisticated operators will operate the Bots and it makes for this like human and Bot interaction that like you know like Mev and like other things where where greater levels of sophistication are driving towards efficiency um you will have checks and balances in over time right so like games will have their version of uni V4 that is like bot resistant but then at the same time there still needs to be some Bots

because there needs to be enough players to play against the the people and the people need that because again that's gonna be Universal basic income or it's going to be like one of the options for Universal basic income I always am firmly of the belief that the future that we occupy will be much more um inspiring and frankly better than than the present and as these things evolve we will find solutions for them and it will just be better for everybody yeah I I'm also quite quite optimistic that that will be the case I think that I think it it Bears reminding ourselves sometimes just how early we are and I know there's sort of a meme that says

like people say like you know that about about about being so early but we are really early I mean there are many people uh that have interacted with crypto today as there were people on the internet in their in the late 90s you know we haven't crossed a billion users yet we're far from it and uh and yeah I mean there's like just so much more ahead of us that I think it's for those of us who've been in it so long it's it's difficult to remind to like sort of remind yourself that that this is still a very very early space um I want to take a step back a little bit and maybe bring it up a little bit more high level um

you know given the the gur the current global geopolitical climate and how has that affected your your thesis about crypto and you know something that I'm really interested in is how has that affected your how you look at investing in crypto I started this by saying I would love your your view on this as well you know because you're you've been a super smart investor in the space for a long time and I'm um and and I really respect your opinions who would love love your view on this as well generally I think for the dream of why most of us got into crypto in kind of the 2011-2012 era seems to be coming to fruition right

uh we got into it because we believed ultimately that the world was going to suffer through a high inflation moment that the US dollar is maybe the most overvalued asset in the history of the planet and was going to go through a significant devaluation and in that environment deflationary assets were going to matter much more than they ever had he had this sort of like return to a a version of the gold standard once again and we see this playing out right like this is like happening in front of our eyes um in this moment so like broadly I'm leaning in to the into the market and and very confident that we're

up and to the right from here um like you know when it when we start a polychain I used to go around saying that um by 2023 no self-respecting hedge fund on the planet would be without exposure to crypto and by 2025 no self-respecting Capital pool of any kind you know pension fund or otherwise would be without exposure to crypto think of a little precipitated on maybe both of those but by like a year to Tops I do think that we're hitting the knee of a curve that we've long been waiting for um and uh and that's really interesting

however as Venture capitalists what that means is that our scarce eth and Bitcoin that we are then giving to a uh an entrepreneur has to perform even better because we know that like I know each has a 10x in it I bet the farm on that right so that means for the entrepreneur that I give money to because my like my opportunity cost is an eath he's got to go out and deliver you know 100x or more and so it has been it you know it it's been making it causing us to to to pause somewhat and

and seek like a more Consolidated portfolio of a a very high outcome um possibilities I would say um on the Venture side but on with respect to like liquid tokens I mean I think I don't I don't a collection of just like thoughtful like high quality liquid you know liquid assets like Cosmos and Ethan polygon and Wormhole and a few others uh just like so obvious right now in my view um and I don't know maybe I'm maybe I'm just a hammer and all I see is nails but

I I think it's like I'm more excited in this moment than I think I ever have been in the space ever um but what what's your take like how do you how are you thinking through this from perspective of like the tectonic changes in geopolitical landscape and how and and how that's affecting you as an investor yeah I mean I wouldn't be starting an investment fund if I didn't think that we were up and to the right from here so that very that that idea very much resonates with me um we're also approaching our investment strategy with a very concentrated portfolio strategy and uh which is why we started with a fair you know reasonably small sized

fund because we need to deploy it and we also want to deploy it in really high quality projects that um you can generate 100 x returns because you know because we are you know our our investors are crypto investors our llps are our crypto LPS and so for them to deploy their you know their Ethan their Bitcoin and and and these high value Assets in um in a fund they they also have to um you know to to have that that um that conviction that the fund will outperform so that um that resonates with with our strategy with regards to where we're at and and the types of

things that we're looking at I think that they're still remains a lot of infrastructure to be built um and I feel that that the next cycle is going to be heavily infrastructure focused so you know we've got the um we've got the initial building blocks of of crypto infrastructure in the form of you know blockchain networks with like a decentralized challenger set that allows you to settle and this sort of thing but the um the way that that will look in say five years is going to be very different and I am I take a lot of

um I take a lot of lessons I think from the way the web has um has sort of abstracted the different layers of its stack and I see that happening in crypto as well where you know in in the early 2000s you know if you wanted to run any website you know like you had to buy physical server space install NOS on there you know run a web server and you were essentially operating all of that infrastructure in one machine which is sort of what blockchains look like now but as things went on all the basically the layers of abstraction between an application and and and the hardware there's like you know perhaps dozens of layers there

and I think that's also happening in crypto what what we need to keep sort of the you know our eye on is is decentralization and this is why like the reason we built the reason we're building this is because we want censorship resistant um scalable applications and we've been I think I think the space for a long time the narrative has been that we need to we need to keep blockchains decentralized and scalable and usable that doesn't really matter we've had the around the wrong thing what we what we really need is decentralized scalable usable applications that are decentralized and so whatever the stack looks like underneath I think doesn't really matter so much as long as

the applications remain retain those properties it's the applications that are going to matter um and so we you know we need to be careful about what what kind of stock we're building and one of the things I look here I look at here for example is like the fact that uh most RPC uh providers are centralized right like that is that's a centralizing point that we need to address but if if every layer of the stack sort of maintains those properties to some extent then the applications will also maintain those properties so anyway that's a sort of a long-winded way to say that I think like infrastructure is a big part of what what will play out in the next cycle and certainly something that interrupt is like highly focused on investing in and where I think a lot of the value will continue to come from right like

infrastructure has been over the last five years like sort of the outside of like nfts and and and sort of things like the infrastructure has been one of the highest returning um verticals or if they yeah in crypto and I think that will continue to be the case oh absolutely I mean no no no no yeah without question and you could just boil it down to the the like the conceptual decision Tree on infrastructure like people people outside of the space always ask me like why do like dozens of blockchains are worth tens of billions of dollars and I say because the decision Tree on it is a Monumental pale

like you're talking about being the financial substrate of the modern world that's a multi-trillion dollar outcome so even if it's a 0.01 the net present value of that's you know 10 billion dollars that's why these later ones and some letter twos are efficiently priced at this value it's not and it's not incoherent it's not irrational it's actually very rational because you're talking about literally like the financial substrate of of the world and Beyond over the next you know however many decades you know I often say there's never been an industry on planet Earth as profitable as

programmable money and within that the infrastructure layer is where naturally all of the value accrues uh or not all the value but but the Lion's Share of the value occurs if you look at the like top 10 most successful Venture outcomes in the space I think I think axi's the only one that's not a layer one um or Layer Two you know and I think that that's a really smart investment strategy especially in a concentrated fund uh I'd actually like your feedback on the way that we look at at early stage investing in a slightly different

approach in that we have these buckets so we go conviction thesis exposure generally as buckets and then we create this long tail across the different buckets conviction buckets or larger bets done really deep due diligence we know the team they have traction all these things that you would look for and that's you know that's that's kind of like your traditional Venture place you have thesis which you know maybe there's like one red flag in there um but you like the team team is always a hard box check in that one and and the outcome can be really interesting

and then differently than most Venture funds we have this long tail of exposure this can be like Angel checks you know kind of 100 to 300K that usually rest on is the technology interesting like is this conceptually a massive outlier outcome or or do you really like the the founder in question and we we leave sort of single digit percentage of the portfolio in our Venture book which is called resonance available for these long tail exposure bets that are somewhat experimental and often allow you an option on making a conviction bet later on so like at the at the precede

you'll maybe make this exposure bet because it's a party round and they're only raising a million dollars so you know you've you write the 200k check and that's really to like get the information to to then later on make a convict and in crypto different from Venture so it traditional Venture would tell you uh that's a waste of time but in crypto because you have shorter timelines to liquidity and because you have much higher Deltas in the return profile right like things go very rapidly into the hundreds of x um those exposure bets are actually in in our view and our our analysis the

exposure bets are actually an important part of a coherent crypto portfolio um because you don't know you're like you can't I constantly Italian team like don't think you're that smart um you don't know what outcome will be a big a big outcome and those can be really fast turnarounds and exposure bets yeah that like I I love how you think about this because you know as a as a as a new manager right like I guess I guess um these are things that that we're trying to sort of you know construct and like put down on paper you know what is our strategy and uh I think when you're investing as an Angel um you you make investment decisions that that affect you and and no one else

and and when you're investing LP's money you I think it forces you to have a little bit deeper um thinking around how you're constructing your portfolio how the how these allocations what portion of your portfolio is allocated with like these convictions or you know these high exposure things and uh yeah this is an interesting way to look at it that I'll certainly take back and and probably uh you know um integrate in some form into into the way we're constructing our portfolio but that but I think you know when we you know we have we haven't like sort of expressed it that way but it does it does I think resemble a lot of the way in which we have been thinking about how

we want to construct our portfolio right like we have these things that are you know super high conviction and then we have a smaller part of the portfolio that you know we we've sort of labeled like these high risk more like high risk bets um and you know some something in the middle there so uh but uh yeah it's it's it's uh it's cool to know that you're also thinking about it this way and so it's built built your peripheral Express rides around it I'm happy to send you some analysis that we've done on this um fantastic just look at it because again it you know it's not it's not like normal Venture like this flies in the face of a lot of the long-held tenants of normal venture yeah

so we we had so many other things to discuss here but I just realized we're way over time uh but I do want to talk about your work in psychedelics a little bit and then you've been you've been wanting to talk about this uh as well so you're also one of the founders of Vine uh VC which is a a VC firm that has focused on like health and uh and wellness and and Consciousness and and certainly um psychedelics um you know what what are some of the Forward Thinking things you're seeing in the space and what's your involvement with maps uh this uh multi uh disciplinary Association yeah yeah science yeah

it started just very quickly it it started when I I went with a friend of mine to uh to Peru uh he was dealing with a really debilitating addiction problem and I saw the transformation that he went through and I kind of went like okay like something's going on here this isn't just people tripping out in the forest um you know mental health is a massive is the largest pandemic that mankind faces um before the pandemic one in five people self suffer from mental health problems I think post pandemic is probably close to maybe 40 percent of the globe um so this is a problem and ssris are not doing the the are not a solution and I think you know for many people who

have tried a psychedelic therapy of any kind that you realize that it's it's a wonderful experience both for curing the sick as well as better men to the well and so I just kind of wanted to like learn more about this so I I spun up a very small separate experimental um fondant in Vine which is now kind of it got really slippery and took a long it took a lot on a life of its own and we've been fortunate enough to back some really interesting things in mental health So like um you should try other ship if if you can if it's in your in your area it's a a community and people in crypto would really resonate with other ship using holotropic breath work and hot cold

therapies um to plus Community to like take a new approach to mental health um but the most sort of the highest conviction bet that we made certainly was in maps so Maps is the multi-disciplinary association of psychedelic science um 37 years as a non-profit led by Rick doblin to bring MDMA over the line um uh of FDA approval they will get that FDA approval by February March of next year and then they can actually legally sell uh MDMA in North America for PTSD but very quickly I think you'll see that Domino's fall for depression as well as

couples therapy MDMA for I funded a study in couples therapy a couple years ago and the results are shocking um how effective it is for for for couples going through various challenges um you know generally I just like I I didn't look at this as like a for-profit thing because again like we work in the most profitable industry on the planet right like if I want to make money I'll go over crypto right like you know nothing's more profitable than programmable money um I just looked at it as kind of an exploration uh project that where I wanted to be a good custodian of LP Capital I'm very grateful for the LPS that have supported Vine and very you

know um very happy and very optimistic about the the returns that they they will have but you know ultimately just playing around on the capital model um because these are you know this is the largest problem that mankind faces um and Maps is unquestionably the leading organization they've been a non-profit and I would like them to be able to stay a non-profit because I think the social experiment of a non-profit leading a novel Pharmaceuticals category is really important um I think if we could prove to the world that you don't need these 20-year patents and Pharma margins and the whole Farm industrial complex to deliver

life-changing therapy I think that that really matters um and so I designed a SPV for maps last year which I led um and we would raise a bit under 50 million dollars uh and and what that was was a a revenue share so you could as a for-profit investor you could you could make money as you know Maps has has increasing revenues but then there is a reciprocity component to it so as you make more money as you go you know 2X and 5x and and you know 8X uh moic on your return you give progressively more back to maps the organizations of the can stay nonprofits that can fund other other research and other philanthropic

entities and we're kind of coming up to um to Maps needing to do another fundraise to get to the point of sustainability um they would need probably around another 60 to 80. and I have started to think about you know how much overlap there is in crypto and and psychedelics like these are my two life's two passions and I've constantly tried to keep them apart and not have any interaction between the two areas um but we saw a glimpse of how much the two communities love each other in the Christie cell last year when we did a digital art sale at Christie's for the

benefit of maps and all it was just amazing the the artists that showed out for that um and that kind of got me thinking of like okay are there things that we could be doing to to have the crypto Community engage um further and I think this would be an important moment for crypto to support a company like this um in part because we have a narrative problem in crypto right now that the outside world thinks that all we are is a bunch of like Ponzi scammer you know profiteers that are just interested in the speculative use case and so supporting something that really matters that really moves the the ball forward

for mankind solving you know arguably the largest problem that mankind faces the mental health pandemic um I think could be really really compelling and then the joke that I've made with Rick is you know when we originally designed the the regenerative financing vehicle um uh last year for for maps it was like 40 pages to have this reciprocity pledge um in the actual company in in the vehicle and I was like you know this is like a few dozen lines of code in a smart contract like like you know in crypto this is like you know refi and DSi like these things are like native and natural to us where in in like the traditional Pharma industrial complex

they're like ah this is crazy like you're gonna like give profits back to a different organization on a program basis I'm like yeah because if you just ask somebody at the end of the day to give a philanthropic donation after they've made 100x on an investment the Retro 25k check and tell you to go off right um and and so you have to program it in it has to be like baked into the incentive model and that's trivial that's trivially available in crypto so I've been trying to think around you know there's I'm not here announcing anything I'm just sort of like thinking through like okay what could be a a model that provides cash flows to investors like provides a really compelling Venture outcome but has this

reciprocity baked in you know could we draw on the crypto Community to support this this fundamentally important organization that has done the most to push psychedelic um therapies forward across the world and um and you know and then could we kick start uh regenerative financing as like a new defy summer but have refi summer and we're doing more you know more good for the world um outside of of you know of of just pure pure profits um could we kick start real like decentralized science and in supporting something like this and I feel like you know

not to be too hyperbolic but I feel like crypto needs maps and Maps needs crypto and the two belong together even though I have tried to keep them apart for as long as I've been involved with both um so that was a bit long-winded my apologies but but yeah no it's super cool and I mean certainly you know the the Psychedelic space is is one that I think yeah I think you're right like there there are a lot of synergies with the crypto space and certainly people in crypto I think um are more likely to have done psychedelics than most other uh people in most other Industries so um I think it makes sense that that that maps and and crypto sort of you know come together in some in some

form or fashion it seems uh it seems quite natural and uh yeah I do also like agree that the mental health pandemic as you call it is it feels like it's it's getting worse and and I think covet accelerated it but also what's going on in the world right now I think is certainly not helping and um any way that we have to come back from that um is uh is a is a good friend positive for Humanity yeah a lot of the things that are happening in the world that are terrible for Humanity are functions of of mental health like why is uh Russia in Ukraine because Putin sat in a basement for two

and a half years you know only allowing people to sit on the other side of a 30-foot table from him in his own you know in his own thought cycle just stewing away until he convinced himself that he was gonna like reunite the the former USSR like that's a mental health issue and you go write down the list of so many other things that are like world leaders have us that have us on these like insane uh Misadventures and they come down to mental health problems right this is a this is you know with the exception of death this is the largest problem that mankind faces maybe for a different time we could dive

in yeah I think we'll need to do another one like deep deep into maps and and psychedelics uh for for epicenter spin-off podcast uh about psychedelics so broadly I'm looking for feedback right now from the community like you know is this something that the community wants to get behind like we do need to come through for maps Like Somebody's gotta gotta write this check like there's no way we're gonna let this 37-year um journey of Rick Dublin like die at this precipice moment right or even have like a you know a Pharma VC come in and own it in the end and it's like all this was for naught um that doesn't seem like the outcome that we we've been waiting for um and so I I do think I am optimistic

that that there's an important Synergy to be realized between crypto and Maps I haven't cracked the nut of what that is yet um but would just love the community's feedback cool well Ryan thanks so much for coming on uh it's been a pleasure thank you guys with you on all these topics I'd love to have you on again at some point maybe not in 250 episodes though you know what the important thing is I know that you guys are going to be around in 250 episodes because you do great work you're as good as I hope so and we're super grateful for uh for everything you do thanks Ryan cool well thanks again and I do I do want to I do want to plug

one thing before we go uh just because we didn't have any sponsors today so it feels fitting so uh nebular Summit it is happening and it's happening in Paris on July 24th and 25th so never really Summit is The Interchange Builders conference it's two days it's gonna be epic uh for anybody who was there last year and I know Felix you were there last year so I know you can you can vouch for this um that uh nevertheless time it is probably one of the best investments events in Europe for interchange Builders so anything related to Cosmos interoperability uh Cosmos defy um and uh Cosmos staking Etc uh so this year we're doing it again it's going to be two days it's uh it's happening at this place called Albert

School in central Paris uh which uh maintains is larger than our venue last year but you know tries to keep the Very Cool vibe that we had at last year's venue and tickets are on sale so the early bird tickets went on sale um on Monday April 3rd and we still have some available I think by the time this goes out there'll probably be some very few early bird tickets left so if you plan on being at HCC this year you should definitely get a ticket to nebular Summit it's going to be great and we've already got you know some like 15 speakers lined up and probably woke up to 70 80 speakers so yeah that's happening and we'd love to see all of you there if you can make it so thanks again for joining us this week and we'll talk to you in next

week's episode