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EXIT Podcast Episode 18: Crypto (Tactical Minivan)
323 Plays3 years ago
Tactical Minivan is an EXIT member, a software engineer, and a crypto investor at 0xVentures, a blockchain venture capital fund organized as a distributed autonomous organization (DAO). We discuss:
- Novel applications of blockchain and NFT technology, especially in gaming
- Making decentralized finance (Defi) accessible to your grandma
- The closing of the crypto frontier
- What you need to know to become a blockchain engineer
- The incoherence of eternal appreciation
Recommended
Transcript
Introduction to Tactical Minivan
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the Exit Podcast.
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This is Dr. Bennett.
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I'm joined here by Tactical Minivan.
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Tactical Minivan is an Exit member and he participates in a crypto venture capital group organized as a decentralized autonomous organization or DAO.
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He spends a lot of his time evaluating new applications of blockchain technology and he's been very successful at it.
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So we wanted to have him on the show to give us the ins and outs of crypto.
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Welcome to the show, Tactical Minivan.
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Hey, thanks for having me today.
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Good to have you.
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So for starters, how did you get involved in crypto
Tactical Minivan's Journey into Crypto
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investing?
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What about it is so compelling to you?
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Yeah, I guess I started sometime around 2015 and I really got drew into it from and that's when I started, you know, heavily.
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And I really got into it because of the sort of ideological aspects.
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I mean, the concept of a non-sovereign state based currency, you know,
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the more based libertarians, you know, have been talking about this sort of thing for a while.
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And it drew me in pretty quickly.
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I had heard of it a long time ago, but I was in college at the time.
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I had no free capital.
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So it's not like I would have made a lot of money anyways.
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I would have put it in.
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It would have 2x and I would have been like, woo, I can pay rent this month.
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So that was never going to happen for me.
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Um,
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So I got in big around 2015 or so and kind of just rode that wave up for a long time.
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2017 was a glorious year, 2018 to 2019 humbled everybody a little bit coming off that.
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And for the most part, I was pretty heavily into Bitcoin specifically, you know, as a decentralized service or platform.
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It offers the most decentralization.
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And for me, that was always kind of the core piece, right?
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If it's not really decentralized, then what's the point?
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Over time, I've kind of drifted away from that some and opened my eyes more to other cryptocurrencies.
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They don't really compete with Bitcoin in the same space as money.
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They do other things.
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There's technological utility.
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You wouldn't say that Amazon is a currency, but you sure as hell want Amazon exposure in your portfolio, right?
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Right.
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So, you know, my perspective on things has changed as I've been in this longer and longer.
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And so that's how I've started to think about a lot of these other protocols and applications is they don't necessarily function as currencies.
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They sometimes provide a valuable service.
Exploring DeFi and Decentralized Loans
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Think of DeFi where you can
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no longer have to go to a bank necessarily and submit all of your KYC to them, let them evaluate your life's history and sign over your unborn child to them.
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You can just go take out a loan from a decentralized service and you have to pay it back over time.
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I mean, they even have services that will pay the loan back for you from the yield on the invested money that you've provided as collateral.
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So there's all sorts of stuff in this space.
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It's pretty crazy.
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Can you say more about that, about specifically DeFi?
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I'd love to hear more about how that operates.
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And like, is it just peer-to-peer investing or is it more complex than that?
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There's different things that constitute DeFi.
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So there's lending protocols like Aave, A-A-V-E is one, where you as a depositor can earn yield on your deposited value.
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And then people who need a loan can take out a loan against it.
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and they have to pay you back over time.
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So that's an example of a lending protocol.
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There's other ones like, I think the one I was talking about is called Alchemix, where you can provide collateral.
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And in exchange for that collateral, you can withdraw, I think it's 50%.
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I think it's 2X collateralized.
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So you can withdraw 50% of that.
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So you're essentially leveraging up, right?
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You're increasing the amount of total assets you have available to you.
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Now that loan that you've taken out from them,
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can be paid down over time by the yield that that collateral you provided them generates.
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So you don't actually have to go make payments on it necessarily.
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You can, in order to pay down the loan faster and get your collateral back faster, or you can just let it sit, generate yield, and that pays the loan off.
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When you say the yield from the collateral, is that, that's, that's more than just the appreciation of the, of the currency, right?
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Or is that some other.
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Yeah.
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So a lot of the way these work is they take your collateral and they go invest it elsewhere.
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or there's other mechanisms within the protocol that generates yield from it, either from protocol emissions.
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So for Alchemix, they have an ALCX token.
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So it could come from token emissions from the protocol itself.
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Sometimes they rehypothecate the stuff and go invest it elsewhere in order to generate
Automation in Finance with Smart Contracts
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the yield.
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It really depends on the specific application.
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Most of them work differently.
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So, sorry, tell me what it means to rehypothecate.
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Yeah, yeah.
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So if you
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this is true in traditional finance too.
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If you deposit $50,000 at a bank, do they sit it in a, in a deposit somewhere in some vault?
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No.
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Right.
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No, they lend it out elsewhere.
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Right.
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And so now you're exposed to some risk there because the money they've lent out to someone else may not be repaid.
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They may go poof and, and bankrupt.
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And so the bank would have to basically pay you out of their own
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stop in order to make you whole as a as a depositor.
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So the rehypothecation is where you basically take the collateral and reuse it elsewhere without actually holding on to it.
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That's a kind of layman's easy way of explanation of what that means.
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Okay.
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So the risk involved there is that either the appreciation won't occur or the investment that the finance... Well, it's not even... Is it an organization that's sort of making these calls and creating these investments or is it...
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That's the beautiful thing.
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These are smart contracts.
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Yeah, these are smart contracts.
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This is code that lives out on the blockchain itself.
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So when you deposit money into it, you're sending money into their wallet and their wallet has a special code, the smart contract that performs the operations necessary.
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So some of those operations may be ad liquidity.
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So that's you as a depositor saying, hey, I want to earn some yield.
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I want to let people borrow my collateral and get some yield back.
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So maybe they have an ad liquidity function where you're providing
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collateral that can then be taken out by someone else.
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Or maybe there is a consume loan utility where you actually take out the loan and then it calculates interest over time, how much you have to pay, et cetera.
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So there's really not a single organization or company that's doing this.
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Sometimes there are manual things that have to be done, but the point of this is to abstract away as much of that as possible so that this is autonomous code running and it's permissionless and anyone can access it.
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Yeah.
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So then, I mean, theoretically, the advantage of having a fund manager or someone at the bank who is intelligently investing the money that's deposited in the bank is that they're making better decisions than, you know, an algorithm.
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And so, yeah, can you say something about how those decisions like how does the how does the algorithm allocate that collateral to investment opportunities?
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It's different for every single protocol.
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Something like Yearn, for example, Yearn Finance, they have a team of people who craft these yield strategies, and some of them are hilariously complex, but they always generate really good yield opportunities for the depositors.
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Some of them are more automated.
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Things like Convex Finance, they use an automated approach.
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on top of something called Curve Finance.
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And Curve is kind of, think of it like a DeFi cornerstone.
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It supports the market in a lot of ways that I don't think people realize.
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What they basically do is they provide huge, deep, stable coin pools.
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So you can go from $10 million worth of USDC to $10 million worth of Tether in a single swap with very, very little slippage.
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So they have an automated strategy there.
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And so you kind of have to
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evaluate each one that you want to deposit.
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Most people find one that's pretty good and they just kind of stick with it.
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Like, you know, if you can get 20% APY and anchor, anchor is a protocol on Terra.
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If you can get 20% every year on your money, why put it anywhere else?
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You're getting better returns for literally almost no work than someone who's investing actively in the stock market.
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I mean, most fund managers can't get that kind of return.
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No, absolutely.
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So, so is this something that if you wanted to get your grandma making that kind of money, would you send her, is there, is there like a, a sort of safe ish sandbox that you could send someone who's not technical?
Making DeFi Accessible to Everyone
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Or is this something that like, you just kind of shouldn't touch unless you're prepared to study?
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There are plenty of applications that are
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currently being developed that are billed as DeFi for the masses, making it easy for people with small technical knowledge or no technical knowledge to get access to these things.
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I'm not sure how many of them are there yet or are currently in beta.
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I know there's some specifically around the anchor protocol on the Terra ecosystem that are coming to market where it's actually attached to a debit card.
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And so you can put your money there and spend it with the debit card directly.
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For most people, that's going to be an optimal strategy because they don't have to actually go out and spend any time researching.
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They're getting compared to traditional yield.
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They're getting hilarious interest rates, 20% APY.
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I mean, that works people's minds when I tell them that.
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And that's a simple strategy.
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That's not even a difficult one to do.
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So from a min max perspective, those DeFi for the masses apps are probably going to be best for the average person.
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Now, if you have any sort of technical chomps at all, this stuff is really not hard to understand.
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I mean, the concept of creating a wallet, a wallet is just 12 to 24 words that you need to keep safe.
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That's all it is.
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It's basically a key, a cryptographic key that gets you into something.
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So the actual core functionality is really easy to understand for most people.
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And then it's just a matter of getting comfortable sending transactions.
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I mean, the first time I made a six figure
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transaction, I was sweating bullets.
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So I get it.
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It's, it's a very nerve wracking sometimes, but you know, if you have any technical chops at all, it's very easy to get in and do, I think.
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Can you give me some examples of like a particular app or service that you think is, is a pretty straightforward thing for a non-technical person to learn?
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Yeah.
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Um, so, and in terms of the DeFi for the masses sort of apps, I think there's one coming to market now called
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Cash, K-A-S-H dot IO.
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And it leverages the anchor protocol on the Terra ecosystem.
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I think there's also another one called Kado Money, K-A-D-O.
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There's a lot more.
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I don't know how many of them are actually live yet for people to use.
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In terms of people who wanted to fire up an Ethereum wallet and learn how to make transactions on the network, it's honestly very simple.
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A very easy way for them to do this would be to load up a wallet with $1,000 and go deposit it into a convex vault or a urine vault.
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A vault is what they call these places where you actually deposit this money.
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And it's as simple as putting it in and letting it earn the yield.
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Sometimes you have to manually claim the rewards.
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And so you have to weigh, is it worth the gas fee?
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Gas is basically the transaction fee on the network.
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So you have to pay gas in order for your transactions to be processed.
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There has to be some incentive for the miners who actually run this blockchain to actually process your transaction.
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So that's why you pay gas.
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So you have to wait, is the value of the rewards worth the gas fee to claim yet?
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And there's some optimization you can do there as well.
Scaling Solutions for Ethereum and Blockchain Debate
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Yeah.
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So...
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I have a little bit of Ethereum and so this is probably like the next step for me, a guy like me is just to throw the money into one of these vaults and sort of watch it grow.
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Yeah.
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I have noticed as I play around a little bit on Urbit, which I don't know if you're familiar with Urbit, but yeah.
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it uh that was kind of the the big prohibitive element to starting up on urbit was like last year or early this year like the actual cost of the planet itself was like ten dollars and the gas was like seventy dollars yeah dude and it hasn't gotten any better so it hasn't gotten better yeah i wanted to ask about like that is there solutions to that problem or yeah a lot of people say that um
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A lot of people say that ETH2 is going to help solve this, but what ETH2 is, is it's a transition from proof of work.
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Proof of work is where machines basically guess at a hash against one another, and the first one to get the answer will then broadcast it to the network.
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And it's very easy for people to verify that it's the correct answer, but it's very, very hard to find the answer.
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So once they broadcast, hey, I know the answer to this, everyone's like, oh, yeah, that is, and they move on to the next hash.
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So that's what proof of work is.
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Proof of stake is different.
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Proof of stake involves validators and basically validators just say, yeah, that's a valid transaction.
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Think of it kind of like that.
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I'm dumbing things down, but that's essentially what it does.
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There's not a lot of electricity use.
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That's one of the big things with proof of stake versus proof of work.
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People are worried about the practical effects, both on electrical grids and for people who are into the climate change thing.
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They're worried about the actual carbon emissions of having a bunch of these computers doing this type of work.
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So that's one aspect with Ethereum.
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So Ethereum 2 is moving to proof of stake.
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What that's not going to do really is actually help reduce gas fees.
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What will help reduce gas fees is something called ZK rollups, zero knowledge rollups that
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and possibly a sharding structure.
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I know these are very technical terms and you don't really need to know much about them.
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Those two things would help gas fees, but ETH2 alone is probably not going to do it.
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Speaker
A lot of people have moved to other chains because the gas fees on Ethereum are prohibitively expensive.
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Speaker
I know I have.
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I mean, I'm not exactly a minnow in this space.
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Speaker
And I don't want to pay $150 to send a transaction.
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Speaker
I mean, if my broker charged me that kind of money to make a trade, I'd want to shoot the dude.
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Speaker
We're back in like the 90s or even worse in terms of trading fees.
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Speaker
Yeah.
00:15:37
Speaker
And I wanted to ask you about this because I've heard some argue that Ethereum is going to overtake Bitcoin in importance because it can be used to create smart contracts.
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But I hear others say that Bitcoin's widespread adoption will keep it the industry standard and smart contracting tech is going to be implemented as like a side chain of Bitcoin.
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Speaker
And I mentioned to hear like, what's your take on that?
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Speaker
Or like, am I completely not even understanding the argument?
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Speaker
No, you're, you're, you're, you're doing fine.
00:16:04
Speaker
I'm not super bullish on Bitcoin specific side chains for smart contracts.
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There are,
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some that do it and I probably need to spend more time playing with them so I have a better personal understanding.
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Speaker
There's one called Stacks, S-T-A-C-K-S.
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And I know they have several applications running on it.
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I probably just need to play with them more.
00:16:30
Speaker
As far as Ethereum dominance, so outside of Bitcoin, you know, Ethereum was the first network to actually implement smart contracts.
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Speaker
And there's a lot of other
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chains at this point that do it and there's a lot of them that do it faster and cheaper for the average person.
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Speaker
So what does that practically mean?
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For an average person, they probably prefer to use those other networks.
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For someone who is a decentralization maximalist who really, really cares about the state of network decentralization, as far as smart contract platforms go, I'm not sure of one that does better than Ethereum in terms of
00:17:08
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the decentralization.
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That's not to say that Ethereum is great.
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Speaker
I mean, if there's a project called Infura that serves network services for applications, if it went down, most of the Ethereum network would go down and that's a centralized entity.
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So I'm not saying that Ethereum is Bitcoin level in terms of decentralization.
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Speaker
It's not, but compared to its competitors, it's a lot further along than a lot of them are.
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Speaker
Now,
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Bitcoin is the most decentralized network that I know of.
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Speaker
I don't think anyone else even comes close.
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Speaker
And it still has centralization problems.
00:17:43
Speaker
Things like actually mining the transactions is very centralized because the devices themselves that do the mining are so expensive that it becomes cost prohibitive for most people who run one.
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Speaker
I mean, if you could run it off a Raspberry Pi, that's one thing.
00:18:00
Speaker
But we're talking about devices that are selling for $5,000 to $10,000 a piece right now.
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Speaker
and you're competing against farms to have thousands and thousands of these, right?
00:18:09
Speaker
I mean, that's kind of built into the nature of it, right?
00:18:11
Speaker
It was always going to... Because, I mean, when I first heard about Bitcoin, it was literally like a dollar a coin, and my friend was like, hey, you just bought this new GPU so you could play Crysis 2.
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Speaker
Why don't you mine, like, 10 Bitcoins a day with this GPU?
00:18:30
Speaker
And so, like, which I didn't do.
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Speaker
And I totally should have.
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Speaker
Yeah.
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Speaker
So, so, but, but I mean, as it, as it grew in value and as the, the algorithmic, the sort of the, the cryptographic task became more complex.
00:18:47
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it was always going to become kind of this, this like one of two things would happen with it.
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Speaker
Either it wouldn't go to the moon and it wouldn't be worth mining anymore and people would just stop doing it.
00:19:00
Speaker
Or it was going to become this thing where like the Chinese government goes to outer Mongolia and buries server farms in the ice.
00:19:09
Speaker
Right, right, right, right.
00:19:10
Speaker
No, I agree.
00:19:12
Speaker
I actually think that one of the things you just mentioned there is probably one of the long-term things
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Speaker
concerns with Bitcoin's longevity.
Bitcoin's Sustainability and Fee Models
00:19:21
Speaker
You mentioned it's not worth it to mine it.
00:19:22
Speaker
So Bitcoin sustains its security model.
00:19:25
Speaker
And what I mean by security model is how expensive and hard would it be for a nation state actor to attack the network and initiate something called a double spin, which is the thing that absolutely should never happen.
00:19:37
Speaker
So it sustains itself by what's called a fee model.
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Speaker
Anytime you send a Bitcoin transaction, you pay a network fee.
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Speaker
And that network fee currently goes to the miners who mine it.
00:19:47
Speaker
There's also currently inflationary rewards.
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Speaker
So there's only ever going to be 21 million of them, but they're not all in circulation right now.
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So every block that comes out, the miner of that block gets the block reward as an additional incentive to keep mine.
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Eventually, that block reward goes to zero.
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And it's like 140 years from now.
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So I won't be around for it, whatever.
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Speaker
But it is going to be a problem at some point.
00:20:14
Speaker
I already think that Bitcoin is overpaying for security right now.
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Speaker
When you look at the amount of fees generated versus value transferred, it doesn't seem like it's very optimized at the moment.
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Speaker
So eventually the main long-term concern is, are we going to be generating enough fees for these miners to continue to provide the security needed to the network?
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Speaker
That becomes a big deal if you're a believer that long-term Bitcoin can be a
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Speaker
nation state level settlement network.
00:20:49
Speaker
So if you're saying that, you know, the United States has paid Mongolia $7 million today in Bitcoin, like what does that mean if someone can initiate a double spend and people lose faith in the network itself?
00:21:04
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That's a big deal.
00:21:05
Speaker
And so that's actually probably the most long-term issue I see with Bitcoin is the fee model approach for sustaining the security of the network.
00:21:15
Speaker
And just to be clear, a double spend is where we're, I mean, what it sounds like intuitively to me is you're spending Bitcoin and then you're acting like you still have it and you're spending it again.
00:21:25
Speaker
You're sort of lying to the network.
00:21:27
Speaker
Yeah.
00:21:28
Speaker
Yeah.
00:21:28
Speaker
Imagine you had a Bitcoin and you traded it for a house.
00:21:31
Speaker
And then you turn around and trade it to someone else for three campers.
00:21:34
Speaker
You spent the same Bitcoin and the network thinks they're both valid.
00:21:38
Speaker
But obviously that's not possible, right?
00:21:41
Speaker
So that's the core problem here is that's like the number one thing you should never have happen.
00:21:47
Speaker
And the way that a nation state actor would do that is by controlling enough of the network to sort of bifurcate the record?
00:21:55
Speaker
Yep.
00:21:55
Speaker
And say that our record is authoritative and not yours?
00:21:58
Speaker
Yeah, pretty much.
00:21:59
Speaker
You may have heard of the 51% attack or 51% problem.
00:22:03
Speaker
Basically, if they control a majority of the network's hash rate, hash rate meaning the amount of computers who are actually doing the mining, then they can make the network say whatever they want it to say.
00:22:14
Speaker
Right.
00:22:15
Speaker
So as long as...
00:22:17
Speaker
The mining power is distributed globally and such that not one massive nation state controls it all.
00:22:27
Speaker
That should be enough.
00:22:30
Speaker
I'm very heavily emphasizing should be enough to prevent something like a China takeover of it or a US takeover of it.
00:22:40
Speaker
Frankly, I mean I wouldn't necessarily want the American regime –
00:22:43
Speaker
fully controlling Bitcoin networks either, because they're going to start doing the thing that no one wants and censoring transactions.
00:22:50
Speaker
Right.
00:22:51
Speaker
And so if you were to sort of re-engineer Bitcoin again, if you had to do it over, uh,
00:22:57
Speaker
perhaps you would make it run out like sort of the hard cap on how many Bitcoin there can be produced.
00:23:03
Speaker
You might've had that run out sooner so that it doesn't reach this sort of absurd computational requirement that incentivizes huge institutions to get involved.
00:23:14
Speaker
Is that kind of where you're driving at or?
00:23:16
Speaker
Maybe, I don't know if there's a great answer to this.
00:23:19
Speaker
I mean, there were people who, before Satoshi worked on the problem of decentralized money.
00:23:24
Speaker
And like, this is a thing that's been worked on by some of the brightest minds.
00:23:28
Speaker
for the last 30 years.
00:23:31
Speaker
So I definitely am not going to say that my idea is better necessarily.
00:23:38
Speaker
I tend to think that the network may have to implement some sort of inflationary rewards long-term and move away from a 21 million hard cap if the fee model starts to suggest that the network itself is in trouble.
00:23:55
Speaker
You know, obviously that's going to be
00:23:57
Speaker
so contentious that it will probably itself destroy the Bitcoin community.
00:24:06
Speaker
But it's a discussion for a future person, essentially.
00:24:12
Speaker
I won't be around by the time that's a problem, but I think it will probably be a problem.
00:24:16
Speaker
Yeah, I mean, part of the advantage here, the selling point to all this is that it's decentralized, and I mean, what you don't want
00:24:26
Speaker
is sort of collusion and coordination and people who hold big pieces of the network to, uh, pull strings and manipulate it in their favor.
Crypto in Business Education and Gaming
00:24:36
Speaker
But that also means that if the network faces a threat, then the big players who would like to protect the network cannot do that.
00:24:45
Speaker
Yeah.
00:24:45
Speaker
Yeah.
00:24:46
Speaker
I mean, we've seen some big players move in and act in a very, um,
00:24:52
Speaker
cohesive manner with what the traditional Bitcoin community likes.
00:24:56
Speaker
People like Michael Saylor have done a great job of coming in, buying huge amounts of Bitcoin.
00:25:02
Speaker
I think they own like 110,000 Bitcoins at this point for micro strategy.
00:25:07
Speaker
Wow.
00:25:08
Speaker
So a very large percentage of the network.
00:25:10
Speaker
He went in hard.
00:25:11
Speaker
He made a hell of a bet and it's paid off for him.
00:25:16
Speaker
So it's good to see big players move in like that.
00:25:18
Speaker
And a lot of them try to
00:25:20
Speaker
at least to some degree, keep the original ethos.
00:25:24
Speaker
There was a little bit of controversy with him with the mining council of big miners.
00:25:29
Speaker
People worried, well, every time these people with this type of centralized power get together, bad things happen for the little guy.
00:25:37
Speaker
But I think he's managed to strike a pretty good balance between
00:25:41
Speaker
Ultimately, what's probably going to happen, which is corporate interests move in and do what corporate interests do and the traditional Bitcoin ethos.
00:25:50
Speaker
I think he's managed to do a good job at straddling those.
00:25:54
Speaker
And so hopefully more people operate like him in that capacity and realize that.
00:26:00
Speaker
rather than trying to take over the network entirely, it's actually in everyone's best interest to cooperate.
00:26:05
Speaker
There's a common thing in crypto right now.
00:26:08
Speaker
People may see people with parentheses and then three comma three inside parentheses on Twitter.
00:26:14
Speaker
Okay.
00:26:15
Speaker
It's basically a game theory allusion to if we all cooperate, it's a, the three comes from a mathematical
00:26:23
Speaker
equation on, you know, cooperation versus defection.
00:26:26
Speaker
The prisoner's dilemma?
00:26:27
Speaker
Yeah, yeah.
00:26:28
Speaker
If we all cooperate, everyone wins.
00:26:30
Speaker
Right.
00:26:30
Speaker
That's essentially what it is.
00:26:32
Speaker
So the more big players who come to that view, the better for everyone.
00:26:36
Speaker
Yeah.
00:26:37
Speaker
You're talking to an econ major.
00:26:38
Speaker
I understood that reference.
00:26:41
Speaker
Okay.
00:26:41
Speaker
I just make it sure.
00:26:42
Speaker
Not everybody gets it at first.
00:26:45
Speaker
It was nice.
00:26:46
Speaker
It was really nice to have something where I could be like, yes, I got that one.
00:26:49
Speaker
Hey, I know what that is.
00:26:53
Speaker
So I'm a believer in, so like my business school had a whole module on crypto right now.
00:26:59
Speaker
Like it's reached that level of sort of normie penetration where people who are sort of just interested in money are interested in crypto who aren't technical at all.
00:27:10
Speaker
Yeah.
00:27:11
Speaker
And I'm a big believer in sort of the business and industrial and fintech applications of crypto, but it seems like there hasn't really been like a killer app
00:27:20
Speaker
yet that has driven like widespread mainstream institutional adoption of a cryptocurrency beyond you know maybe teaching teaching grandma to buy some bitcoin and just hang on to it or buying it for her you know um and and you don't have to name names but what types of technologies do you think are closest to that kind of practical adoption sort of um
00:27:42
Speaker
being world changing in themselves and gaming what they do gaming there is a big yeah there is a big thing coming and I think it's going to be huge gaming tied into blockchain stuff so what that essentially means is you use the blockchain for things like in-game assets that you find or you know you use it as a store of record for things you don't actually build like the game itself on the blockchain but the game integrates with the blockchain or to say hey
00:28:13
Speaker
You own these NFTs, which are your sword, your hat, your shield, and these shoes of magical plus five speed.
00:28:21
Speaker
Right.
00:28:22
Speaker
Right.
00:28:22
Speaker
So you can verify that you can take these things with you.
00:28:25
Speaker
There's even projects out there that are trying to build like a base layer NFTs and they're just words.
00:28:31
Speaker
It sounds silly at first, but the idea I think makes some sense is that you get a collection of words and you can take these words with you and then games or other NFT projects, et cetera, can utilize those words and provide you with an NFT designed around those words.
00:28:46
Speaker
So imagine, I'll give you an example.
00:28:48
Speaker
Imagine you got a two-handed sword as a word, right?
00:28:54
Speaker
So now whenever you integrate with a game that supports this type of project,
00:29:00
Speaker
they will have an asset that corresponds to the, to that word, a two handed sword.
00:29:05
Speaker
And now that becomes your in-game asset.
00:29:07
Speaker
Sort of like how in, you know, you, you start in Crusader Kings and then you can take your map to Europa Universalis and then you can take your map to Hearts of Iron.
00:29:18
Speaker
You know, whatever you built in the one game cashes out in the other game, but this is more because it's because they're NFTs, you're not necessarily, I mean, like,
00:29:30
Speaker
You still have to rely on the game developers to create environments where your NFTs are relevant, but it's your NFT.
00:29:39
Speaker
Yes.
00:29:40
Speaker
Yes, exactly.
00:29:41
Speaker
No one can take it from you.
00:29:42
Speaker
It's kind of funny because the Ethereum, and this is just something I've heard.
00:29:47
Speaker
I obviously haven't talked to this fella and got it from him, but I've always heard that Ethereum kind of came out of Vitalik.
00:29:54
Speaker
getting his, I think it was a World of Warcraft character taken away from him or nerfed or something.
00:30:00
Speaker
Oh yeah.
00:30:01
Speaker
I've heard that story.
00:30:02
Speaker
And he thought, you know, you should never be able to do that to someone.
00:30:05
Speaker
That was mine.
00:30:07
Speaker
And that's the concept behind this is this NFT is mine.
00:30:09
Speaker
You cannot take it from me.
00:30:10
Speaker
You cannot modify it.
00:30:11
Speaker
Only I own it.
00:30:13
Speaker
You know, I thought that's interesting that now we are what, six or seven years into it and it's come full circle back to that.
00:30:20
Speaker
I thought that was pretty interesting.
00:30:22
Speaker
So.
00:30:22
Speaker
There's a bunch of games coming out that I am like hyper bullish on.
00:30:27
Speaker
Ember Sword, Olivium, Missing Frontier.
00:30:31
Speaker
Those are some big name games coming forward that have blockchain integrations.
00:30:37
Speaker
And I think they're going to be huge.
00:30:39
Speaker
I mean, you have people who play video games literally all the time and they spend money to do it.
00:30:44
Speaker
And now you're telling me that I can play video games and get paid to do it.
00:30:47
Speaker
Like you earn in-game tokens that are worth money.
00:30:51
Speaker
Oh, yes.
00:30:52
Speaker
So that's so that's the angle that because I know people used to like used to, you know, have Chinese peasants farming gold and wow, World of Warcraft.
00:31:02
Speaker
And that was sort of they didn't like that and sort of tried to militate against that, but they sort of weren't able to.
00:31:09
Speaker
But but in this case, it's like, let's just embrace this model of like making money while you game.
00:31:14
Speaker
Yeah, there's a bunch of people in the Philippines making their their salary.
00:31:20
Speaker
playing Axie Infinity and revenue splitting it with people who sponsor them and give them the assets to play with.
00:31:27
Speaker
Yeah.
00:31:27
Speaker
And then you've got, I mean, then you've got so much more.
00:31:31
Speaker
I mean, the goal of, I've read Blizzard's 10K for an article I was writing about how sort of monstrous and addictive their business model is.
00:31:40
Speaker
But they're all about
00:31:45
Speaker
like maximal engagement, how much can we suck people in?
00:31:49
Speaker
And like, in my experience, when I reached the point where I realized that I've just created sort of fake, I've just sort of made the number bigger in a fake database.
00:31:59
Speaker
That's where I sort of like, I'm starting to like see the code in the matrix or the shadows on the cave.
00:32:05
Speaker
I'm realizing that I'm in, I'm in the cave.
00:32:08
Speaker
Right.
00:32:10
Speaker
But that's a great analogy.
00:32:11
Speaker
But this creates another layer of abstraction.
00:32:14
Speaker
And like I'm saying this like it's interesting from a technological perspective, but it's maybe a little scary from a human perspective of like it creates.
00:32:23
Speaker
Yeah, I mean, there's sociological.
00:32:26
Speaker
Right.
00:32:26
Speaker
Right.
00:32:26
Speaker
Right.
00:32:27
Speaker
It creates this additional layer of abstraction where the thing feels real.
00:32:32
Speaker
And so your achievement feels more real and, and it takes longer for you to sort of wake up to what you're doing.
00:32:38
Speaker
That's wow.
00:32:40
Speaker
I got to think about that one.
00:32:41
Speaker
That's a, that's kind of spooky.
00:32:44
Speaker
Yeah.
00:32:45
Speaker
I mean, in one way it provides an income source for people in third world countries that have an internet connection.
00:32:53
Speaker
Sure.
00:32:53
Speaker
I mean,
00:32:54
Speaker
There are people who literally make their salary playing games and revenue splitting with people who own the actual asset, the NFT asset itself.
00:33:03
Speaker
So we can't say it's all bad because people are literally surviving with this stuff.
00:33:11
Speaker
I mean, as all technology, it's going to be a double-edged sword.
00:33:14
Speaker
It always is.
00:33:15
Speaker
There are no free lunches.
00:33:16
Speaker
Sure.
00:33:17
Speaker
Sorry, I want to go back to what you said about like their revenue sharing with the person who owns the NFT.
00:33:22
Speaker
So like, are there people who will like sponsor a player and give them cool equipment and then they go make money with that cool equipment and bring it back?
00:33:29
Speaker
Yeah, it's you can do that thing.
00:33:31
Speaker
It's called a scholarship.
00:33:32
Speaker
So you scholarship someone, you basically provide them the things necessary for them to go out and play the game and earn the actual assets.
00:33:39
Speaker
Yeah, I know some people who do it and it seems to be quite, quite profitable.
00:33:45
Speaker
for everybody involved.
00:33:46
Speaker
Yeah.
00:33:46
Speaker
Yeah.
00:33:47
Speaker
That's a fascinating, I hadn't, hadn't even occurred to me that that space was there, but that's, um, cause mostly what I hear about in crypto is FinTech.
00:33:54
Speaker
It's almost all FinTech.
00:33:55
Speaker
Yeah.
00:33:56
Speaker
Um, yeah.
00:33:58
Speaker
So that's, I mean, that's where, that's where it all started.
00:34:01
Speaker
You other meant, you also mentioned, um, other assets that are gonna, that are gonna make it mainstream just to embrace a little bit of my old school Bitcoin.
00:34:11
Speaker
I was never a maxi, but I was always an enthusiast.
00:34:14
Speaker
Um,
00:34:15
Speaker
Money is an application.
00:34:17
Speaker
Like the ability to store value long-term is an application.
00:34:22
Speaker
And it's something that people in Lebanon, Venezuela, Argentina absolutely wish they had.
00:34:29
Speaker
So, you know, that was the original killer use case.
00:34:32
Speaker
And people talk about Bitcoin being a dumb pet rock, but there's nothing else out there that stores value quite like it.
00:34:39
Speaker
Um,
00:34:40
Speaker
And I think that's going to be its killer use case for all time, basically.
00:34:44
Speaker
Yeah, you definitely tend to think of these things from a first world perspective.
00:34:49
Speaker
And, you know, is it a hedge against inflation of the US dollar and sort of people saying that, like, it doesn't necessarily, like when the stock market dips or the dollar goes up or inflates, then it doesn't necessarily...
00:35:04
Speaker
correlate with Bitcoin and they're sort of using that as a negative for Bitcoin.
00:35:08
Speaker
But like compared to like El Salvador, I think was who just adopted Bitcoin as a legal tender.
00:35:16
Speaker
And like from their perspective, those problems are not even problems.
00:35:19
Speaker
Like it's not even close to it.
00:35:23
Speaker
Literal first world problems.
00:35:25
Speaker
Right.
Understanding DAOs and Their Operations
00:35:26
Speaker
So tell me a little bit about, so you're involved in a crypto venture capital group that's organized as a DAO, which is a decentralized autonomous organization.
00:35:38
Speaker
Can you tell me a little bit about your DAO, how it's organized and sort of in general, what is a DAO?
00:35:45
Speaker
Yeah, so I'm a member of 0x Ventures.
00:35:49
Speaker
0x coming from the first two characters of Ethereum addresses.
00:35:53
Speaker
And it's a structure that a lot of chains have adopted.
00:35:57
Speaker
Anything that's Ethereum compatible starts with a 0x address.
00:36:02
Speaker
So what a DAO is, is it's a group of people who have come together to work together towards a common goal.
00:36:10
Speaker
Our common goal is to work with
00:36:13
Speaker
promising dApps and protocols to help them achieve wider network success, help them achieve better tokenomics, a better actual product by beta testing these things.
00:36:27
Speaker
Um, and then also to make a financial return for us.
00:36:30
Speaker
So getting in early and, you know, there's a lot of risk involved here with these sort of early, um, investments, but, you know, it gives us a chance to see what's coming down the pipeline next.
00:36:41
Speaker
Uh, what's, what do we think is going to be big and then how can we help the ones that we choose to work with actually make a better product?
00:36:49
Speaker
So the way it works is we really have no centralized, um,
00:36:54
Speaker
vertical hierarchy.
00:36:55
Speaker
It's a flat, horizontal hierarchy.
00:36:58
Speaker
Anyone can make a proposal.
00:37:00
Speaker
Major decisions have to be voted on and approved by everybody.
00:37:04
Speaker
We don't have hard numbers, unlike there must be a quorum of so many people who agree.
00:37:10
Speaker
We've never had those kind of issues come up.
00:37:13
Speaker
That's a discussion for a future day.
00:37:15
Speaker
But most people are very involved with the DAO, so they already see the proposals early on.
00:37:21
Speaker
So
00:37:21
Speaker
Anybody can propose pretty much anything.
00:37:23
Speaker
So we have an internal treasury that can invest in things, projects or internal things that we want to build or basically anything that the DAO decides would be a value added service.
00:37:37
Speaker
And everybody kind of contributes according to what they can do.
00:37:40
Speaker
So I have a bit of an engineering background.
00:37:42
Speaker
I've been a software engineer for more than a decade.
00:37:46
Speaker
I do split product management and engineering management at the moment.
00:37:51
Speaker
But I've been hands-on in the code for more than a decade.
00:37:54
Speaker
And so I can generally jump into the code, and I'm not a blockchain engineer by any means, but I have a good idea of what's happening.
00:38:03
Speaker
And so I can kind of see how far along are they?
00:38:05
Speaker
What does the code generally look like?
00:38:08
Speaker
Is this feasible?
00:38:10
Speaker
I mean, people come up with all sorts of ideas of what they think would be cool, and that's great, but is it even possible to do?
00:38:18
Speaker
So that's some of the things that I contribute.
00:38:21
Speaker
Yeah, and well, so my question then, I guess, is I am aware of investment groups that vote on investment opportunities without using a DAO, without using blockchain.
00:38:35
Speaker
So maybe what is the utility of organizing this sort of democratic process under a DAO?
00:38:45
Speaker
Yeah, so I don't know any of these people in real life.
00:38:50
Speaker
They don't know me.
00:38:52
Speaker
They don't have to know me.
00:38:53
Speaker
I don't have to know them.
00:38:54
Speaker
We can use the blockchain itself to do this stuff in a fairly trustless manner.
00:39:01
Speaker
It also allows us to pull in people as we need.
00:39:06
Speaker
So as we find new skills that the DAO can use, we go out and we look and recruit people with those skills specifically.
00:39:14
Speaker
There's no corporate structure.
00:39:15
Speaker
We don't have to file any paperwork.
00:39:17
Speaker
There's no legal structure.
00:39:19
Speaker
issues there.
00:39:20
Speaker
It's a little bit cowboyish in that there is no legal recourse there, right?
00:39:25
Speaker
I mean, this is a totally kind of new structure.
00:39:28
Speaker
And to some degree, there's trust involved.
00:39:31
Speaker
To other degrees, there's not.
00:39:34
Speaker
The blockchain is what the blockchain says, you know.
00:39:37
Speaker
So maybe the advantage, so I was in an investment club at school and we had a treasurer who took everybody's money and made the trades.
00:39:49
Speaker
And the element of trust was that that person wasn't going to run off with our money.
00:39:55
Speaker
So maybe the advantage is like, I mean, you can always vote.
00:39:59
Speaker
You can always make decisions immediately.
00:40:01
Speaker
in a flat, low hierarchy kind of way, but the advantage of the Dow is that it escrows your funds.
00:40:09
Speaker
Is that, am I picking that up?
00:40:11
Speaker
Yeah, to some degree.
00:40:12
Speaker
I mean, we still have people who actually send the money out and it's controlled by a multi-sig wallet.
00:40:17
Speaker
So there have to be multiple signers on the treasury funds before it actually moves from the wallet.
00:40:22
Speaker
You can set them up in different ways.
00:40:24
Speaker
So you can do like a two of three or a three of five, four of seven,
00:40:28
Speaker
Basically a majority of signers have to give approval.
00:40:32
Speaker
Uh, and the signers are chosen from people who are prominent in the DAO who most people tend to think are a reasonable actors.
00:40:41
Speaker
And you can organize those rules however you want to sort of up to you.
00:40:46
Speaker
Yeah.
00:40:47
Speaker
Yeah.
00:40:47
Speaker
And we can, you can revise them in the future.
00:40:48
Speaker
I mean, if I wanted to propose tomorrow that we strip someone of the multi-sig, I could.
00:40:55
Speaker
Do I want to do that?
00:40:56
Speaker
No, I like the people who currently do it.
00:40:58
Speaker
But you know, the point is you can make these changes on the fly.
00:41:01
Speaker
Um, you can make these proposals on the fly and everyone gets a voice.
00:41:05
Speaker
What are some other interesting applications of a DAO?
00:41:08
Speaker
Yeah.
00:41:08
Speaker
Uh, anything honestly that you're geographically distributed, um, and you don't necessarily want to have a legal structure like exit group itself could become a DAO.
00:41:24
Speaker
Um,
00:41:24
Speaker
Any sort of communities like this could become a DAO.
00:41:30
Speaker
There are tools being built out there specifically to help with DAO administration.
00:41:36
Speaker
I'm blanking on the names of them.
00:41:37
Speaker
I've seen them around.
00:41:38
Speaker
They look like they're making good progress.
00:41:41
Speaker
Typically that involves things like proposals and voting, treasury management, internal communications.
00:41:48
Speaker
So beyond like a Slack or a Discord channel, et cetera.
00:41:53
Speaker
Yeah, so one of the challenges for exit group is varying levels of OPSEC.
00:41:59
Speaker
And right now, the solution to that OPSEC problem is that I'm sort of the trusted node.
00:42:07
Speaker
And I always ask before I disclose any information about anybody that they haven't already disclosed.
00:42:15
Speaker
And there's a lot of people relying on me to keep their information safe.
00:42:20
Speaker
But if it was a DAO, then potentially they could input whatever they wanted shared and that would be what people had access to and they could control to what level that information was disclosed internally.
00:42:33
Speaker
So that's really interesting.
00:42:35
Speaker
Yeah, and I mean, like, you can't prevent someone from saying, hey, I'm so-and-so in a chat.
00:42:42
Speaker
Sure.
00:42:42
Speaker
Like, nothing's going to stop that, right?
00:42:46
Speaker
But for, I know for our DAO,
00:42:48
Speaker
There's maybe one or two people who know who I am.
00:42:51
Speaker
The rest of them all know me as TAC or tactical minivan.
00:42:55
Speaker
There's really no need to see my face, know my name, know what my email is.
00:43:00
Speaker
None of that.
00:43:01
Speaker
There's no need for it.
00:43:03
Speaker
And so I can choose what I want to share.
00:43:09
Speaker
I like that structure.
00:43:11
Speaker
Personally, I don't think there's a lot of benefits to being
00:43:14
Speaker
Doxed even among people you trust in an online environment.
00:43:17
Speaker
I really just don't see the value.
00:43:21
Speaker
Either what you say has value on its own or it doesn't.
00:43:25
Speaker
I know that's a very, what's the best word for this?
00:43:31
Speaker
4chan-ish?
00:43:31
Speaker
Well, that's the old-timey ethos of the web, right?
00:43:35
Speaker
I mean, that was, it should be about what you say.
00:43:39
Speaker
It shouldn't be about who you are.
00:43:41
Speaker
It doesn't matter what my credentials are.
00:43:43
Speaker
Right.
00:43:44
Speaker
And I mean, at some point you want to maybe like, you know, have a barbecue or like, you know, go, go shooting or something.
00:43:51
Speaker
And that's, that's when you open up those vulnerabilities.
00:43:54
Speaker
But yeah, when it's just sort of when it's just sort of discussing ideas, there's not really, exactly not really a ton of practical utility to it.
00:44:00
Speaker
Yeah.
00:44:01
Speaker
It's just like with anything you choose when you want to self-doct to people.
00:44:04
Speaker
Right.
00:44:05
Speaker
So you've told me that you've had some success in this DAO with making investments that don't necessarily have a very impressive white paper or PowerPoint behind them.
Evaluating Crypto Investments
00:44:16
Speaker
How do you go about evaluating prospective investments and what's different about your approach?
00:44:24
Speaker
Yeah.
00:44:24
Speaker
So,
00:44:25
Speaker
You know, when we look at a new investment, there's, we kind of go through a sniff test, right?
00:44:30
Speaker
Do initial things look good?
00:44:32
Speaker
So you look at things like fully diluted value.
00:44:36
Speaker
Basically what it means is how much is the whole dang thing worth on the market?
00:44:41
Speaker
You look at, you know, how far along is the project in development?
00:44:45
Speaker
how much of the tokens does the team have locked up and invested?
00:44:50
Speaker
Like if the team gets all of their tokens in the first three months, that's a big red flag for me.
00:44:56
Speaker
No, you have no serious vesting here that would require you to input and make this thing better over the long term.
00:45:02
Speaker
So I'm not interested.
00:45:04
Speaker
For things that, you know, kind of meet those, it moves on to a more deep analysis of
00:45:11
Speaker
The concept itself, the tokenomics.
00:45:13
Speaker
So tokenomics, meaning what sort of value accrual comes back to the token itself.
00:45:19
Speaker
Why does the token have value is ultimately the big question there.
00:45:24
Speaker
There are some tokens that don't have value, like the Yearn Finance token.
00:45:28
Speaker
I don't know why people buy that.
00:45:30
Speaker
I have no idea why people buy that.
00:45:33
Speaker
The value accrual there is horrible.
00:45:36
Speaker
I don't get it.
00:45:37
Speaker
I personally would never buy the token.
00:45:40
Speaker
They just sort of think that they're investing in the yearn business, kind of?
00:45:44
Speaker
They think they're kind of buying stock in yearn?
00:45:46
Speaker
I guess.
00:45:48
Speaker
I think that's what it is.
00:45:51
Speaker
But the actual mechanisms that control value accrual are simply not there.
00:45:55
Speaker
At least they weren't when I looked.
00:45:57
Speaker
I don't even know when it was, months ago.
00:45:59
Speaker
When I looked at it, I was like, why are people buying?
00:46:02
Speaker
I don't get it.
00:46:04
Speaker
I guess the why is there's a lot of dumb money out there.
00:46:07
Speaker
So if things sometimes look at first glance kind of rough, like maybe the deck is not very polished or the white paper is very hard to read or something, you look deeper at the core concept.
00:46:20
Speaker
Most of the time, there's a core concept behind the product itself.
00:46:24
Speaker
And you have to ask yourself, does the core concept have value on its own?
00:46:29
Speaker
Look past the window dressing.
00:46:31
Speaker
What is the problem they're trying to solve?
00:46:32
Speaker
And does the solution actually solve it?
00:46:35
Speaker
Um, that's the example I can easily give is I'm not going to name projects, but like, I wasn't super impressed by kind of the upfront, uh, documentation I saw, but the core idea itself was gold.
00:46:49
Speaker
And so you just wanted to dig in more and hear more about it and ask more questions of the team.
00:46:54
Speaker
And so when you get them talking, a lot of people who don't necessarily come off well in a white paper or in a deck, but they can present the idea to you in a cohesive manner, you kind of get the feeling that, yeah, they know what they're doing.
00:47:05
Speaker
It's just a communication problem.
00:47:08
Speaker
And so you have to decide at that point, do you want to move forward with it or not?
00:47:13
Speaker
And we did, and it's one of the projects I'm most excited about, actually.
00:47:19
Speaker
I think they're solving an absolutely foundational problem for one of the blockchains.
00:47:26
Speaker
And I'm excited to see it come to fruition.
00:47:29
Speaker
Yeah.
00:47:29
Speaker
I mean, if you cut yourself off from software developers who are not great communicators, you're going to miss a swath of the field.
00:47:45
Speaker
So how would you direct someone who wants to learn how to develop crypto, like as a blockchain engineer?
00:47:53
Speaker
Yeah.
00:47:54
Speaker
So...
00:47:55
Speaker
I think the easiest way to do that, there's a fella by the name of Patrick Collins.
00:48:00
Speaker
He works for Chainlink and he has made this 16 hour, yes, 16 hour YouTube video.
00:48:08
Speaker
And it's broken down into sections, different types of blockchain development.
00:48:13
Speaker
You know, they build on one another as you go.
00:48:16
Speaker
That's been by far the best introduction.
00:48:19
Speaker
to blockchain development that I've seen.
00:48:22
Speaker
It teaches you some initial solidity, which is the language that you use to write Ethereum smart contracts with.
00:48:29
Speaker
And it also relies on Python.
00:48:33
Speaker
And so it kind of assumes you have some programming knowledge when you use those things.
00:48:39
Speaker
So you can't just come into it with absolutely no knowledge of programming.
00:48:43
Speaker
You kind of have to learn the basics first.
00:48:47
Speaker
But that is by far the best and most comprehensive introduction to blockchain programming I've seen so far.
00:48:53
Speaker
Okay.
00:48:54
Speaker
So a guy like me, I've got some Python, some JavaScript, some VBA.
00:48:59
Speaker
Like, in other words, I sort of have triangulated how to do logic, how to do syntax.
00:49:07
Speaker
It's sort of at that range of expertise where, like, I probably couldn't...
00:49:14
Speaker
necessarily build a tool that was very useful all by itself, but I can maybe troubleshoot one.
00:49:20
Speaker
Um, yeah, you can understand that.
00:49:21
Speaker
So someone at that level could probably pick this up and, and start developing apps.
00:49:26
Speaker
Yeah, I think so.
00:49:28
Speaker
I mean, once you learn the solidity itself or the Python itself, you can go read these smart contracts or most of them are open source.
00:49:36
Speaker
So you can actually go look at the smart contract code itself on the blockchain.
00:49:41
Speaker
Okay, cool.
00:49:43
Speaker
And then, so, I mean, my next question was going to be, where would you send someone if they wanted, you know, the technical savvy to evaluate crypto investments?
00:49:52
Speaker
And is that like, do you feel like at this stage of the game, you kind of need to be able to read the code to evaluate an investment like this?
00:50:00
Speaker
Or is there sort of a, like an investor tier level of knowledge that's appropriate?
00:50:09
Speaker
On the latter question about
00:50:11
Speaker
code knowledge in order to evaluate it, I say no, not really.
00:50:15
Speaker
There's plenty of people who know nothing about actual blockchain development who do crypto investing full-time.
00:50:24
Speaker
In terms of what people should learn in order to do it, it kind of depends on the type of investment you're trying to do.
00:50:29
Speaker
So early seed round style stuff like we do requires, I think, a different eye than what most people are familiar with is where they evaluate or they look at an asset
00:50:41
Speaker
And they decide, hey, am I bullish on this asset, right?
00:50:44
Speaker
So the average person signs into Coinbase and they look and they say, cool, XRP is 20 cents.
00:50:50
Speaker
What if it goes to a dollar?
00:50:51
Speaker
How about I buy that now?
00:50:54
Speaker
Okay, that's one way to do it, right?
00:50:56
Speaker
I mean, that's the driving impetus behind a lot of this is unit bias.
00:51:00
Speaker
Oh, it's cheap.
00:51:01
Speaker
I can own a million of it and feel rich.
00:51:03
Speaker
That's cool, but have you looked at the supply and if it goes to a dollar, you understand it's going to be more valuable than Bitcoin itself, right?
00:51:10
Speaker
So you kind of have to look at the broader picture here other than just, oh, wow, it's cheap.
00:51:17
Speaker
Let's buy.
00:51:18
Speaker
That's an interesting point, which is the market capitalization, for lack of a better term, of the coin tells you something about sort of
00:51:29
Speaker
the story that you'd have to believe for a particular case, like, yeah, like you're saying, if it goes to a dollar, that would mean that in terms of market cap or in terms, well, I don't know if there's a, is there an alternative word for like the sort of size or scale of a coin?
00:51:44
Speaker
Yeah, there's market cap and then there's also fully diluted value, which is the value of the protocol after all coins are available and liquid on the network.
00:51:53
Speaker
The other things that I tend to look for is I try to look for, um,
00:51:58
Speaker
Other fundamental questions.
00:51:59
Speaker
So when I'm evaluating something, I think, you know, is this an inflationary thing?
00:52:05
Speaker
Like for the Cosmos ecosystem, Atom is inherently inflationary.
00:52:10
Speaker
I don't think there's any long-term caps on growth there.
00:52:15
Speaker
Ethereum was inherently inflationary before the EIP-1559 change that took place earlier this summer.
00:52:24
Speaker
Now Ethereum- Did that impose a cap?
00:52:26
Speaker
It doesn't, it doesn't impose a cap.
00:52:28
Speaker
What it does is every time a mine or a block is mined, it burns part of the Ethereum supply.
00:52:35
Speaker
So you have this interplay between the inflationary Ethereum emissions versus the burned Ethereum.
00:52:44
Speaker
It's not necessarily inflationary or deflationary.
00:52:46
Speaker
They basically give themselves a lever
00:52:49
Speaker
by which to modify that over time, similar to how the federal reserve can increase or decrease the money supply.
00:52:57
Speaker
You can achieve the same thing through these sorts of emissions and burns.
00:53:02
Speaker
But isn't that sort of one of the reasons people want to do crypto is so that they can't have inflationary sort of manipulation and somebody making decisions like that?
Ethereum Governance and Its Challenges
00:53:12
Speaker
Yeah.
00:53:12
Speaker
And it's not going to be a single person making that decision.
00:53:15
Speaker
I mean, it's going to be something that goes through governance and gets changed.
00:53:19
Speaker
through that.
00:53:20
Speaker
Now, that's part of the reason that people may not want to invest in Ethereum is that can be changed, right?
00:53:27
Speaker
And so you may, if you are a hardcore, I need a max number of coins that's ever going to exist type of person, that is probably not the investment for you.
00:53:37
Speaker
And then there's other things like the novel tokenomics of some of these.
00:53:41
Speaker
So I've mentioned the Terra Luna relationship before.
00:53:44
Speaker
Terra is the protocol.
00:53:46
Speaker
And Luna is the native asset.
00:53:48
Speaker
So the way that ecosystem is set up, you have there, it's kind of evolves around a stable coin called UST.
00:53:54
Speaker
UST is the native stable coin of the Terra ecosystem.
00:54:00
Speaker
Whenever you want to ARB that to back to $1, you either burn or mint Luna.
00:54:08
Speaker
And so you get this narrative and I'm just gonna call it a narrative because
00:54:12
Speaker
Whether it's true or not doesn't really matter.
00:54:15
Speaker
Most of the space functions on narrative.
00:54:17
Speaker
We're still very early and we're kind of at that stage.
00:54:19
Speaker
So the narrative here is as more UST is printed, printed meaning minted, and there's a lot of reason for it to be.
00:54:28
Speaker
I mean, they're launching a lot of big things coming where it's going to increase demand for UST significantly.
00:54:33
Speaker
But as more is minted, the supply of Luna goes down because Luna is being burnt in order to mint it.
00:54:39
Speaker
It's a very novel mechanism for maintaining a peg, a $1 peg.
00:54:45
Speaker
That's the narrative, right?
00:54:46
Speaker
And so people are buying into it.
00:54:48
Speaker
I mean, this thing has gone absolutely nuts.
00:54:50
Speaker
I think it's $52 now.
00:54:51
Speaker
I remember during the crash earlier this summer, I think it went down to like $10, $10 to $15 at the time.
00:55:00
Speaker
And so it's made a heck of a run since then.
00:55:04
Speaker
So you have to look at those type of interesting things.
00:55:07
Speaker
tokenomics as well and those kind of unique mechanisms.
00:55:11
Speaker
Now, the mechanism itself is very bullish for Luna in terms of price.
00:55:16
Speaker
Like as these catalysts happen and their stable coin gets greater and greater adoption as more augmented, the supply goes down, the price of Luna goes up.
00:55:23
Speaker
That's a beautiful narrative.
00:55:26
Speaker
What you also have is that there's a lot of reflexivity in that relationship.
00:55:31
Speaker
And what I mean by that is as imagine a flash crash happens.
00:55:35
Speaker
Imagine we have a COVID style
00:55:38
Speaker
Bitcoin meltdown, the markets crash 50% in a day, whatever.
00:55:43
Speaker
That price of Luna and UST is going to kind of crash at the same time.
00:55:49
Speaker
And so you're going to see more pronounced price depreciation on Luna than you would on other assets because of that strange relationship.
00:56:01
Speaker
So
00:56:03
Speaker
It really has a lot of upside on the good days, and I think it's going to have a lot of downside on the bad days too.
00:56:11
Speaker
And I don't really know if you can get around that.
00:56:13
Speaker
It's just kind of inherent to the relationship between UST and Luna.
00:56:18
Speaker
I know that the team behind it, Terraform Labs, recently bought several billion dollars worth of Bitcoin in an attempt to diversify its treasury, to kind of hedge against this.
00:56:29
Speaker
Whether that will actually do
00:56:31
Speaker
do what they think it will, I don't know.
00:56:34
Speaker
At least it's a good play and they have it on their radar.
00:56:39
Speaker
Right, so maybe you'd buy that if you just wanted a pro-cyclical, a way to lever up.
00:56:45
Speaker
Yeah.
00:56:46
Speaker
And sort of play into what the market's doing.
00:56:48
Speaker
Yeah, with those sort of very reflexive products like that, I kind of look at it as a leveraged bet on the market, essentially.
00:56:57
Speaker
Man.
00:56:58
Speaker
Okay.
00:56:58
Speaker
So, uh, the, the other coin that I, that I'm interested in that I have a little bit of stake in is chain link.
00:57:06
Speaker
And I wanted to get your thoughts on like, am I an idiot?
00:57:09
Speaker
What, like I, all I basically know about link is that people say it's good.
00:57:13
Speaker
Like I know it has something to do with smart contracts.
00:57:16
Speaker
That's about the extent of it.
00:57:17
Speaker
So like, uh, and then there was sort of some, some FUD a while back about like, oh, you don't actually need link.
00:57:23
Speaker
And yeah, please go ahead.
00:57:25
Speaker
Yeah.
00:57:25
Speaker
I'll explain.
00:57:29
Speaker
the problem that Chainlink is trying to solve.
00:57:33
Speaker
So the core problem with this is at the end of the day, these blockchains are deterministic systems, meaning that if you were to replay it over and over again, from the beginning, you would get the exact same results each time.
00:57:48
Speaker
So if you reach out to a third party API, imagine you needed weather for some reason.
00:57:53
Speaker
So you wanted the weather in New York City.
00:57:56
Speaker
When you replayed the Ethereum blockchain on a node somewhere from scratch, every time you reach out and get the weather in New York, it's going to be different each day.
00:58:05
Speaker
And so it should give you different results, which is clearly not what you want on a deterministic system.
00:58:12
Speaker
So Chainlink has built a way to integrate third-party external information into its own internal blockchain that can be replayed
00:58:24
Speaker
by these other blockchains and it injects that data into those blockchains so that it can read from it.
00:58:32
Speaker
It's a critical service.
00:58:35
Speaker
Most of these apps and protocols simply would not exist without it or without similar Oracle systems.
00:58:45
Speaker
I think of it as crypto infrastructure.
00:58:49
Speaker
So the problem with Chainlink is
00:58:53
Speaker
The value accrual for Chainlink tokens is not very good, and the team has to dump a lot of it in order to fund itself consistently.
00:59:02
Speaker
So there's consistent sell pressure on the coin.
00:59:08
Speaker
I think there are things that they could do to give it more value accrual, but obviously I have no hand in that.
00:59:16
Speaker
I think it's probably a pretty good play long term.
00:59:20
Speaker
I mean, they serve almost every blockchain hub.
00:59:24
Speaker
And the ones that they don't serve, I would guarantee they're working on integrations for.
00:59:28
Speaker
So I like infrastructure plays personally.
00:59:33
Speaker
You know, there's the old saying of in a gold rush, sell shovels.
00:59:37
Speaker
I think it's a smart strategy.
00:59:39
Speaker
I just wish that they could implement a few other mechanisms that would drive more value accrual to the token itself.
00:59:47
Speaker
So it's kind of like...
00:59:49
Speaker
what you were saying about yearn where the value that the service is providing is really, really good.
00:59:55
Speaker
It's just not sure how that, how that value is encapsulated in the token.
01:00:00
Speaker
Yeah, pretty much.
01:00:02
Speaker
So you're saying it's still maybe a good long-term play because they may solve that value accrual problem.
01:00:08
Speaker
And then the fact that this token is so widespread and so useful will, the value will accrue to the token when they solve that problem.
01:00:15
Speaker
Yeah, exactly.
01:00:17
Speaker
So there's a,
01:00:19
Speaker
problem here that I see that I don't think many people think about, and it's one I've been thinking about, and I don't have great answers, but I've been thinking about it.
01:00:28
Speaker
So I'm going to go back to Ethereum.
01:00:31
Speaker
So Ethereum, the price has gone nuts.
01:00:34
Speaker
It's like $4,700 last time I looked at it per Ethereum.
01:00:39
Speaker
That's great, and that's cool.
01:00:41
Speaker
But Ethereum's core premise from the beginning was to be a world computer.
01:00:45
Speaker
And when you're
01:00:48
Speaker
When you're becoming a sort of commodity platform like that, I don't understand how you can achieve that goal when the underlying commodity itself is going bonkers in price.
01:01:01
Speaker
I liken it to oil.
01:01:03
Speaker
So what would happen to industrial society if oil went through the roof and people who were long oil suddenly retired because it's now 5,300x or whatever Ethereum has done?
01:01:18
Speaker
Industrial society would grind to a halt because the economic impact of activities would be less than just buying and holding oil.
01:01:29
Speaker
So I'm wondering how they're going to solve that problem.
01:01:31
Speaker
It seems that for platforms that actually want to be computational platforms or at least widespread ones, they would want a token where...
01:01:44
Speaker
It didn't necessarily have a ton of value accrual to the underlying token.
01:01:49
Speaker
Kind of goes to something that people call the fat protocol thesis or alternatively the thin protocol thesis.
01:01:56
Speaker
Like what happens when there's more value just from holding the thing than there is from transacting and using the network itself?
01:02:03
Speaker
Right.
01:02:03
Speaker
I don't think that's something that a lot of people have thought about.
01:02:06
Speaker
I mean, it's something I've always criticized Ethereum for back before I even started getting onto these other smart contract platforms.
01:02:14
Speaker
is how do you overcome that?
01:02:18
Speaker
Maybe they think that the value that people will be generating from Ethereum transactions is going to be so large, you know, institutional style large that the $150 to send it is still nothing to them.
01:02:34
Speaker
I mean, for me, $150, you know, drives me absolutely nuts.
01:02:40
Speaker
I can't handle that.
01:02:40
Speaker
I just won't use it.
01:02:41
Speaker
Right.
01:02:42
Speaker
But for JP Morgan to send $5 billion across the network.
01:02:47
Speaker
All right, 150 sure.
01:02:49
Speaker
You know, so maybe the play for them is that they're going for that high value sort of economic transactions and kind of abandoning the more retail style use.
01:03:01
Speaker
I don't know.
01:03:02
Speaker
I don't have an answer to that.
01:03:03
Speaker
It's just been something I've been thinking about and kind of sparked that thought as we were discussing
01:03:08
Speaker
you know, chain link and the value
Balancing Blockchain Investments
01:03:10
Speaker
accrual there.
01:03:10
Speaker
Yeah, that's a really important point.
01:03:12
Speaker
Like if there was a, if there was a magic asset that would appreciate forever at ridiculous rates, then yeah, eventually sort of all human society would orient around making more of whatever that thing was.
01:03:27
Speaker
And, and, you know, we'd stop all hell to orb, right?
01:03:30
Speaker
All hell to orb.
01:03:31
Speaker
That's right.
01:03:32
Speaker
Yeah.
01:03:35
Speaker
And so, you know, maybe, maybe that needs to color our optimism about any one particular blockchain investment that like, you know, there's always sort of an intrinsic ceiling on the, on the utility of these.
01:03:51
Speaker
And like, I was talking to, I can't remember who I was talking to, but we were talking about real estate markets and like,
01:04:01
Speaker
uh yes the money that i put into my house uh 10 years ago has 10x and it would have like 100x if i had put that in bitcoin um but but more i was something like that but like but like if i do it if i'm looking from from time now uh what's the story that i have to believe for bitcoin to go 100x again
01:04:28
Speaker
Yeah, I mean, the concept of lengthening cycles and diminishing returns is becoming a popular one.
01:04:35
Speaker
I mean, to reach the market cap of gold, I think it is, it has to be 500K per Bitcoin, which is what a 10X from 50K.
01:04:45
Speaker
We're just we're at 67, I think.
01:04:48
Speaker
So if your thesis is, well, this is at least as valuable as gold, then the underlying thesis is my Bitcoin is minimum worth 500K.
01:05:00
Speaker
Now, is it worth 100x from 50k?
01:05:03
Speaker
I don't know.
01:05:04
Speaker
How are you drawing that comparison?
01:05:06
Speaker
Is it like a single Bitcoin equating to a pound of gold?
01:05:10
Speaker
Because an ounce of gold is like, what, 1,800 or something?
01:05:13
Speaker
Yeah, you're right in that we don't actually know the supply of gold, which is a common troll point for people who are making fun of Peter Schiff, who shows gold all the time.
01:05:21
Speaker
But basically, I took that by looking at the market cap of gold and then dividing it into the number of Bitcoins out there.
01:05:28
Speaker
Oh, I see.
01:05:29
Speaker
Okay.
01:05:29
Speaker
Okay, that makes sense.
01:05:31
Speaker
And then you also have to factor in that a bunch of these coins are lost from people who either lost their wallets or sent it to an address that doesn't exist or something.
01:05:43
Speaker
So 21 million will never... Boy, can you imagine the horror?
01:05:46
Speaker
Oh, dude.
01:05:47
Speaker
The agony?
01:05:48
Speaker
I mean, what do you do other than just cry?
01:05:51
Speaker
I don't know.
01:05:52
Speaker
I don't know.
01:05:54
Speaker
But there will never be 21 million Bitcoin actually liquid on the market.
01:05:58
Speaker
Right.
01:05:58
Speaker
Most of these are going to be locked up in long-term cold storage.
01:06:02
Speaker
And a lot of them are going to be lost.
01:06:03
Speaker
Probably three to four million of them are probably going to be lost, frankly.
01:06:08
Speaker
And so the amount of liquid Bitcoin is going to be pretty small, I think.
01:06:14
Speaker
Yeah.
01:06:14
Speaker
And so it may be that even if Bitcoin sort of in absolute terms...
01:06:21
Speaker
will turn out to have been more important to the overall ecosystem than any of these other altcoins.
01:06:27
Speaker
It may be the case that right now you still get the better returns from investing in the altcoin because it's got room to grow.
01:06:34
Speaker
Yeah.
01:06:35
Speaker
To be transparent, I own Bitcoin.
01:06:37
Speaker
I own some Ethereum.
01:06:39
Speaker
Almost all of my portfolio, however, is in seed round projects that I'm personally bullish on and other small early stage projects.
01:06:51
Speaker
dApps, protocols and layer ones.
01:06:55
Speaker
So I keep some classic Bitcoin and classic Ethereum, but I am kind of quote levered up on some of these other stuff that I think has a higher multiple return than what Bitcoin or Ethereum could deliver.
01:07:10
Speaker
So what is the, just to get into more personal territory, what is the dream for you?
Tactical Minivan's Future in Crypto
01:07:16
Speaker
Like, are you going to be kind of playing in this space forever just because you find it fun?
01:07:20
Speaker
Or is there like an island in the Caribbean that you've got your eye on somewhere?
01:07:28
Speaker
I'm not really a Caribbean type of guy.
01:07:30
Speaker
I'm a, I'm fly over America born and bred.
01:07:33
Speaker
Like, I don't know, beaches are okay, but I get a little bored.
01:07:37
Speaker
So yeah.
01:07:38
Speaker
I guess for me, I'm probably going to play in this, at least for the foreseeable future.
01:07:44
Speaker
My goal here is to do this 100% full time.
01:07:47
Speaker
I'm pretty close to that, to where I feel comfortable doing exactly that.
01:07:54
Speaker
I really like the space.
01:07:55
Speaker
I love seeing all the new technological stuff that's coming out, helping projects along, that sort of thing.
01:08:01
Speaker
And I think that my engineering background helps me in that to a large degree.
01:08:08
Speaker
So I'm probably going to just keep doing this for quite a long time.
01:08:10
Speaker
I would be pretty bored if I retired.
01:08:11
Speaker
I'll be honest.
01:08:12
Speaker
You know, there's the classic, you know, I like gardening and I can garden and I have a 3D printer so I can play with stuff, but I would get bored pretty fast, I think.
01:08:22
Speaker
All right.
01:08:23
Speaker
Well, it's a fascinating subject and I'm so glad that you took the time to talk with us and I'm probably going to pick your brain a little bit more offline because I think there's all kinds of fun things we can talk about.
01:08:37
Speaker
Yeah, of course.
01:08:38
Speaker
Tactical Minivan is an exit member in our group.
01:08:40
Speaker
He's part of the Zero X Ventures Venture Capital Group.
01:08:45
Speaker
And his Twitter account is Raytheon, W-R-A-I-T-H-E-O-N-N.
01:08:52
Speaker
And you can find him there.
01:08:53
Speaker
Thanks so much for taking the time.
01:08:55
Speaker
Of course.
01:08:55
Speaker
Thanks for having me.