Transcript
Speaker: the Exit Podcast.
Speaker: This is Dr. Bennett.
Speaker: I'm joined here by Tactical Minivan.
Speaker: Tactical Minivan is an Exit member and he participates in a crypto venture capital group organized as a decentralized autonomous organization or DAO.
Speaker: He spends a lot of his time evaluating new applications of blockchain technology and he's been very successful at it.
Speaker: So we wanted to have him on the show to give us the ins and outs of crypto.
Speaker: Welcome to the show, Tactical Minivan.
Speaker: Hey, thanks for having me today.
Speaker: Good to have you.
Speaker: So for starters, how did you get involved in crypto investing?
Speaker: What about it is so compelling to you?
Speaker: 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.
Speaker: And I really got into it because of the sort of ideological aspects.
Speaker: I mean, the concept of a non-sovereign state based currency, you know,
Speaker: the more based libertarians, you know, have been talking about this sort of thing for a while.
Speaker: And it drew me in pretty quickly.
Speaker: I had heard of it a long time ago, but I was in college at the time.
Speaker: I had no free capital.
Speaker: So it's not like I would have made a lot of money anyways.
Speaker: I would have put it in.
Speaker: It would have 2x and I would have been like, woo, I can pay rent this month.
Speaker: So that was never going to happen for me.
Speaker: Um,
Speaker: So I got in big around 2015 or so and kind of just rode that wave up for a long time.
Speaker: 2017 was a glorious year, 2018 to 2019 humbled everybody a little bit coming off that.
Speaker: And for the most part, I was pretty heavily into Bitcoin specifically, you know, as a decentralized service or platform.
Speaker: It offers the most decentralization.
Speaker: And for me, that was always kind of the core piece, right?
Speaker: If it's not really decentralized, then what's the point?
Speaker: Over time, I've kind of drifted away from that some and opened my eyes more to other cryptocurrencies.
Speaker: They don't really compete with Bitcoin in the same space as money.
Speaker: They do other things.
Speaker: There's technological utility.
Speaker: You wouldn't say that Amazon is a currency, but you sure as hell want Amazon exposure in your portfolio, right?
Speaker: Right.
Speaker: So, you know, my perspective on things has changed as I've been in this longer and longer.
Speaker: 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.
Speaker: They sometimes provide a valuable service.
Speaker: Think of DeFi where you can
Speaker: 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.
Speaker: You can just go take out a loan from a decentralized service and you have to pay it back over time.
Speaker: 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.
Speaker: So there's all sorts of stuff in this space.
Speaker: It's pretty crazy.
Speaker: Can you say more about that, about specifically DeFi?
Speaker: I'd love to hear more about how that operates.
Speaker: And like, is it just peer-to-peer investing or is it more complex than that?
Speaker: There's different things that constitute DeFi.
Speaker: 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.
Speaker: And then people who need a loan can take out a loan against it.
Speaker: and they have to pay you back over time.
Speaker: So that's an example of a lending protocol.
Speaker: There's other ones like, I think the one I was talking about is called Alchemix, where you can provide collateral.
Speaker: And in exchange for that collateral, you can withdraw, I think it's 50%.
Speaker: I think it's 2X collateralized.
Speaker: So you can withdraw 50% of that.
Speaker: So you're essentially leveraging up, right?
Speaker: You're increasing the amount of total assets you have available to you.
Speaker: Now that loan that you've taken out from them,
Speaker: can be paid down over time by the yield that that collateral you provided them generates.
Speaker: So you don't actually have to go make payments on it necessarily.
Speaker: 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.
Speaker: 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?
Speaker: Or is that some other.
Speaker: Yeah.
Speaker: So a lot of the way these work is they take your collateral and they go invest it elsewhere.
Speaker: or there's other mechanisms within the protocol that generates yield from it, either from protocol emissions.
Speaker: So for Alchemix, they have an ALCX token.
Speaker: So it could come from token emissions from the protocol itself.
Speaker: Sometimes they rehypothecate the stuff and go invest it elsewhere in order to generate the yield.
Speaker: It really depends on the specific application.
Speaker: Most of them work differently.
Speaker: So, sorry, tell me what it means to rehypothecate.
Speaker: Yeah, yeah.
Speaker: So if you
Speaker: this is true in traditional finance too.
Speaker: If you deposit $50,000 at a bank, do they sit it in a, in a deposit somewhere in some vault?
Speaker: No.
Speaker: Right.
Speaker: No, they lend it out elsewhere.
Speaker: Right.
Speaker: And so now you're exposed to some risk there because the money they've lent out to someone else may not be repaid.
Speaker: They may go poof and, and bankrupt.
Speaker: And so the bank would have to basically pay you out of their own
Speaker: stop in order to make you whole as a as a depositor.
Speaker: So the rehypothecation is where you basically take the collateral and reuse it elsewhere without actually holding on to it.
Speaker: That's a kind of layman's easy way of explanation of what that means.
Speaker: Okay.
Speaker: 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...
Speaker: That's the beautiful thing.
Speaker: These are smart contracts.
Speaker: Yeah, these are smart contracts.
Speaker: This is code that lives out on the blockchain itself.
Speaker: 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.
Speaker: So some of those operations may be ad liquidity.
Speaker: So that's you as a depositor saying, hey, I want to earn some yield.
Speaker: I want to let people borrow my collateral and get some yield back.
Speaker: So maybe they have an ad liquidity function where you're providing
Speaker: collateral that can then be taken out by someone else.
Speaker: 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.
Speaker: So there's really not a single organization or company that's doing this.
Speaker: 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.
Speaker: Yeah.
Speaker: 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.
Speaker: 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?
Speaker: It's different for every single protocol.
Speaker: 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.
Speaker: Some of them are more automated.
Speaker: Things like Convex Finance, they use an automated approach.
Speaker: on top of something called Curve Finance.
Speaker: And Curve is kind of, think of it like a DeFi cornerstone.
Speaker: It supports the market in a lot of ways that I don't think people realize.
Speaker: What they basically do is they provide huge, deep, stable coin pools.
Speaker: 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.
Speaker: So they have an automated strategy there.
Speaker: And so you kind of have to
Speaker: evaluate each one that you want to deposit.
Speaker: Most people find one that's pretty good and they just kind of stick with it.
Speaker: Like, you know, if you can get 20% APY and anchor, anchor is a protocol on Terra.
Speaker: If you can get 20% every year on your money, why put it anywhere else?
Speaker: You're getting better returns for literally almost no work than someone who's investing actively in the stock market.
Speaker: I mean, most fund managers can't get that kind of return.
Speaker: No, absolutely.
Speaker: 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?
Speaker: Or is this something that like, you just kind of shouldn't touch unless you're prepared to study?
Speaker: There are plenty of applications that are
Speaker: 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.
Speaker: I'm not sure how many of them are there yet or are currently in beta.
Speaker: 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.
Speaker: And so you can put your money there and spend it with the debit card directly.
Speaker: 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.
Speaker: They're getting compared to traditional yield.
Speaker: They're getting hilarious interest rates, 20% APY.
Speaker: I mean, that works people's minds when I tell them that.
Speaker: And that's a simple strategy.
Speaker: That's not even a difficult one to do.
Speaker: So from a min max perspective, those DeFi for the masses apps are probably going to be best for the average person.
Speaker: Now, if you have any sort of technical chomps at all, this stuff is really not hard to understand.
Speaker: I mean, the concept of creating a wallet, a wallet is just 12 to 24 words that you need to keep safe.
Speaker: That's all it is.
Speaker: It's basically a key, a cryptographic key that gets you into something.
Speaker: So the actual core functionality is really easy to understand for most people.
Speaker: And then it's just a matter of getting comfortable sending transactions.
Speaker: I mean, the first time I made a six figure
Speaker: transaction, I was sweating bullets.
Speaker: So I get it.
Speaker: 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.
Speaker: 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?
Speaker: Yeah.
Speaker: Um, so, and in terms of the DeFi for the masses sort of apps, I think there's one coming to market now called
Speaker: Cash, K-A-S-H dot IO.
Speaker: And it leverages the anchor protocol on the Terra ecosystem.
Speaker: I think there's also another one called Kado Money, K-A-D-O.
Speaker: There's a lot more.
Speaker: I don't know how many of them are actually live yet for people to use.
Speaker: 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.
Speaker: 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.
Speaker: A vault is what they call these places where you actually deposit this money.
Speaker: And it's as simple as putting it in and letting it earn the yield.
Speaker: Sometimes you have to manually claim the rewards.
Speaker: And so you have to weigh, is it worth the gas fee?
Speaker: Gas is basically the transaction fee on the network.
Speaker: So you have to pay gas in order for your transactions to be processed.
Speaker: There has to be some incentive for the miners who actually run this blockchain to actually process your transaction.
Speaker: So that's why you pay gas.
Speaker: So you have to wait, is the value of the rewards worth the gas fee to claim yet?
Speaker: And there's some optimization you can do there as well.
Speaker: Yeah.
Speaker: So...
Speaker: 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.
Speaker: Yeah.
Speaker: 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.
Speaker: 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
Speaker: 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.
Speaker: 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.
Speaker: 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.
Speaker: 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.
Speaker: So that's what proof of work is.
Speaker: Proof of stake is different.
Speaker: Proof of stake involves validators and basically validators just say, yeah, that's a valid transaction.
Speaker: Think of it kind of like that.
Speaker: I'm dumbing things down, but that's essentially what it does.
Speaker: There's not a lot of electricity use.
Speaker: That's one of the big things with proof of stake versus proof of work.
Speaker: People are worried about the practical effects, both on electrical grids and for people who are into the climate change thing.
Speaker: They're worried about the actual carbon emissions of having a bunch of these computers doing this type of work.
Speaker: So that's one aspect with Ethereum.
Speaker: So Ethereum 2 is moving to proof of stake.
Speaker: What that's not going to do really is actually help reduce gas fees.
Speaker: What will help reduce gas fees is something called ZK rollups, zero knowledge rollups that
Speaker: and possibly a sharding structure.
Speaker: I know these are very technical terms and you don't really need to know much about them.
Speaker: Those two things would help gas fees, but ETH2 alone is probably not going to do it.
Speaker: A lot of people have moved to other chains because the gas fees on Ethereum are prohibitively expensive.
Speaker: I know I have.
Speaker: I mean, I'm not exactly a minnow in this space.
Speaker: And I don't want to pay $150 to send a transaction.
Speaker: I mean, if my broker charged me that kind of money to make a trade, I'd want to shoot the dude.
Speaker: We're back in like the 90s or even worse in terms of trading fees.
Speaker: Yeah.
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.
Speaker: 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.
Speaker: And I mentioned to hear like, what's your take on that?
Speaker: Or like, am I completely not even understanding the argument?
Speaker: No, you're, you're, you're, you're doing fine.
Speaker: I'm not super bullish on Bitcoin specific side chains for smart contracts.
Speaker: There are,
Speaker: some that do it and I probably need to spend more time playing with them so I have a better personal understanding.
Speaker: There's one called Stacks, S-T-A-C-K-S.
Speaker: And I know they have several applications running on it.
Speaker: I probably just need to play with them more.
Speaker: As far as Ethereum dominance, so outside of Bitcoin, you know, Ethereum was the first network to actually implement smart contracts.
Speaker: And there's a lot of other
Speaker: chains at this point that do it and there's a lot of them that do it faster and cheaper for the average person.
Speaker: So what does that practically mean?
Speaker: For an average person, they probably prefer to use those other networks.
Speaker: 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
Speaker: the decentralization.
Speaker: That's not to say that Ethereum is great.
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.
Speaker: So I'm not saying that Ethereum is Bitcoin level in terms of decentralization.
Speaker: It's not, but compared to its competitors, it's a lot further along than a lot of them are.
Speaker: Now,
Speaker: Bitcoin is the most decentralized network that I know of.
Speaker: I don't think anyone else even comes close.
Speaker: And it still has centralization problems.
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.
Speaker: I mean, if you could run it off a Raspberry Pi, that's one thing.
Speaker: But we're talking about devices that are selling for $5,000 to $10,000 a piece right now.
Speaker: and you're competing against farms to have thousands and thousands of these, right?
Speaker: I mean, that's kind of built into the nature of it, right?
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.
Speaker: Why don't you mine, like, 10 Bitcoins a day with this GPU?
Speaker: And so, like, which I didn't do.
Speaker: And I totally should have.
Speaker: Yeah.
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.
Speaker: it was always going to become kind of this, this like one of two things would happen with it.
Speaker: Either it wouldn't go to the moon and it wouldn't be worth mining anymore and people would just stop doing it.
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.
Speaker: Right, right, right, right.
Speaker: No, I agree.
Speaker: I actually think that one of the things you just mentioned there is probably one of the long-term things
Speaker: concerns with Bitcoin's longevity.
Speaker: You mentioned it's not worth it to mine it.
Speaker: So Bitcoin sustains its security model.
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.
Speaker: So it sustains itself by what's called a fee model.
Speaker: Anytime you send a Bitcoin transaction, you pay a network fee.
Speaker: And that network fee currently goes to the miners who mine it.
Speaker: There's also currently inflationary rewards.
Speaker: So there's only ever going to be 21 million of them, but they're not all in circulation right now.
Speaker: So every block that comes out, the miner of that block gets the block reward as an additional incentive to keep mine.
Speaker: Eventually, that block reward goes to zero.
Speaker: And it's like 140 years from now.
Speaker: So I won't be around for it, whatever.
Speaker: But it is going to be a problem at some point.
Speaker: I already think that Bitcoin is overpaying for security right now.
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.
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?
Speaker: That becomes a big deal if you're a believer that long-term Bitcoin can be a
Speaker: nation state level settlement network.
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?
Speaker: That's a big deal.
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.
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.
Speaker: You're sort of lying to the network.
Speaker: Yeah.
Speaker: Yeah.
Speaker: Imagine you had a Bitcoin and you traded it for a house.
Speaker: And then you turn around and trade it to someone else for three campers.
Speaker: You spent the same Bitcoin and the network thinks they're both valid.
Speaker: But obviously that's not possible, right?
Speaker: So that's the core problem here is that's like the number one thing you should never have happen.
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?
Speaker: Yep.
Speaker: And say that our record is authoritative and not yours?
Speaker: Yeah, pretty much.
Speaker: You may have heard of the 51% attack or 51% problem.
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.
Speaker: Right.
Speaker: So as long as...
Speaker: The mining power is distributed globally and such that not one massive nation state controls it all.
Speaker: That should be enough.
Speaker: I'm very heavily emphasizing should be enough to prevent something like a China takeover of it or a US takeover of it.
Speaker: Frankly, I mean I wouldn't necessarily want the American regime –
Speaker: fully controlling Bitcoin networks either, because they're going to start doing the thing that no one wants and censoring transactions.
Speaker: Right.
Speaker: And so if you were to sort of re-engineer Bitcoin again, if you had to do it over, uh,
Speaker: perhaps you would make it run out like sort of the hard cap on how many Bitcoin there can be produced.
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.
Speaker: Is that kind of where you're driving at or?
Speaker: Maybe, I don't know if there's a great answer to this.
Speaker: I mean, there were people who, before Satoshi worked on the problem of decentralized money.
Speaker: And like, this is a thing that's been worked on by some of the brightest minds.
Speaker: for the last 30 years.
Speaker: So I definitely am not going to say that my idea is better necessarily.
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.
Speaker: You know, obviously that's going to be
Speaker: so contentious that it will probably itself destroy the Bitcoin community.
Speaker: But it's a discussion for a future person, essentially.
Speaker: I won't be around by the time that's a problem, but I think it will probably be a problem.
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
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.
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.
Speaker: Yeah.
Speaker: Yeah.
Speaker: I mean, we've seen some big players move in and act in a very, um,
Speaker: cohesive manner with what the traditional Bitcoin community likes.
Speaker: People like Michael Saylor have done a great job of coming in, buying huge amounts of Bitcoin.
Speaker: I think they own like 110,000 Bitcoins at this point for micro strategy.
Speaker: Wow.
Speaker: So a very large percentage of the network.
Speaker: He went in hard.
Speaker: He made a hell of a bet and it's paid off for him.
Speaker: So it's good to see big players move in like that.
Speaker: And a lot of them try to
Speaker: at least to some degree, keep the original ethos.
Speaker: There was a little bit of controversy with him with the mining council of big miners.
Speaker: People worried, well, every time these people with this type of centralized power get together, bad things happen for the little guy.
Speaker: But I think he's managed to strike a pretty good balance between
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.
Speaker: I think he's managed to do a good job at straddling those.
Speaker: And so hopefully more people operate like him in that capacity and realize that.
Speaker: rather than trying to take over the network entirely, it's actually in everyone's best interest to cooperate.
Speaker: There's a common thing in crypto right now.
Speaker: People may see people with parentheses and then three comma three inside parentheses on Twitter.
Speaker: Okay.
Speaker: It's basically a game theory allusion to if we all cooperate, it's a, the three comes from a mathematical
Speaker: equation on, you know, cooperation versus defection.
Speaker: The prisoner's dilemma?
Speaker: Yeah, yeah.
Speaker: If we all cooperate, everyone wins.
Speaker: Right.
Speaker: That's essentially what it is.
Speaker: So the more big players who come to that view, the better for everyone.
Speaker: Yeah.
Speaker: You're talking to an econ major.
Speaker: I understood that reference.
Speaker: Okay.
Speaker: I just make it sure.
Speaker: Not everybody gets it at first.
Speaker: It was nice.
Speaker: It was really nice to have something where I could be like, yes, I got that one.
Speaker: Hey, I know what that is.
Speaker: So I'm a believer in, so like my business school had a whole module on crypto right now.
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.
Speaker: Yeah.
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
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
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
Speaker: You own these NFTs, which are your sword, your hat, your shield, and these shoes of magical plus five speed.
Speaker: Right.
Speaker: Right.
Speaker: So you can verify that you can take these things with you.
Speaker: There's even projects out there that are trying to build like a base layer NFTs and they're just words.
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.
Speaker: So imagine, I'll give you an example.
Speaker: Imagine you got a two-handed sword as a word, right?
Speaker: So now whenever you integrate with a game that supports this type of project,
Speaker: they will have an asset that corresponds to the, to that word, a two handed sword.
Speaker: And now that becomes your in-game asset.
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.
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,
Speaker: You still have to rely on the game developers to create environments where your NFTs are relevant, but it's your NFT.
Speaker: Yes.
Speaker: Yes, exactly.
Speaker: No one can take it from you.
Speaker: It's kind of funny because the Ethereum, and this is just something I've heard.
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.
Speaker: getting his, I think it was a World of Warcraft character taken away from him or nerfed or something.
Speaker: Oh yeah.
Speaker: I've heard that story.
Speaker: And he thought, you know, you should never be able to do that to someone.
Speaker: That was mine.
Speaker: And that's the concept behind this is this NFT is mine.
Speaker: You cannot take it from me.
Speaker: You cannot modify it.
Speaker: Only I own it.
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.
Speaker: I thought that was pretty interesting.
Speaker: So.
Speaker: There's a bunch of games coming out that I am like hyper bullish on.
Speaker: Ember Sword, Olivium, Missing Frontier.
Speaker: Those are some big name games coming forward that have blockchain integrations.
Speaker: And I think they're going to be huge.
Speaker: I mean, you have people who play video games literally all the time and they spend money to do it.
Speaker: And now you're telling me that I can play video games and get paid to do it.
Speaker: Like you earn in-game tokens that are worth money.
Speaker: Oh, yes.
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.
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.
Speaker: But but in this case, it's like, let's just embrace this model of like making money while you game.
Speaker: Yeah, there's a bunch of people in the Philippines making their their salary.
Speaker: playing Axie Infinity and revenue splitting it with people who sponsor them and give them the assets to play with.
Speaker: Yeah.
Speaker: And then you've got, I mean, then you've got so much more.
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.
Speaker: But they're all about
Speaker: like maximal engagement, how much can we suck people in?
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.
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.
Speaker: I'm realizing that I'm in, I'm in the cave.
Speaker: Right.
Speaker: But that's a great analogy.
Speaker: But this creates another layer of abstraction.
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.
Speaker: Yeah, I mean, there's sociological.
Speaker: Right.
Speaker: Right.
Speaker: Right.
Speaker: It creates this additional layer of abstraction where the thing feels real.
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.
Speaker: That's wow.
Speaker: I got to think about that one.
Speaker: That's a, that's kind of spooky.
Speaker: Yeah.
Speaker: I mean, in one way it provides an income source for people in third world countries that have an internet connection.
Speaker: Sure.
Speaker: I mean,
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.
Speaker: So we can't say it's all bad because people are literally surviving with this stuff.
Speaker: I mean, as all technology, it's going to be a double-edged sword.
Speaker: It always is.
Speaker: There are no free lunches.
Speaker: Sure.
Speaker: Sorry, I want to go back to what you said about like their revenue sharing with the person who owns the NFT.
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?
Speaker: Yeah, it's you can do that thing.
Speaker: It's called a scholarship.
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.
Speaker: Yeah, I know some people who do it and it seems to be quite, quite profitable.
Speaker: for everybody involved.
Speaker: Yeah.
Speaker: Yeah.
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.
Speaker: It's almost all FinTech.
Speaker: Yeah.
Speaker: Um, yeah.
Speaker: So that's, I mean, that's where, that's where it all started.
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.
Speaker: I was never a maxi, but I was always an enthusiast.
Speaker: Um,
Speaker: Money is an application.
Speaker: Like the ability to store value long-term is an application.
Speaker: And it's something that people in Lebanon, Venezuela, Argentina absolutely wish they had.
Speaker: So, you know, that was the original killer use case.
Speaker: And people talk about Bitcoin being a dumb pet rock, but there's nothing else out there that stores value quite like it.
Speaker: Um,
Speaker: And I think that's going to be its killer use case for all time, basically.
Speaker: Yeah, you definitely tend to think of these things from a first world perspective.
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...
Speaker: correlate with Bitcoin and they're sort of using that as a negative for Bitcoin.
Speaker: But like compared to like El Salvador, I think was who just adopted Bitcoin as a legal tender.
Speaker: And like from their perspective, those problems are not even problems.
Speaker: Like it's not even close to it.
Speaker: Literal first world problems.
Speaker: Right.
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.
Speaker: Can you tell me a little bit about your DAO, how it's organized and sort of in general, what is a DAO?
Speaker: Yeah, so I'm a member of 0x Ventures.
Speaker: 0x coming from the first two characters of Ethereum addresses.
Speaker: And it's a structure that a lot of chains have adopted.
Speaker: Anything that's Ethereum compatible starts with a 0x address.
Speaker: So what a DAO is, is it's a group of people who have come together to work together towards a common goal.
Speaker: Our common goal is to work with
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.
Speaker: Um, and then also to make a financial return for us.
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.
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?
Speaker: So the way it works is we really have no centralized, um,
Speaker: vertical hierarchy.
Speaker: It's a flat, horizontal hierarchy.
Speaker: Anyone can make a proposal.
Speaker: Major decisions have to be voted on and approved by everybody.
Speaker: We don't have hard numbers, unlike there must be a quorum of so many people who agree.
Speaker: We've never had those kind of issues come up.
Speaker: That's a discussion for a future day.
Speaker: But most people are very involved with the DAO, so they already see the proposals early on.
Speaker: So
Speaker: Anybody can propose pretty much anything.
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.
Speaker: And everybody kind of contributes according to what they can do.
Speaker: So I have a bit of an engineering background.
Speaker: I've been a software engineer for more than a decade.
Speaker: I do split product management and engineering management at the moment.
Speaker: But I've been hands-on in the code for more than a decade.
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.
Speaker: And so I can kind of see how far along are they?
Speaker: What does the code generally look like?
Speaker: Is this feasible?
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?
Speaker: So that's some of the things that I contribute.
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.
Speaker: So maybe what is the utility of organizing this sort of democratic process under a DAO?
Speaker: Yeah, so I don't know any of these people in real life.
Speaker: They don't know me.
Speaker: They don't have to know me.
Speaker: I don't have to know them.
Speaker: We can use the blockchain itself to do this stuff in a fairly trustless manner.
Speaker: It also allows us to pull in people as we need.
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.
Speaker: There's no corporate structure.
Speaker: We don't have to file any paperwork.
Speaker: There's no legal structure.
Speaker: issues there.
Speaker: It's a little bit cowboyish in that there is no legal recourse there, right?
Speaker: I mean, this is a totally kind of new structure.
Speaker: And to some degree, there's trust involved.
Speaker: To other degrees, there's not.
Speaker: The blockchain is what the blockchain says, you know.
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.
Speaker: And the element of trust was that that person wasn't going to run off with our money.
Speaker: So maybe the advantage is like, I mean, you can always vote.
Speaker: You can always make decisions immediately.
Speaker: in a flat, low hierarchy kind of way, but the advantage of the Dow is that it escrows your funds.
Speaker: Is that, am I picking that up?
Speaker: Yeah, to some degree.
Speaker: I mean, we still have people who actually send the money out and it's controlled by a multi-sig wallet.
Speaker: So there have to be multiple signers on the treasury funds before it actually moves from the wallet.
Speaker: You can set them up in different ways.
Speaker: So you can do like a two of three or a three of five, four of seven,
Speaker: Basically a majority of signers have to give approval.
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.
Speaker: And you can organize those rules however you want to sort of up to you.
Speaker: Yeah.
Speaker: Yeah.
Speaker: And we can, you can revise them in the future.
Speaker: I mean, if I wanted to propose tomorrow that we strip someone of the multi-sig, I could.
Speaker: Do I want to do that?
Speaker: No, I like the people who currently do it.
Speaker: But you know, the point is you can make these changes on the fly.
Speaker: Um, you can make these proposals on the fly and everyone gets a voice.
Speaker: What are some other interesting applications of a DAO?
Speaker: Yeah.
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.
Speaker: Um,
Speaker: Any sort of communities like this could become a DAO.
Speaker: There are tools being built out there specifically to help with DAO administration.
Speaker: I'm blanking on the names of them.
Speaker: I've seen them around.
Speaker: They look like they're making good progress.
Speaker: Typically that involves things like proposals and voting, treasury management, internal communications.
Speaker: So beyond like a Slack or a Discord channel, et cetera.
Speaker: Yeah, so one of the challenges for exit group is varying levels of OPSEC.
Speaker: And right now, the solution to that OPSEC problem is that I'm sort of the trusted node.
Speaker: And I always ask before I disclose any information about anybody that they haven't already disclosed.
Speaker: And there's a lot of people relying on me to keep their information safe.
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.
Speaker: So that's really interesting.
Speaker: Yeah, and I mean, like, you can't prevent someone from saying, hey, I'm so-and-so in a chat.
Speaker: Sure.
Speaker: Like, nothing's going to stop that, right?
Speaker: But for, I know for our DAO,
Speaker: There's maybe one or two people who know who I am.
Speaker: The rest of them all know me as TAC or tactical minivan.
Speaker: There's really no need to see my face, know my name, know what my email is.
Speaker: None of that.
Speaker: There's no need for it.
Speaker: And so I can choose what I want to share.
Speaker: I like that structure.
Speaker: Personally, I don't think there's a lot of benefits to being
Speaker: Doxed even among people you trust in an online environment.
Speaker: I really just don't see the value.
Speaker: Either what you say has value on its own or it doesn't.
Speaker: I know that's a very, what's the best word for this?
Speaker: 4chan-ish?
Speaker: Well, that's the old-timey ethos of the web, right?
Speaker: I mean, that was, it should be about what you say.
Speaker: It shouldn't be about who you are.
Speaker: It doesn't matter what my credentials are.
Speaker: Right.
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.
Speaker: And that's, that's when you open up those vulnerabilities.
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.
Speaker: Yeah.
Speaker: It's just like with anything you choose when you want to self-doct to people.
Speaker: Right.
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.
Speaker: How do you go about evaluating prospective investments and what's different about your approach?
Speaker: Yeah.
Speaker: So,
Speaker: You know, when we look at a new investment, there's, we kind of go through a sniff test, right?
Speaker: Do initial things look good?
Speaker: So you look at things like fully diluted value.
Speaker: Basically what it means is how much is the whole dang thing worth on the market?
Speaker: You look at, you know, how far along is the project in development?
Speaker: how much of the tokens does the team have locked up and invested?
Speaker: Like if the team gets all of their tokens in the first three months, that's a big red flag for me.
Speaker: No, you have no serious vesting here that would require you to input and make this thing better over the long term.
Speaker: So I'm not interested.
Speaker: For things that, you know, kind of meet those, it moves on to a more deep analysis of
Speaker: The concept itself, the tokenomics.
Speaker: So tokenomics, meaning what sort of value accrual comes back to the token itself.
Speaker: Why does the token have value is ultimately the big question there.
Speaker: There are some tokens that don't have value, like the Yearn Finance token.
Speaker: I don't know why people buy that.
Speaker: I have no idea why people buy that.
Speaker: The value accrual there is horrible.
Speaker: I don't get it.
Speaker: I personally would never buy the token.
Speaker: They just sort of think that they're investing in the yearn business, kind of?
Speaker: They think they're kind of buying stock in yearn?
Speaker: I guess.
Speaker: I think that's what it is.
Speaker: But the actual mechanisms that control value accrual are simply not there.
Speaker: At least they weren't when I looked.
Speaker: I don't even know when it was, months ago.
Speaker: When I looked at it, I was like, why are people buying?
Speaker: I don't get it.
Speaker: I guess the why is there's a lot of dumb money out there.
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.
Speaker: Most of the time, there's a core concept behind the product itself.
Speaker: And you have to ask yourself, does the core concept have value on its own?
Speaker: Look past the window dressing.
Speaker: What is the problem they're trying to solve?
Speaker: And does the solution actually solve it?
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.
Speaker: And so you just wanted to dig in more and hear more about it and ask more questions of the team.
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.
Speaker: It's just a communication problem.
Speaker: And so you have to decide at that point, do you want to move forward with it or not?
Speaker: And we did, and it's one of the projects I'm most excited about, actually.
Speaker: I think they're solving an absolutely foundational problem for one of the blockchains.
Speaker: And I'm excited to see it come to fruition.
Speaker: Yeah.
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.
Speaker: So how would you direct someone who wants to learn how to develop crypto, like as a blockchain engineer?
Speaker: Yeah.
Speaker: So...
Speaker: I think the easiest way to do that, there's a fella by the name of Patrick Collins.
Speaker: He works for Chainlink and he has made this 16 hour, yes, 16 hour YouTube video.
Speaker: And it's broken down into sections, different types of blockchain development.
Speaker: You know, they build on one another as you go.
Speaker: That's been by far the best introduction.
Speaker: to blockchain development that I've seen.
Speaker: It teaches you some initial solidity, which is the language that you use to write Ethereum smart contracts with.
Speaker: And it also relies on Python.
Speaker: And so it kind of assumes you have some programming knowledge when you use those things.
Speaker: So you can't just come into it with absolutely no knowledge of programming.
Speaker: You kind of have to learn the basics first.
Speaker: But that is by far the best and most comprehensive introduction to blockchain programming I've seen so far.
Speaker: Okay.
Speaker: So a guy like me, I've got some Python, some JavaScript, some VBA.
Speaker: Like, in other words, I sort of have triangulated how to do logic, how to do syntax.
Speaker: It's sort of at that range of expertise where, like, I probably couldn't...
Speaker: necessarily build a tool that was very useful all by itself, but I can maybe troubleshoot one.
Speaker: Um, yeah, you can understand that.
Speaker: So someone at that level could probably pick this up and, and start developing apps.
Speaker: Yeah, I think so.
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.
Speaker: So you can actually go look at the smart contract code itself on the blockchain.
Speaker: Okay, cool.
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?
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?
Speaker: Or is there sort of a, like an investor tier level of knowledge that's appropriate?
Speaker: On the latter question about
Speaker: code knowledge in order to evaluate it, I say no, not really.
Speaker: There's plenty of people who know nothing about actual blockchain development who do crypto investing full-time.
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.
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
Speaker: And they decide, hey, am I bullish on this asset, right?
Speaker: So the average person signs into Coinbase and they look and they say, cool, XRP is 20 cents.
Speaker: What if it goes to a dollar?
Speaker: How about I buy that now?
Speaker: Okay, that's one way to do it, right?
Speaker: I mean, that's the driving impetus behind a lot of this is unit bias.
Speaker: Oh, it's cheap.
Speaker: I can own a million of it and feel rich.
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?
Speaker: So you kind of have to look at the broader picture here other than just, oh, wow, it's cheap.
Speaker: Let's buy.
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
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?
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.
Speaker: The other things that I tend to look for is I try to look for, um,
Speaker: Other fundamental questions.
Speaker: So when I'm evaluating something, I think, you know, is this an inflationary thing?
Speaker: Like for the Cosmos ecosystem, Atom is inherently inflationary.
Speaker: I don't think there's any long-term caps on growth there.
Speaker: Ethereum was inherently inflationary before the EIP-1559 change that took place earlier this summer.
Speaker: Now Ethereum- Did that impose a cap?
Speaker: It doesn't, it doesn't impose a cap.
Speaker: What it does is every time a mine or a block is mined, it burns part of the Ethereum supply.
Speaker: So you have this interplay between the inflationary Ethereum emissions versus the burned Ethereum.
Speaker: It's not necessarily inflationary or deflationary.
Speaker: They basically give themselves a lever
Speaker: by which to modify that over time, similar to how the federal reserve can increase or decrease the money supply.
Speaker: You can achieve the same thing through these sorts of emissions and burns.
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?
Speaker: Yeah.
Speaker: And it's not going to be a single person making that decision.
Speaker: I mean, it's going to be something that goes through governance and gets changed.
Speaker: through that.
Speaker: Now, that's part of the reason that people may not want to invest in Ethereum is that can be changed, right?
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.
Speaker: And then there's other things like the novel tokenomics of some of these.
Speaker: So I've mentioned the Terra Luna relationship before.
Speaker: Terra is the protocol.
Speaker: And Luna is the native asset.
Speaker: So the way that ecosystem is set up, you have there, it's kind of evolves around a stable coin called UST.
Speaker: UST is the native stable coin of the Terra ecosystem.
Speaker: Whenever you want to ARB that to back to $1, you either burn or mint Luna.
Speaker: And so you get this narrative and I'm just gonna call it a narrative because
Speaker: Whether it's true or not doesn't really matter.
Speaker: Most of the space functions on narrative.
Speaker: We're still very early and we're kind of at that stage.
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.
Speaker: I mean, they're launching a lot of big things coming where it's going to increase demand for UST significantly.
Speaker: But as more is minted, the supply of Luna goes down because Luna is being burnt in order to mint it.
Speaker: It's a very novel mechanism for maintaining a peg, a $1 peg.
Speaker: That's the narrative, right?
Speaker: And so people are buying into it.
Speaker: I mean, this thing has gone absolutely nuts.
Speaker: I think it's $52 now.
Speaker: I remember during the crash earlier this summer, I think it went down to like $10, $10 to $15 at the time.
Speaker: And so it's made a heck of a run since then.
Speaker: So you have to look at those type of interesting things.
Speaker: tokenomics as well and those kind of unique mechanisms.
Speaker: Now, the mechanism itself is very bullish for Luna in terms of price.
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.
Speaker: That's a beautiful narrative.
Speaker: What you also have is that there's a lot of reflexivity in that relationship.
Speaker: And what I mean by that is as imagine a flash crash happens.
Speaker: Imagine we have a COVID style
Speaker: Bitcoin meltdown, the markets crash 50% in a day, whatever.
Speaker: That price of Luna and UST is going to kind of crash at the same time.
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.
Speaker: So
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.
Speaker: And I don't really know if you can get around that.
Speaker: It's just kind of inherent to the relationship between UST and Luna.
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.
Speaker: Whether that will actually do
Speaker: do what they think it will, I don't know.
Speaker: At least it's a good play and they have it on their radar.
Speaker: Right, so maybe you'd buy that if you just wanted a pro-cyclical, a way to lever up.
Speaker: Yeah.
Speaker: And sort of play into what the market's doing.
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.
Speaker: Man.
Speaker: Okay.
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.
Speaker: And I wanted to get your thoughts on like, am I an idiot?
Speaker: What, like I, all I basically know about link is that people say it's good.
Speaker: Like I know it has something to do with smart contracts.
Speaker: That's about the extent of it.
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.
Speaker: And yeah, please go ahead.
Speaker: Yeah.
Speaker: I'll explain.
Speaker: the problem that Chainlink is trying to solve.
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.
Speaker: So if you reach out to a third party API, imagine you needed weather for some reason.
Speaker: So you wanted the weather in New York City.
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.
Speaker: And so it should give you different results, which is clearly not what you want on a deterministic system.
Speaker: So Chainlink has built a way to integrate third-party external information into its own internal blockchain that can be replayed
Speaker: by these other blockchains and it injects that data into those blockchains so that it can read from it.
Speaker: It's a critical service.
Speaker: Most of these apps and protocols simply would not exist without it or without similar Oracle systems.
Speaker: I think of it as crypto infrastructure.
Speaker: So the problem with Chainlink is
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.
Speaker: So there's consistent sell pressure on the coin.
Speaker: I think there are things that they could do to give it more value accrual, but obviously I have no hand in that.
Speaker: I think it's probably a pretty good play long term.
Speaker: I mean, they serve almost every blockchain hub.
Speaker: And the ones that they don't serve, I would guarantee they're working on integrations for.
Speaker: So I like infrastructure plays personally.
Speaker: You know, there's the old saying of in a gold rush, sell shovels.
Speaker: I think it's a smart strategy.
Speaker: I just wish that they could implement a few other mechanisms that would drive more value accrual to the token itself.
Speaker: So it's kind of like...
Speaker: what you were saying about yearn where the value that the service is providing is really, really good.
Speaker: It's just not sure how that, how that value is encapsulated in the token.
Speaker: Yeah, pretty much.
Speaker: So you're saying it's still maybe a good long-term play because they may solve that value accrual problem.
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.
Speaker: Yeah, exactly.
Speaker: So there's a,
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.
Speaker: So I'm going to go back to Ethereum.
Speaker: So Ethereum, the price has gone nuts.
Speaker: It's like $4,700 last time I looked at it per Ethereum.
Speaker: That's great, and that's cool.
Speaker: But Ethereum's core premise from the beginning was to be a world computer.
Speaker: And when you're
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.
Speaker: I liken it to oil.
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?
Speaker: Industrial society would grind to a halt because the economic impact of activities would be less than just buying and holding oil.
Speaker: So I'm wondering how they're going to solve that problem.
Speaker: It seems that for platforms that actually want to be computational platforms or at least widespread ones, they would want a token where...
Speaker: It didn't necessarily have a ton of value accrual to the underlying token.
Speaker: Kind of goes to something that people call the fat protocol thesis or alternatively the thin protocol thesis.
Speaker: Like what happens when there's more value just from holding the thing than there is from transacting and using the network itself?
Speaker: Right.
Speaker: I don't think that's something that a lot of people have thought about.
Speaker: I mean, it's something I've always criticized Ethereum for back before I even started getting onto these other smart contract platforms.
Speaker: is how do you overcome that?
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.
Speaker: I mean, for me, $150, you know, drives me absolutely nuts.
Speaker: I can't handle that.
Speaker: I just won't use it.
Speaker: Right.
Speaker: But for JP Morgan to send $5 billion across the network.
Speaker: All right, 150 sure.
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.
Speaker: I don't know.
Speaker: I don't have an answer to that.
Speaker: It's just been something I've been thinking about and kind of sparked that thought as we were discussing
Speaker: you know, chain link and the value accrual there.
Speaker: Yeah, that's a really important point.
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.
Speaker: And, and, you know, we'd stop all hell to orb, right?
Speaker: All hell to orb.
Speaker: That's right.
Speaker: Yeah.
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.
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,
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
Speaker: Yeah, I mean, the concept of lengthening cycles and diminishing returns is becoming a popular one.
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.
Speaker: We're just we're at 67, I think.
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.
Speaker: Now, is it worth 100x from 50k?
Speaker: I don't know.
Speaker: How are you drawing that comparison?
Speaker: Is it like a single Bitcoin equating to a pound of gold?
Speaker: Because an ounce of gold is like, what, 1,800 or something?
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.
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.
Speaker: Oh, I see.
Speaker: Okay.
Speaker: Okay, that makes sense.
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.
Speaker: So 21 million will never... Boy, can you imagine the horror?
Speaker: Oh, dude.
Speaker: The agony?
Speaker: I mean, what do you do other than just cry?
Speaker: I don't know.
Speaker: I don't know.
Speaker: But there will never be 21 million Bitcoin actually liquid on the market.
Speaker: Right.
Speaker: Most of these are going to be locked up in long-term cold storage.
Speaker: And a lot of them are going to be lost.
Speaker: Probably three to four million of them are probably going to be lost, frankly.
Speaker: And so the amount of liquid Bitcoin is going to be pretty small, I think.
Speaker: Yeah.
Speaker: And so it may be that even if Bitcoin sort of in absolute terms...
Speaker: will turn out to have been more important to the overall ecosystem than any of these other altcoins.
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.
Speaker: Yeah.
Speaker: To be transparent, I own Bitcoin.
Speaker: I own some Ethereum.
Speaker: Almost all of my portfolio, however, is in seed round projects that I'm personally bullish on and other small early stage projects.
Speaker: dApps, protocols and layer ones.
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.
Speaker: So what is the, just to get into more personal territory, what is the dream for you?
Speaker: Like, are you going to be kind of playing in this space forever just because you find it fun?
Speaker: Or is there like an island in the Caribbean that you've got your eye on somewhere?
Speaker: I'm not really a Caribbean type of guy.
Speaker: I'm a, I'm fly over America born and bred.
Speaker: Like, I don't know, beaches are okay, but I get a little bored.
Speaker: So yeah.
Speaker: I guess for me, I'm probably going to play in this, at least for the foreseeable future.
Speaker: My goal here is to do this 100% full time.
Speaker: I'm pretty close to that, to where I feel comfortable doing exactly that.
Speaker: I really like the space.
Speaker: I love seeing all the new technological stuff that's coming out, helping projects along, that sort of thing.
Speaker: And I think that my engineering background helps me in that to a large degree.
Speaker: So I'm probably going to just keep doing this for quite a long time.
Speaker: I would be pretty bored if I retired.
Speaker: I'll be honest.
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.
Speaker: All right.
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.
Speaker: Yeah, of course.
Speaker: Tactical Minivan is an exit member in our group.
Speaker: He's part of the Zero X Ventures Venture Capital Group.
Speaker: And his Twitter account is Raytheon, W-R-A-I-T-H-E-O-N-N.
Speaker: And you can find him there.
Speaker: Thanks so much for taking the time.
Speaker: Of course.
Speaker: Thanks for having me.
