a16z’s State of Crypto: The $4 Trillion Milestone and What’s Next’

0:00:03 Crypto sure does feel exactly like a 17-year-old, right?
0:00:06 Like just nearing the end of adolescence,
0:00:07 starting to step into adulthood,
0:00:11 being taken seriously by the other adults in the room,
0:00:12 but still plenty of growing up left to do.
0:00:15 Every bank I’ve ever spoken with
0:00:16 wants to talk about stablecoins,
0:00:17 every financial institution,
0:00:20 and then small companies, merchants.
0:00:22 They feel totally inevitable now to the mainstream.
0:00:24 Bitcoin specifically now,
0:00:26 it’s a top 10 asset in the world.
0:00:29 Crypto certainly has become a meaningful part
0:00:30 of the modern economy today.
0:00:32 People say people don’t care about privacy, whatever.
0:00:35 No, of course they care about privacy.
0:00:36 People take it for granted.
0:00:37 That’s what they mean by don’t care.
0:00:39 But they have expectations.
0:00:45 Crypto just turned 17,
0:00:47 and it’s finally being taken seriously
0:00:48 by the adults in the room.
0:00:51 Today, you’ll hear from Darren Matsuoka
0:00:53 and Eddie Lazarin of A16Z Crypto
0:00:55 on their 2025 State of Crypto Report.
0:00:58 They cover how the industry hit $4 trillion in market cap
0:01:01 while developers mysteriously stayed away,
0:01:04 why stablecoins are now a top 20 holder of US debt
0:01:07 and the perfect storm of institutional adoption
0:01:08 that’s actually real this time.
0:01:11 We discuss the distributed price innovation cycle
0:01:13 where meme coins couldn’t attract builders,
0:01:16 why privacy will become non-negotiable
0:01:17 as crypto goes mainstream,
0:01:20 and what happens when crypto turns 18 next year,
0:01:22 becoming a legally liable adult
0:01:24 with real regulations and consequences.
0:01:26 Let’s get into it.
0:01:28 Welcome to Web3 with A16Z.
0:01:30 I’m your host, Robert Hackett.
0:01:32 Today, we’re taking you behind the scenes
0:01:36 of A16Z Crypto’s 2025 State of Crypto Report.
0:01:39 Each year, this report takes stock
0:01:40 of where the industry stands,
0:01:42 cutting through the noise to capture a snapshot
0:01:45 of crypto’s evolution across markets,
0:01:48 technology, policy, culture, and more.
0:01:50 Now in its fourth edition,
0:01:51 the State of Crypto Report reflects
0:01:53 how this once-fringed technology
0:01:57 has recently hit all-time highs and gone mainstream,
0:02:00 from stable coins and tokenized assets
0:02:03 to rapid recent adoption by major financial firms.
0:02:06 In this episode, we’ll dig into the findings
0:02:07 and themes from this year’s report
0:02:08 with some of its authors,
0:02:11 including lead author Darren Matsuoka,
0:02:14 A16Z Crypto’s head of data and funds strategy,
0:02:16 and Eddie Lazarin,
0:02:18 A16Z Crypto’s chief technology officer.
0:02:22 We’ll also talk about what’s changed since last year,
0:02:24 where crypto stands in its stages of development,
0:02:27 why stable coins are suddenly taking over,
0:02:31 and how institutions from fintechs to legacy banks
0:02:32 are embracing the technology.
0:02:36 We’ll also look ahead at trends like privacy
0:02:37 and tokenization,
0:02:40 and what the next phase of crypto’s adulthood
0:02:41 might look like.
0:02:44 You can find the report in this episode’s show notes
0:02:47 and at a16zcrypto.com
0:02:49 slash stateofcrypto2025.
0:02:51 Also be sure to check out
0:02:53 our new State of Crypto data dashboard,
0:02:55 which you can also find on our site.
0:02:56 As always,
0:02:58 none of the following should be taken
0:03:01 as investment, business, legal, or tax advice.
0:03:04 Please see a16z.com slash disclosures
0:03:05 for more important information,
0:03:08 including a link to a list of our investments.
0:03:18 All right, so before we even get into the findings
0:03:19 of this year’s report,
0:03:20 I want to take a step back and ask,
0:03:23 what is the State of Crypto Report?
0:03:25 Why do we do it each year?
0:03:26 With so much happening,
0:03:28 with so much noise,
0:03:30 with so much at the technical level,
0:03:31 infrastructural level,
0:03:33 so much just beneath the surface,
0:03:36 I think it is incredibly helpful
0:03:38 if someone goes in
0:03:39 and sweeps it all together
0:03:41 and just takes a snapshot
0:03:43 that allows you to place yourself
0:03:44 in the history of the unfolding
0:03:47 of some new kind of technologies.
0:03:49 And that’s why we do it.
0:03:52 A16z’s role is to bring the periphery
0:03:53 to the mainstream,
0:03:54 the periphery of technology, of course.
0:03:58 And crypto is,
0:03:59 although it is mainstreaming
0:04:01 in very notable ways,
0:04:03 which is a theme of the report,
0:04:05 it still remains on the periphery
0:04:07 because it’s inscrutability,
0:04:10 it’s infrastructure heaviness,
0:04:13 the subculture of its people,
0:04:16 you know, things make it hard to understand.
0:04:18 And so the report is our attempt
0:04:20 to try to crystallize
0:04:23 a moment in time every year or so
0:04:25 and share it with everyone.
0:04:25 It’s like,
0:04:28 take the unevenly distributed future
0:04:30 and distribute it more evenly.
0:04:33 It’s also our fourth year doing the report.
0:04:35 which sort of gives us a cool lens
0:04:38 to kind of see how things have changed
0:04:39 and evolved over the years
0:04:40 since we started doing this.
0:04:45 and that’s also something that we like to look at year over year
0:04:48 to see what are the trends that are emerging
0:04:49 and what is falling off
0:04:50 and, you know, everything in between.
0:04:53 Yeah, I always have a lot of fun looking at past editions.
0:04:55 It’s always pretty interesting to see
0:04:57 how things have shifted and changed
0:04:59 because there are lots of changes that happen.
0:04:59 Oh, yeah.
0:05:02 There’s many things unexpected in some way,
0:05:04 sometimes unexpectedly prophetic.
0:05:07 In other ways, a little goofy.
0:05:08 There is goofiness.
0:05:10 But hopefully this report, as you said,
0:05:12 it will do our signature move,
0:05:14 which is to separate the signal from the noise.
0:05:17 And with that, I think let’s dive in.
0:05:19 Let’s talk about this year’s report.
0:05:23 What, in your view, changed this year
0:05:24 compared to last year?
0:05:26 I think the surprising thing
0:05:29 is that on essentially every front,
0:05:31 essentially every front,
0:05:33 crypto is mainstreaming.
0:05:35 The numbers are becoming clearer,
0:05:38 more specific, larger, faster,
0:05:40 in every dimension.
0:05:41 We talked a lot last year
0:05:44 about stablecoins finding product market fit.
0:05:46 Well, that has kind of been
0:05:48 one of the big themes of 2025
0:05:51 when we, and people have obviously
0:05:52 been talking about stablecoins,
0:05:54 but I think everyone agrees
0:05:56 they are now in a completely different place.
0:05:57 They feel totally inevitable
0:05:58 now to the mainstream.
0:05:59 We were saying they were inevitable
0:06:01 a year ago
0:06:03 and that they had hit product market fit.
0:06:06 Now I think I’ve heard the cable news
0:06:07 talking about stablecoins, right?
0:06:09 I see headlines about stablecoins.
0:06:12 Every bank I’ve ever spoken with
0:06:13 wants to talk about stablecoins.
0:06:15 Every financial institution
0:06:17 and then small companies, merchants,
0:06:18 everybody’s talking about them.
0:06:19 There was a great headline, by the way.
0:06:20 It was like,
0:06:21 there’s a new cryptocurrency
0:06:22 called stablecoin.
0:06:23 Here’s what you should know.
0:06:24 Yeah, which is unreal.
0:06:26 That’s when you really know you’ve made it,
0:06:27 when the boomers trip over themselves
0:06:28 trying to understand you.
0:06:30 But that’s just one example.
0:06:33 You know, ZK proofs have accelerated.
0:06:35 Privacy has reached
0:06:37 a surprising early stage
0:06:39 of some indications
0:06:40 of product market fit,
0:06:42 not in the same way as stablecoins.
0:06:44 interesting stuff with X402,
0:06:45 AI payments,
0:06:47 the agentic economy,
0:06:48 as some people say.
0:06:50 That’s still very nascent in my mind.
0:06:51 Right?
0:06:52 But if you take each of these fronts,
0:06:54 they’re all plugging
0:06:56 into different critical aspects
0:06:57 of crypto and advancing.
0:06:59 And you can see just
0:07:00 unmistakable signs of progress
0:07:02 and mainstreaming
0:07:03 across the entire industry.
0:07:04 That to me is,
0:07:06 it’s almost like a perfect storm, right?
0:07:09 You look down at a hurricane
0:07:10 from the sky, right?
0:07:11 From way up there.
0:07:12 It looks a lot different
0:07:13 than when you’re
0:07:14 in the middle of it
0:07:15 or just beside it, right?
0:07:17 It’s kind of hard to see the shape,
0:07:18 maybe somewhat menacing.
0:07:20 But if you see it from orbit,
0:07:21 you see the structure.
0:07:22 You see the order.
0:07:25 You see the accumulation
0:07:26 of structure in the thing.
0:07:27 And that’s how you know
0:07:28 that it’s real.
0:07:29 That’s what makes it
0:07:30 a discrete object.
0:07:31 Like our industry
0:07:32 is reaching that point
0:07:34 where all the sort of forces
0:07:35 are coalescing
0:07:36 and connecting together
0:07:37 along with the rest
0:07:38 of the economy
0:07:39 in a way that to me
0:07:42 underscores its inevitability
0:07:43 and its realness.
0:07:44 I think that’s a really
0:07:45 apt analogy too.
0:07:46 This is an industry
0:07:48 that has hurricane force winds.
0:07:51 And even when it appears
0:07:52 to be nice and pleasant
0:07:52 and tranquil
0:07:53 and you’re just sort of,
0:07:55 you know,
0:07:56 things are steady.
0:07:58 You mean when you’re offline, Robert?
0:07:59 Yeah, when you’re offline.
0:08:00 It usually means
0:08:01 it’s the eye of the storm
0:08:02 and it’s just a brief reprieve
0:08:04 until the madness begins again.
0:08:05 Yeah.
0:08:06 Another way I like to think
0:08:07 about this is
0:08:09 I use this kind of silly analogy
0:08:10 with crypto
0:08:11 as a 17-year-old, right?
0:08:13 So the Bitcoin white paper
0:08:15 was released in October 2008,
0:08:15 actually,
0:08:17 which means the industry
0:08:19 is now 17 years old, right?
0:08:22 And crypto sure does feel
0:08:24 exactly like a 17-year-old, right?
0:08:25 Like just nearing
0:08:27 the end of adolescence,
0:08:27 you know,
0:08:29 starting to step into adulthood,
0:08:29 you know,
0:08:30 being taken seriously
0:08:32 by the other adults
0:08:32 in the room,
0:08:33 but still plenty of growing up
0:08:34 left to do, right?
0:08:36 It’s kind of right on the cusp
0:08:37 of entering adulthood
0:08:40 and really kind of
0:08:41 stepping into the world.
0:08:42 I think that’s right.
0:08:42 Yeah.
0:08:43 So crypto is moving
0:08:45 from its adolescence
0:08:47 into its adulthood.
0:08:48 Maybe it’s early adulthood,
0:08:49 but it’s adulthood.
0:08:49 Early adulthood, yeah.
0:08:50 Nonetheless.
0:08:51 17 years old.
0:08:52 Yeah.
0:08:53 That’s right.
0:08:54 Soon to be joining the workforce,
0:08:56 putting its talents to use
0:08:59 for many large financial institutions
0:08:59 for sure.
0:09:00 Yeah.
0:09:01 Yeah.
0:09:03 So let’s talk about,
0:09:04 let’s talk about
0:09:06 the big picture cycle that,
0:09:06 like,
0:09:07 we like to look at
0:09:09 the way the market evolves
0:09:10 in this sort of cyclical way.
0:09:12 It undergoes various waves.
0:09:14 It has had different periods
0:09:16 that have defined those waves
0:09:17 that have characterized them
0:09:19 based on what was popular
0:09:20 at that time.
0:09:21 Where are we now
0:09:22 in that cycle?
0:09:24 Looking at a price graph
0:09:25 is always a scary thing, right?
0:09:27 Because you can start to project
0:09:28 all types of fantasies onto it.
0:09:28 It’s like the,
0:09:29 it’s like worse than,
0:09:31 far worse than tea leaves.
0:09:31 You know,
0:09:32 I could hear an argument
0:09:33 from almost any direction.
0:09:35 I don’t think we’re in the depths, right?
0:09:36 I don’t think we’re in crypto winter.
0:09:37 That’s pretty clear.
0:09:38 Because we did hit
0:09:40 a new all-time high this year
0:09:40 with market cap
0:09:42 exceeding $4 trillion.
0:09:44 $4 trillion is a lot of money.
0:09:45 So I feel confident
0:09:46 in saying that.
0:09:47 It also doesn’t feel like
0:09:49 we’re exactly in a frenzy, though.
0:09:50 I think that that’s pretty clear.
0:09:53 I haven’t been getting questions
0:09:54 from Uber drivers
0:09:55 and stuff like that, right?
0:09:56 I think which like
0:09:57 a lot of us know
0:09:58 that that feeling
0:09:59 when the normies
0:10:01 are all of a sudden curious again.
0:10:02 I haven’t quite been getting that.
0:10:03 But at the same time,
0:10:04 I’ve been getting
0:10:05 other really interesting
0:10:06 strong signals
0:10:08 like the financial institution interest
0:10:10 where we’re hearing
0:10:12 concrete, interesting plans
0:10:13 from all types of companies
0:10:14 who want to integrate
0:10:15 specific things,
0:10:16 which that sounds like,
0:10:17 oh, why is that
0:10:18 like a speculative thing?
0:10:20 Because in prior cycles,
0:10:21 in prior cycles,
0:10:23 the corporates
0:10:24 got really interested
0:10:25 around the peak
0:10:26 because of the price action,
0:10:28 because of the retail frenzy.
0:10:29 And I’ll admit
0:10:30 there was something
0:10:31 very insincere
0:10:32 about it to me.
0:10:33 I just kind of
0:10:34 didn’t buy it.
0:10:34 In retrospect,
0:10:36 a lot of them did bail
0:10:37 when things got
0:10:38 a little bit dark.
0:10:39 You know,
0:10:40 and that happens.
0:10:41 But this time,
0:10:42 it doesn’t feel like that.
0:10:42 This time,
0:10:43 it feels like
0:10:43 they’re actually building
0:10:44 real tech
0:10:45 that is going to last
0:10:46 in many cases.
0:10:47 Not in every case.
0:10:47 Real tech
0:10:48 doesn’t always
0:10:49 pan out, right?
0:10:50 Not every product
0:10:51 pans out,
0:10:52 but it feels like
0:10:53 something they want
0:10:53 to follow through.
0:10:55 So that’s something
0:10:55 that gives me
0:10:56 a little bit of
0:10:57 like a hype cycle vibe,
0:10:58 but maybe it’s
0:10:59 a little bit different.
0:11:01 The regulatory climate
0:11:02 has changed, right?
0:11:04 Radically since last year.
0:11:04 Like,
0:11:05 that’s probably
0:11:07 the single starkest
0:11:09 qualitative difference
0:11:09 between this year
0:11:10 and last year
0:11:11 is that
0:11:12 the regulatory condition
0:11:13 has totally inverted,
0:11:14 right?
0:11:15 It has gone from
0:11:17 near worst case scenario,
0:11:18 really bad
0:11:18 to
0:11:20 outright jubilee,
0:11:21 practically.
0:11:21 Yeah,
0:11:22 it was not that long ago
0:11:23 that you had senators
0:11:24 talking about
0:11:25 an anti-crypto army
0:11:26 as a way to fire up
0:11:27 their base.
0:11:28 Right, exactly.
0:11:29 And now it’s like
0:11:29 the exact opposite.
0:11:30 And now, by contrast,
0:11:31 we have sincere
0:11:33 bipartisan laws
0:11:34 being passed
0:11:35 and laws being debated
0:11:37 that are mature,
0:11:38 serious,
0:11:39 and planned
0:11:40 for the future,
0:11:40 right?
0:11:41 Real serious laws
0:11:42 that are trying
0:11:42 to structure
0:11:43 the industry
0:11:44 for long-term success.
0:11:45 It’s definitely
0:11:46 a positive,
0:11:47 exciting time,
0:11:47 Well, maybe
0:11:48 let me add
0:11:49 like a contrasting
0:11:50 like somewhat
0:11:51 like maybe
0:11:51 like a negative
0:11:52 point,
0:11:52 which is that
0:11:53 it isn’t really
0:11:54 the case
0:11:55 that I see
0:11:56 far more
0:11:57 crypto developers
0:11:57 now than I did
0:11:58 in prior years.
0:11:59 I don’t think
0:12:00 that crypto developers
0:12:02 are swarming
0:12:02 at an all-time high,
0:12:03 right?
0:12:04 I think a lot of them
0:12:05 have left to AI.
0:12:06 We have pulled them
0:12:07 from other industries
0:12:08 in certain cases,
0:12:09 so it’s a little bit
0:12:10 of a wash.
0:12:12 But if we were
0:12:13 in the peak
0:12:13 of crypto summer
0:12:14 and if it was
0:12:15 just a totally
0:12:18 ultra-optimistic period,
0:12:19 then I think we would
0:12:20 be seeing a lot more
0:12:20 there, right?
0:12:21 So the point is
0:12:22 there are some signals
0:12:24 that indicate
0:12:24 that we’re not
0:12:25 at the exact
0:12:28 most outrageously
0:12:28 hot,
0:12:29 you know,
0:12:32 supercharged time,
0:12:34 but the fundamentals,
0:12:35 as I hope
0:12:36 the report shows,
0:12:38 is maturity
0:12:39 and strength
0:12:40 in all the most
0:12:40 interesting,
0:12:41 all the most
0:12:43 substantial areas
0:12:43 in crypto.
0:12:44 What’s very weird
0:12:45 about this is
0:12:46 we’ve often talked
0:12:46 about this price
0:12:47 innovation cycle.
0:12:48 You know,
0:12:49 the prices go up
0:12:50 and that causes
0:12:51 developers to get involved,
0:12:52 that causes new products
0:12:53 to get released,
0:12:54 and then it sort of
0:12:56 kicks off this flywheel,
0:12:58 this positive feedback loop
0:12:58 of more people
0:12:59 getting interested
0:13:00 and excited
0:13:01 and the actual
0:13:02 tech getting better.
0:13:05 We’ve seen prices go up,
0:13:05 as you mentioned.
0:13:07 We went above
0:13:08 a $4 trillion
0:13:09 total market cap
0:13:09 for crypto,
0:13:10 which is like on par
0:13:11 with the GDP of Japan.
0:13:13 It’s come down
0:13:14 a little bit since then.
0:13:14 Who knows where it’ll be
0:13:16 by the time this publishes.
0:13:18 But at the same time
0:13:18 that we’ve had
0:13:19 these prices increase,
0:13:20 the developers
0:13:21 have not kept pace,
0:13:22 and this is what
0:13:22 you were getting at,
0:13:23 Eddie.
0:13:24 We’re not seeing
0:13:26 this same kind of
0:13:27 feedback loop
0:13:27 as we’ve seen
0:13:29 in previous cycles.
0:13:31 At least the data’s not
0:13:31 showing that.
0:13:32 Yeah, I think this is
0:13:33 a really important point
0:13:35 to double-click into
0:13:36 because it gets at
0:13:38 really everything
0:13:38 that we do
0:13:39 and all of the expertise
0:13:40 that we develop
0:13:41 from, you know,
0:13:42 our experience
0:13:42 meeting with
0:13:43 these entrepreneurs
0:13:44 and developers
0:13:46 analyzing and evaluating
0:13:47 the kind of whole
0:13:49 innovation aspect
0:13:50 of the crypto space,
0:13:50 right?
0:13:51 Like,
0:13:52 not considering
0:13:53 kind of the macro
0:13:54 price view,
0:13:56 but just looking at
0:13:56 developers.
0:13:57 And as you mentioned,
0:13:57 Robert,
0:13:58 this price
0:13:59 innovation cycle,
0:14:00 we’ve always believed
0:14:01 and invested
0:14:03 on the thesis
0:14:04 that there is
0:14:04 this strong
0:14:05 feedback loop
0:14:06 between prices,
0:14:07 developers,
0:14:08 and then ultimately
0:14:08 users.
0:14:09 And throughout
0:14:10 crypto’s history,
0:14:11 we’ve seen
0:14:12 this repeat itself,
0:14:12 right?
0:14:13 Like with the
0:14:14 ICO boom
0:14:15 and then the
0:14:16 DeFi summer
0:14:16 and then the
0:14:17 NFT surge,
0:14:19 all of these things
0:14:20 really kind of
0:14:22 generated interest.
0:14:23 It increased the
0:14:23 prices,
0:14:24 and as a result,
0:14:25 developers saw
0:14:26 the opportunity
0:14:27 to come in
0:14:27 and build
0:14:28 new products
0:14:29 that attracted
0:14:30 new users,
0:14:30 right?
0:14:30 And we’ve seen
0:14:32 this cycle
0:14:33 repeat itself
0:14:34 throughout crypto’s
0:14:34 history.
0:14:36 I’d say the last
0:14:37 sort of uptick
0:14:38 in prices
0:14:39 that we saw
0:14:40 were more so
0:14:41 if you just look
0:14:41 at the kind of
0:14:42 external events
0:14:43 that happened
0:14:44 around those times,
0:14:45 it was things
0:14:46 like the Bitcoin
0:14:47 and Ethereum ETFs
0:14:48 that launched.
0:14:48 It was things
0:14:49 like the
0:14:51 meme coin mania
0:14:51 that we saw
0:14:52 that brought in
0:14:52 new users.
0:14:54 But to me,
0:14:55 and clearly
0:14:56 to developers
0:14:56 as well,
0:14:57 these things
0:14:57 just weren’t
0:14:58 that interesting
0:14:59 to build on,
0:14:59 right?
0:14:59 Like,
0:15:01 what can you do
0:15:02 as a developer
0:15:03 to develop a new
0:15:04 kind of innovative
0:15:06 product or offering
0:15:07 with the ETFs
0:15:08 or with new coins?
0:15:09 And by the way,
0:15:11 caveat on the ETFs,
0:15:11 we’re calling them
0:15:12 ETFs very casually.
0:15:14 They are ETPs,
0:15:15 exchange-traded products.
0:15:17 Which indicates
0:15:18 that the underlying
0:15:19 portfolios are not
0:15:20 securities.
0:15:21 I think all of that
0:15:22 just kind of speaks
0:15:22 to the fact that,
0:15:23 you know,
0:15:23 we saw a run-up
0:15:24 in price
0:15:25 that was more so
0:15:25 driven by
0:15:27 these external factors,
0:15:27 right?
0:15:28 Not the traditional
0:15:30 developer-driven
0:15:30 bull market
0:15:31 like we’ve seen
0:15:31 historically.
0:15:32 Now,
0:15:33 with all that said,
0:15:34 I actually think
0:15:35 we’re extremely
0:15:36 well-positioned
0:15:37 right now
0:15:38 for the next
0:15:38 developer-driven
0:15:39 bull market.
0:15:39 And the reason
0:15:40 is because
0:15:41 we have the
0:15:41 stablecoin trend
0:15:42 that is now
0:15:43 bringing in
0:15:44 a new type
0:15:44 of builder
0:15:44 that we’ve never
0:15:45 seen before,
0:15:46 whether it’s from
0:15:46 kind of more
0:15:47 traditional
0:15:48 finance backgrounds
0:15:49 or fintechs
0:15:49 or whatever.
0:15:50 I think there’s
0:15:51 a huge reason
0:15:52 to believe
0:15:53 that stablecoins
0:15:54 is going to draw
0:15:56 more developers in.
0:15:57 We also have
0:15:58 pending market
0:15:59 structure legislation
0:16:00 in the U.S.
0:16:00 right now,
0:16:01 which, you know,
0:16:02 by design is meant
0:16:04 to kind of attract
0:16:05 the next wave
0:16:06 of developers
0:16:07 in the United States,
0:16:08 provide kind of
0:16:09 the clear rules
0:16:10 of the road,
0:16:10 which hopefully
0:16:11 should lead to
0:16:12 an inflow of talent.
0:16:13 So I think we’re
0:16:14 really well positioned
0:16:15 for the next wave.
0:16:15 Yeah, I feel that
0:16:16 feeling really strongly.
0:16:17 Like, I have been
0:16:18 excoriated in public
0:16:19 for being a little
0:16:20 critical of meme coins,
0:16:20 right?
0:16:21 So if I could risk
0:16:22 that again,
0:16:23 I’d say that,
0:16:24 you know,
0:16:25 from the perspective
0:16:27 of the average
0:16:28 entrepreneurial person
0:16:29 or developer,
0:16:31 meme coins don’t
0:16:31 present a lot
0:16:32 of opportunity
0:16:33 except maybe a coin flip
0:16:34 to make a bunch
0:16:35 of money, right?
0:16:36 Maybe making a launchpad
0:16:38 could be interesting,
0:16:39 maybe, you know,
0:16:40 I don’t know.
0:16:41 But in any case,
0:16:42 it just is evidently
0:16:43 true that that’s
0:16:45 not something
0:16:46 that most entrepreneurs,
0:16:47 even most crypto
0:16:48 curious entrepreneurs
0:16:50 see and say like,
0:16:51 no, this is the future
0:16:52 of a technology
0:16:53 that I can bet
0:16:54 my career on
0:16:55 that will last
0:16:56 the test of time,
0:16:56 right?
0:16:57 That’s just,
0:16:57 it just doesn’t have
0:16:58 those properties.
0:17:00 Whereas I think,
0:17:00 you know,
0:17:01 stable coins do.
0:17:03 Network tokens,
0:17:03 if we get like
0:17:04 the Clarity Act,
0:17:05 do.
0:17:06 A lot of the
0:17:06 interesting ways
0:17:08 of trying to create
0:17:08 new decentralized
0:17:09 marketplaces
0:17:11 using
0:17:12 some of the tech
0:17:13 like we mentioned
0:17:13 in the report,
0:17:15 those things have
0:17:16 those potential properties,
0:17:17 but those things
0:17:18 hadn’t had
0:17:19 the same type
0:17:20 of attention
0:17:21 as a result
0:17:21 of the price
0:17:22 innovation cycle
0:17:23 that maybe
0:17:24 other things did,
0:17:25 right?
0:17:26 Whereas the ETPs
0:17:27 and meme coins
0:17:28 and so on did.
0:17:30 So the cycle
0:17:30 got a little bit
0:17:31 dislocated,
0:17:32 I think.
0:17:32 There are these
0:17:33 exogenous factors
0:17:34 and also it may be
0:17:34 implicit in what
0:17:35 we’re saying.
0:17:37 The space has
0:17:38 pluralized,
0:17:38 right?
0:17:39 there are now
0:17:40 actually multiple
0:17:40 different areas.
0:17:41 There’s people
0:17:42 who I’ve talked
0:17:42 to,
0:17:43 which genuinely
0:17:44 surprised me,
0:17:44 people who are
0:17:45 like experts
0:17:46 in stable coin
0:17:47 payment flows
0:17:48 and exactly how
0:17:49 they relate
0:17:49 with,
0:17:50 you know,
0:17:51 payment processors
0:17:52 and KYC
0:17:53 requirements
0:17:54 and these types
0:17:54 of things.
0:17:56 And they don’t
0:17:57 know a damn
0:17:58 thing about
0:17:59 like what’s
0:17:59 happening in
0:18:00 meme coin
0:18:01 launchpad world.
0:18:01 to what extent
0:18:02 is AI
0:18:03 attracting
0:18:04 or drawing
0:18:05 people away
0:18:05 from crypto?
0:18:06 Look,
0:18:06 it’s true.
0:18:07 Like,
0:18:07 AI is really
0:18:08 exciting.
0:18:08 It’s really
0:18:09 attractive.
0:18:09 There’s huge
0:18:10 opportunity,
0:18:11 huge investment.
0:18:12 I think it’s a
0:18:12 great area.
0:18:12 Obviously,
0:18:13 our firm is very
0:18:14 focused on AI
0:18:16 as an exciting,
0:18:17 productive area.
0:18:18 And I think
0:18:18 it’s natural
0:18:19 and makes sense
0:18:19 that a lot of
0:18:20 people would be
0:18:21 attracted to it,
0:18:22 especially when
0:18:23 they compare
0:18:23 their opportunities
0:18:24 in AI with
0:18:26 opportunities in
0:18:26 crypto.
0:18:27 if they
0:18:28 weren’t a
0:18:28 meme coin
0:18:29 person,
0:18:29 they’re probably
0:18:30 more attracted
0:18:31 to AI at
0:18:32 the peak of
0:18:32 AI.
0:18:33 At the same
0:18:34 time,
0:18:34 if you’re a
0:18:34 crypto person
0:18:36 who doesn’t
0:18:37 care so much
0:18:38 about the hype
0:18:38 cycle,
0:18:39 the hype and
0:18:40 its popularity
0:18:41 among like
0:18:42 certain tech
0:18:43 circles or
0:18:43 others,
0:18:45 then you also
0:18:45 know that this
0:18:46 time,
0:18:47 the time when
0:18:48 the regulatory
0:18:51 is at its
0:18:52 zenith,
0:18:53 when the
0:18:54 interest by
0:18:55 other startups
0:18:56 is maybe
0:18:56 somewhat lower,
0:18:58 then you know
0:18:58 that that’s
0:18:59 actually the
0:19:00 exact best
0:19:00 time to do
0:19:00 it.
0:19:01 So I’m not
0:19:02 worried because
0:19:03 having been
0:19:04 investing with
0:19:05 our funds for
0:19:06 a while now,
0:19:06 like I just
0:19:08 know that when
0:19:09 something is a
0:19:09 little bit
0:19:10 uncool,
0:19:10 that’s kind
0:19:11 of when it’s
0:19:12 at its best.
0:19:13 So yeah,
0:19:14 AI has taken
0:19:15 some attention.
0:19:16 At the same
0:19:16 time,
0:19:16 and you’ll see
0:19:17 in our slides,
0:19:18 basically an
0:19:18 equal portion,
0:19:19 an equal number
0:19:20 of people came
0:19:20 from other
0:19:21 industries to
0:19:21 crypto.
0:19:23 So perhaps
0:19:24 reflecting the
0:19:24 shift in
0:19:25 focus,
0:19:25 the shift in
0:19:26 interest in
0:19:28 thematic areas
0:19:28 in crypto.
0:19:29 Yeah,
0:19:29 I think the
0:19:30 historical context
0:19:31 is also important
0:19:31 here.
0:19:32 I think a lot
0:19:32 of people
0:19:33 actually don’t
0:19:34 remember this,
0:19:35 but the time
0:19:36 between the
0:19:37 FTX collapse
0:19:38 and the launch
0:19:39 of ChatGPT
0:19:39 was like less
0:19:40 than a month,
0:19:40 right?
0:19:42 And we don’t
0:19:42 talk about this
0:19:43 dark period,
0:19:43 Darren.
0:19:45 We’ve omitted
0:19:46 this from the
0:19:47 history books.
0:19:47 think about what
0:19:47 that meant
0:19:49 for a smart
0:19:49 kid coming
0:19:50 out of college,
0:19:50 right?
0:19:52 You see
0:19:53 the FTX
0:19:54 collapse,
0:19:55 and as a
0:19:55 result of
0:19:55 that,
0:19:57 the entire
0:19:58 crypto industry
0:19:59 was under a
0:19:59 full-blown
0:20:01 regulatory attack.
0:20:01 And at the
0:20:02 same time,
0:20:03 there’s this
0:20:03 exciting new
0:20:05 technology that
0:20:06 has emerged.
0:20:07 It’s a pretty
0:20:08 obvious choice,
0:20:08 right?
0:20:09 Even as people
0:20:10 who are in the
0:20:10 crypto industry,
0:20:12 it made a lot
0:20:12 of sense at the
0:20:13 time to do
0:20:13 that.
0:20:14 And that’s
0:20:15 why we get
0:20:15 the question
0:20:16 all the time,
0:20:16 how much
0:20:16 talent have
0:20:17 we lost
0:20:17 to AI?
0:20:18 And I think
0:20:19 it’s definitely
0:20:19 hard to assess
0:20:21 the quality of
0:20:21 talent just by
0:20:22 looking at some
0:20:22 of the numbers
0:20:23 we have.
0:20:24 But I think,
0:20:24 yeah,
0:20:25 we did lose
0:20:26 some talent
0:20:27 to AI,
0:20:27 certainly.
0:20:29 But now
0:20:30 things are
0:20:30 changing.
0:20:31 Now we have
0:20:32 a much better
0:20:33 regulatory environment
0:20:34 that is encouraging
0:20:36 people to come
0:20:36 back to crypto
0:20:37 or people who
0:20:38 are coming out
0:20:39 of school to
0:20:40 build in crypto.
0:20:41 And even
0:20:42 better to do
0:20:43 that in the
0:20:43 United States
0:20:44 it’s fully
0:20:45 now supported
0:20:46 by the
0:20:46 regulators,
0:20:47 which is a
0:20:48 very positive
0:20:48 signal.
0:20:49 And then also,
0:20:50 we talk about
0:20:51 this a lot
0:20:52 in our report
0:20:52 as well,
0:20:53 is there are
0:20:54 very clear
0:20:54 opportunities at
0:20:55 the intersection
0:20:56 of crypto
0:20:57 and AI now.
0:20:58 And there’s
0:20:59 lots of
0:21:01 ideas on how
0:21:02 crypto can solve
0:21:03 some of AI’s
0:21:04 most pressing
0:21:04 challenges.
0:21:05 And so we’re
0:21:06 seeing a
0:21:07 growing number
0:21:08 of people
0:21:09 and startups
0:21:10 interested in
0:21:11 the intersection
0:21:12 of what I
0:21:13 think are the
0:21:13 two most
0:21:14 important
0:21:15 technology
0:21:15 trends
0:21:17 probably of
0:21:17 our
0:21:18 lifetimes.
0:21:19 And I
0:21:19 haven’t seen
0:21:20 this analysis
0:21:20 done before,
0:21:21 so I think
0:21:21 it’s really
0:21:22 interesting that
0:21:22 since the
0:21:23 launch of
0:21:23 ChatGPT,
0:21:24 like you
0:21:24 said,
0:21:24 in November
0:21:25 2022,
0:21:26 there’s been
0:21:27 about a
0:21:28 thousand net
0:21:28 crypto jobs
0:21:29 gained from
0:21:30 other industries
0:21:31 and a
0:21:32 thousand net
0:21:32 crypto jobs
0:21:33 lost to
0:21:34 AI startups.
0:21:35 So it
0:21:35 kind of
0:21:36 nets out.
0:21:37 I think
0:21:38 people who
0:21:39 don’t look at
0:21:39 the data might
0:21:40 think that
0:21:42 crypto has
0:21:42 lost more
0:21:43 to AI than
0:21:43 it has
0:21:44 gained from
0:21:44 elsewhere,
0:21:45 it’s interesting
0:21:46 to see that
0:21:47 it’s been
0:21:47 kind of
0:21:47 even.
0:21:48 Yeah,
0:21:49 which in the
0:21:49 grand scheme
0:21:50 of things,
0:21:50 given how
0:21:51 cool AI is,
0:21:52 that’s a win
0:21:52 to me.
0:21:53 It’s a huge
0:21:53 trend.
0:21:54 But let’s
0:21:55 finish talking
0:21:55 about the
0:21:56 market dynamics,
0:21:56 the sizing
0:21:57 it up,
0:21:58 who’s using
0:21:58 crypto,
0:21:59 what they’re
0:22:00 using,
0:22:01 how many
0:22:01 people are
0:22:01 using it.
0:22:02 Let’s talk
0:22:03 hard numbers
0:22:04 around these
0:22:05 things.
0:22:05 One,
0:22:06 you sort
0:22:06 of talked
0:22:06 about it,
0:22:07 $4 trillion
0:22:09 in market
0:22:09 cap.
0:22:10 We’ve hit
0:22:10 all-time highs
0:22:11 this year,
0:22:11 and so that’s
0:22:13 one way to
0:22:14 measure it.
0:22:14 If you look
0:22:15 at Bitcoin
0:22:16 specifically now,
0:22:17 it’s a top
0:22:18 10 asset
0:22:19 in the world,
0:22:20 and all of
0:22:20 the top 10
0:22:20 assets are
0:22:21 either US
0:22:22 tech companies
0:22:23 or global
0:22:23 commodities,
0:22:24 and so crypto
0:22:25 certainly has
0:22:26 become a
0:22:27 meaningful part
0:22:27 of the modern
0:22:28 economy today.
0:22:29 You can also
0:22:30 look more at
0:22:31 kind of the
0:22:32 number of people
0:22:33 that are using
0:22:33 crypto,
0:22:34 and we have
0:22:34 an updated
0:22:35 estimate to
0:22:36 our analysis
0:22:37 that we put
0:22:37 out last year,
0:22:39 which basically
0:22:40 says we think
0:22:41 there’s somewhere
0:22:41 between 40
0:22:42 to 70 million
0:22:44 unique people
0:22:45 using crypto
0:22:46 on-chain
0:22:47 monthly.
0:22:48 And of course,
0:22:48 that’s a very
0:22:49 wide range because
0:22:50 it’s very
0:22:52 difficult to get
0:22:53 a precise number
0:22:53 there.
0:22:54 But we did
0:22:54 sort of
0:22:55 construct an
0:22:55 analysis,
0:22:56 bottoms up,
0:22:57 based on
0:22:58 wallet user
0:22:59 data,
0:22:59 on-chain
0:23:00 forensics,
0:23:01 some discussions
0:23:02 with some of
0:23:02 our portfolio
0:23:03 companies and
0:23:04 industry partners,
0:23:05 and we came
0:23:05 up with this
0:23:06 range of
0:23:07 40 to 70
0:23:08 million.
0:23:09 It’s about
0:23:09 10 million
0:23:10 more than
0:23:10 our estimate
0:23:11 last year.
0:23:12 And even
0:23:12 that,
0:23:13 in the context
0:23:13 of the
0:23:15 broader set
0:23:15 of people
0:23:16 who just
0:23:16 own crypto
0:23:17 for purposes
0:23:18 of investment
0:23:19 or speculation,
0:23:20 it’s still
0:23:20 just a very
0:23:21 small fraction,
0:23:22 which presents
0:23:23 an opportunity
0:23:24 to bring
0:23:25 more people
0:23:25 on-chain
0:23:26 from that
0:23:27 larger group
0:23:28 that owns
0:23:28 crypto.
0:23:29 And remember,
0:23:30 this is
0:23:31 transactors,
0:23:31 right?
0:23:31 This is
0:23:31 people who
0:23:32 are actually
0:23:32 kicking
0:23:33 transactions
0:23:33 on-chain,
0:23:34 individual
0:23:34 people,
0:23:35 which is
0:23:36 the most
0:23:36 strenuous,
0:23:37 most difficult,
0:23:38 highest standard
0:23:39 to reach,
0:23:39 right?
0:23:41 I think if
0:23:42 you ask
0:23:42 among your
0:23:43 normie
0:23:44 contacts,
0:23:45 you can
0:23:45 validate
0:23:46 this ratio,
0:23:47 right?
0:23:47 That there’s
0:23:47 many more
0:23:48 people who
0:23:48 own a little
0:23:49 bit on
0:23:50 Coinbase or
0:23:50 whatever,
0:23:51 versus people
0:23:52 who actually
0:23:54 withdraw into
0:23:54 a wallet,
0:23:55 use a smart
0:23:56 contract,
0:23:57 use DeFi,
0:23:58 transact,
0:23:58 pay for
0:23:59 something,
0:23:59 whatever.
0:24:00 You’ll find,
0:24:01 right,
0:24:01 in your
0:24:02 experience,
0:24:02 there’s this
0:24:03 waterfall,
0:24:03 right?
0:24:03 People who
0:24:04 just own,
0:24:05 people who
0:24:06 are kind of
0:24:07 frequent
0:24:08 engagers,
0:24:09 owning,
0:24:09 buying,
0:24:10 and selling,
0:24:11 transferring,
0:24:12 people who
0:24:13 actually use
0:24:14 apps and
0:24:15 apps of
0:24:15 some type,
0:24:15 right?
0:24:16 This sort
0:24:17 of waterfall.
0:24:18 40 to 70
0:24:19 million at the
0:24:20 sharpest,
0:24:20 most difficult
0:24:21 point to be
0:24:21 in in that
0:24:22 funnel,
0:24:23 that’s a
0:24:23 pretty big
0:24:24 number in
0:24:24 my mind.
0:24:25 Because honestly,
0:24:25 like,
0:24:25 you know,
0:24:26 on our team,
0:24:26 like,
0:24:27 we’re always
0:24:27 trying out
0:24:28 new stuff
0:24:28 and showing
0:24:29 each other.
0:24:30 I’m sometimes
0:24:31 amazed at how,
0:24:32 this is a
0:24:33 persistent theme
0:24:33 for me,
0:24:34 how difficult
0:24:35 crypto can be
0:24:35 to use,
0:24:36 how difficult
0:24:37 it can be
0:24:37 to use
0:24:37 safely,
0:24:38 how many
0:24:38 cognitive
0:24:39 hazards there
0:24:40 are in
0:24:40 using it,
0:24:41 and like,
0:24:41 things you
0:24:42 can,
0:24:43 ways you can
0:24:43 make mistakes
0:24:44 and whatever.
0:24:45 And it has
0:24:46 gotten substantially
0:24:46 better,
0:24:47 but it still
0:24:47 has a long way
0:24:48 to go.
0:24:48 you know,
0:24:49 $300 trillion
0:24:50 into existence
0:24:51 by accident,
0:24:51 for instance.
0:24:52 $300 trillion
0:24:52 by accident.
0:24:52 No,
0:24:53 but we
0:24:54 shouldn’t be,
0:24:55 we’re not
0:24:55 digging on
0:24:56 anybody.
0:24:56 There’s mistakes
0:24:57 and no harm
0:24:58 was done.
0:24:58 That happens
0:24:59 in TrackFi
0:24:59 too.
0:25:00 Yeah,
0:25:00 it does,
0:25:01 exactly.
0:25:03 That is an
0:25:03 impressive number
0:25:04 to me,
0:25:04 right?
0:25:05 40 to 70
0:25:05 million who
0:25:06 actually use
0:25:06 it.
0:25:06 Now,
0:25:07 I should
0:25:07 point out
0:25:08 that we
0:25:08 don’t really
0:25:09 break down
0:25:10 this 40 to
0:25:10 70,
0:25:11 it would be
0:25:11 way too
0:25:11 difficult,
0:25:13 into behavioral
0:25:13 cohorts,
0:25:14 like,
0:25:14 segments of
0:25:15 exactly who
0:25:16 is doing
0:25:16 what and
0:25:17 that type
0:25:17 of personality,
0:25:18 but I was
0:25:19 just at a
0:25:20 crypto-related
0:25:21 kind of meeting
0:25:22 yesterday with
0:25:22 a bunch of
0:25:23 40,
0:25:24 50 really
0:25:24 highly informed
0:25:26 people who
0:25:26 were primarily
0:25:27 focused on
0:25:28 South American
0:25:29 remittances,
0:25:30 South American
0:25:30 use,
0:25:32 some gentlemen
0:25:33 who ran
0:25:33 like a
0:25:34 Guatemalan bank,
0:25:34 some guys who
0:25:35 ran Mexican
0:25:35 banks,
0:25:36 like I was
0:25:36 talking with,
0:25:37 they were
0:25:38 telling me that
0:25:38 something like
0:25:39 a third of
0:25:39 South Americans
0:25:41 interact with
0:25:41 crypto.
0:25:41 I think,
0:25:42 I forget on
0:25:43 the frequency,
0:25:43 maybe it was
0:25:44 monthly,
0:25:44 maybe it was
0:25:44 yearly,
0:25:46 but in any
0:25:46 case,
0:25:47 a huge,
0:25:48 a huge number,
0:25:48 maybe indirectly,
0:25:49 right,
0:25:49 maybe through
0:25:49 using other
0:25:50 services,
0:25:50 right,
0:25:52 but that is
0:25:53 like mind-blowing
0:25:53 to me and
0:25:54 that’s despite
0:25:56 what it,
0:25:56 candidly,
0:25:57 is a brutally
0:25:58 challenging user
0:25:58 experience,
0:26:00 so I see that
0:26:00 and I see
0:26:01 opportunity,
0:26:01 right,
0:26:02 people are
0:26:02 using it
0:26:02 despite its
0:26:03 challenges.
0:26:04 And that’s
0:26:04 a good segue
0:26:05 to what I
0:26:05 think is one
0:26:06 of the more
0:26:07 interesting slides
0:26:07 in the State
0:26:07 of Crypto
0:26:08 report,
0:26:09 which is our
0:26:09 sort of
0:26:10 geography
0:26:11 analysis this
0:26:11 year.
0:26:12 We looked at
0:26:12 it through
0:26:13 two lenses,
0:26:13 right,
0:26:14 one was
0:26:15 mobile wallet
0:26:15 usage,
0:26:16 which we think
0:26:17 is at least
0:26:18 a proxy for
0:26:18 people that
0:26:19 are actually
0:26:20 using crypto
0:26:20 on-chain,
0:26:21 whether it’s
0:26:22 for, you
0:26:22 know,
0:26:22 buying goods
0:26:23 and services,
0:26:24 whether it’s
0:26:25 for remittances
0:26:26 or interacting
0:26:27 with applications
0:26:28 of crypto.
0:26:29 And if you
0:26:29 and if you
0:26:30 look at the
0:26:31 geographic data
0:26:32 associated with
0:26:33 those indicators
0:26:34 of on-chain
0:26:34 activity,
0:26:35 it’s largely
0:26:36 coming from
0:26:37 developing countries,
0:26:38 countries like
0:26:39 Argentina,
0:26:40 Colombia,
0:26:41 Pakistan.
0:26:42 On the flip
0:26:42 side,
0:26:43 the other lens
0:26:44 that we looked
0:26:44 at this through
0:26:46 is web traffic
0:26:47 associated with
0:26:48 the top tokens
0:26:50 on CoinGecko,
0:26:51 which we think
0:26:52 is an indicator
0:26:53 of interest
0:26:53 in sort of
0:26:54 trading these
0:26:54 tokens,
0:26:55 that is
0:26:56 developed nations
0:26:57 like South
0:26:58 Korea,
0:26:59 Australia,
0:27:00 which,
0:27:00 you know,
0:27:01 just kind of
0:27:01 speaks to the
0:27:02 fact that
0:27:03 the applications
0:27:03 where crypto
0:27:04 is needed
0:27:05 most today
0:27:06 tend to be
0:27:07 kind of more
0:27:08 geared towards
0:27:09 the developing
0:27:10 countries where,
0:27:11 you know,
0:27:11 they have
0:27:12 unreliable
0:27:13 financial infrastructure
0:27:14 or economic
0:27:15 or political
0:27:15 stability.
0:27:16 And, you know,
0:27:17 I think crypto
0:27:18 is serving them
0:27:18 well,
0:27:19 whereas kind of
0:27:20 the developed
0:27:20 nations tend
0:27:22 to skew more
0:27:22 towards just like,
0:27:23 you know,
0:27:24 trading the tokens
0:27:25 and speculation
0:27:26 and the other
0:27:27 side of crypto,
0:27:28 maybe.
0:27:29 So two quick
0:27:30 things before we
0:27:31 move on to the
0:27:31 next section,
0:27:31 I want to make
0:27:32 sure we get to.
0:27:34 One thing,
0:27:34 there was a notable
0:27:36 decline in the
0:27:36 number of monthly
0:27:37 active addresses
0:27:38 this year.
0:27:39 Last year,
0:27:40 we had 220 million.
0:27:40 This year,
0:27:43 we have 181 million.
0:27:44 That’s a pretty
0:27:45 notable decline.
0:27:47 And in this year,
0:27:47 we actually didn’t
0:27:48 do a comparison
0:27:49 as we’ve done
0:27:50 in years past
0:27:51 of like monthly
0:27:52 active addresses
0:27:53 kind of lined up
0:27:53 with a chart
0:27:54 showing internet
0:27:55 adoption and
0:27:55 kind of showing
0:27:56 how these things
0:27:57 are playing out
0:27:57 at a similar
0:27:58 rate.
0:27:59 I want to ask
0:28:00 about that.
0:28:00 Do we know
0:28:02 why monthly
0:28:02 active addresses
0:28:03 might have
0:28:04 dipped this year?
0:28:05 We’ve always
0:28:06 been very skeptical
0:28:06 of monthly
0:28:07 active addresses
0:28:08 as sort of
0:28:09 any indicator
0:28:11 of user activity
0:28:12 and its progress,
0:28:13 right?
0:28:13 We, you know,
0:28:14 often will anchor
0:28:16 some analysis
0:28:16 and assumptions
0:28:17 around that,
0:28:18 but we’ve never
0:28:19 sort of led
0:28:20 with monthly
0:28:21 active addresses
0:28:21 addresses as
0:28:22 the be-all
0:28:22 end-all
0:28:23 for crypto
0:28:24 adoption
0:28:25 and activity.
0:28:25 The short
0:28:26 answer is that
0:28:27 people can
0:28:28 spin up
0:28:29 many different
0:28:29 addresses
0:28:30 and there
0:28:31 are reasons
0:28:32 to do that
0:28:32 at times
0:28:33 and, you know,
0:28:34 particularly
0:28:35 with the crypto
0:28:36 industry that
0:28:37 has different
0:28:37 incentive
0:28:38 structures
0:28:39 and airdrops
0:28:40 and farming,
0:28:41 like, it does
0:28:41 become a very
0:28:42 gameable metric
0:28:43 and so we’ve
0:28:43 always treated
0:28:45 it with a lot
0:28:45 of caution.
0:28:46 I will say
0:28:47 and I’d be
0:28:47 curious to get
0:28:48 Eddie’s take
0:28:49 here, I think
0:28:49 this year
0:28:50 we’ve seen a
0:28:51 little bit less
0:28:52 of the airdrop
0:28:54 farming and
0:28:55 kind of that
0:28:56 specific type of
0:28:57 activity largely
0:28:58 because I think
0:28:58 people have
0:28:59 caught on to
0:29:00 this and they’re
0:29:00 not, in many
0:29:01 cases, just
0:29:02 going to blindly
0:29:03 airdrop to a
0:29:03 bunch of
0:29:04 addresses and so
0:29:04 I think maybe
0:29:05 that subsided a
0:29:06 little bit.
0:29:07 I have seen
0:29:07 some, in fact,
0:29:08 I’ve seen even
0:29:09 in just the last
0:29:10 few weeks, like
0:29:10 a little bit of
0:29:11 a new meta
0:29:12 emerging that
0:29:13 can’t wait to
0:29:13 follow, which
0:29:14 is people saying
0:29:15 that airdrops
0:29:16 are done,
0:29:17 like airdrops
0:29:18 are over,
0:29:18 they’re too
0:29:19 farmable,
0:29:21 instead, like
0:29:21 whatever, some
0:29:22 alternative, some
0:29:23 people are saying
0:29:24 selling tokens,
0:29:25 maybe there’s some
0:29:26 legal caveats
0:29:27 around that,
0:29:28 some people are
0:29:28 saying just
0:29:29 partnerships, right,
0:29:30 giving them in
0:29:31 partnerships, I saw
0:29:31 someone talking
0:29:32 about that, like
0:29:33 forget airdrop
0:29:34 farmers, embrace
0:29:35 partners, right,
0:29:36 things like that.
0:29:38 So maybe backing
0:29:38 up and connecting
0:29:39 this with what
0:29:40 Darren was saying
0:29:40 with your
0:29:41 question, Robert.
0:29:43 In prior
0:29:44 episodes where
0:29:45 we’ve talked
0:29:45 about
0:29:46 active addresses
0:29:47 and in
0:29:48 other podcasts
0:29:48 like where
0:29:48 we talked
0:29:49 about the
0:29:50 airdrops and
0:29:50 stuff like
0:29:51 that, we
0:29:52 often talk
0:29:52 about the
0:29:53 professionalization
0:29:54 of airdrop
0:29:55 farming and
0:29:56 that has
0:29:57 remained, I
0:29:57 mean, that’s
0:29:57 not going to
0:29:58 decline, right,
0:29:59 that knowledge
0:29:59 won’t be lost.
0:30:00 The airdrop
0:30:01 farmers have
0:30:01 figured out how
0:30:02 to do a great
0:30:03 job and at
0:30:03 the same time
0:30:04 people have
0:30:04 figured out how
0:30:06 to block or
0:30:07 remove or
0:30:08 undermine airdrop
0:30:08 farmers.
0:30:10 In prior years,
0:30:11 part of our
0:30:11 highlighting active
0:30:12 addresses, and
0:30:13 you know, we
0:30:13 still have the
0:30:14 number in here,
0:30:16 is because the
0:30:17 active addresses
0:30:18 is still a
0:30:18 kind of a
0:30:19 proxy for
0:30:19 something.
0:30:20 It’s a
0:30:21 reflection to
0:30:21 some degree of
0:30:22 the total
0:30:23 capacity of the
0:30:23 system.
0:30:24 It’s a
0:30:25 reflection of
0:30:25 the interest
0:30:26 and willingness
0:30:27 of people to
0:30:28 even perform
0:30:29 anything, whether
0:30:29 it’s legitimate
0:30:30 activity or
0:30:30 whether it’s
0:30:31 farming.
0:30:32 Now that people
0:30:33 are becoming a
0:30:33 little bit more
0:30:34 guarded about
0:30:36 airdrop farming,
0:30:38 we’re likely to
0:30:38 see that number
0:30:40 adjust maybe
0:30:40 somewhat closer
0:30:41 to something
0:30:42 that reflects
0:30:42 real usage.
0:30:43 I don’t
0:30:44 mean one-to-one
0:30:45 parity with
0:30:45 users and
0:30:45 addresses.
0:30:47 I use many
0:30:48 addresses in my
0:30:48 daily use.
0:30:49 I mean something
0:30:50 that is some
0:30:51 kind of a
0:30:51 proxy.
0:30:52 Interesting.
0:30:52 Okay, so maybe
0:30:54 some inklings of
0:30:55 a prediction for
0:30:56 2026 beginning to
0:30:57 coalesce, the
0:30:58 meta changing from
0:30:59 airdrops over to
0:31:00 some other new
0:31:01 sorts of ways to
0:31:01 distribute crypto.
0:31:02 As transaction
0:31:03 capacity, as
0:31:04 total gas
0:31:05 capacity or
0:31:06 consensus
0:31:07 capacity grows
0:31:09 and the cost
0:31:10 of transactions
0:31:11 decreases
0:31:12 potentially, then
0:31:13 the willingness
0:31:14 to spin up
0:31:15 more addresses
0:31:16 for spam
0:31:17 goes up because
0:31:17 the marginal
0:31:18 cost of the
0:31:19 spamming declines.
0:31:20 So basically
0:31:22 at the limit,
0:31:23 my belief is
0:31:24 that the number
0:31:24 of active
0:31:25 addresses and
0:31:25 transactions
0:31:28 should converge
0:31:29 with the
0:31:30 capacity of the
0:31:31 system, not
0:31:32 only with real
0:31:32 use.
0:31:33 It’s hard to
0:31:34 predict.
0:31:35 I’m more willing
0:31:36 to bet that the
0:31:37 number of monthly
0:31:38 active users will
0:31:39 go up in a more
0:31:40 consistent way.
0:31:41 And it’s why we do
0:31:42 these estimates,
0:31:42 right?
0:31:43 Because we recognize
0:31:44 that there are
0:31:44 flaws in the
0:31:45 existing data that’s
0:31:46 out there and so
0:31:47 we put our heads
0:31:47 together, we talk
0:31:48 to a bunch of
0:31:49 people, we approach
0:31:50 it from a lot of
0:31:51 different ways and
0:31:51 we try to throw
0:31:52 out an estimate
0:31:52 because we think
0:31:54 it’s useful to
0:31:54 know how many
0:31:55 people are out
0:31:56 there even if it
0:31:57 is a wide range
0:31:58 that we’re estimating.
0:31:59 So that’s why
0:31:59 we do it.
0:32:00 Another thing I
0:32:01 really want to
0:32:02 get into is
0:32:04 Bitcoin itself.
0:32:05 So past year’s
0:32:06 reports didn’t
0:32:07 focus so much
0:32:09 on Bitcoin, but
0:32:10 this year there
0:32:12 is a number of
0:32:13 slides on it, in
0:32:13 fact, at the very
0:32:14 start because it’s
0:32:15 been such a big
0:32:16 part of the story,
0:32:18 the narrative in
0:32:18 the crypto industry
0:32:20 over the past
0:32:20 year.
0:32:21 You know, over
0:32:22 the past three
0:32:22 years, Bitcoin
0:32:24 has really clawed
0:32:25 its way back, you
0:32:26 know, into being
0:32:27 more than 50% of
0:32:28 the market share of
0:32:29 crypto in
0:32:31 aggregate, which is
0:32:32 kind of incredible.
0:32:33 And this store of
0:32:34 value narrative is
0:32:35 really caught on.
0:32:37 People are still
0:32:37 kind of thinking
0:32:38 about how they
0:32:39 should regard
0:32:40 Bitcoin.
0:32:42 Is it a high-risk
0:32:44 tech-like product?
0:32:46 Is it a safe haven
0:32:46 kind of thing?
0:32:49 Maybe just tell me a
0:32:50 little bit about what
0:32:51 we’re seeing, what we
0:32:52 found when it comes
0:32:54 to Bitcoin’s product
0:32:54 market fit.
0:32:55 There’s a couple
0:32:56 cuts.
0:32:57 One is that I
0:32:58 don’t know that it’s
0:32:59 the case that the
0:33:00 Bitcoin store of
0:33:02 value story has
0:33:04 caught on as much
0:33:06 as I’d say that the
0:33:07 need for a store of
0:33:08 value has increased.
0:33:09 Right?
0:33:10 I like that
0:33:11 distinction.
0:33:11 That’s, yeah.
0:33:12 I think that that is
0:33:14 already a well, it’s
0:33:15 like a well-accepted
0:33:16 story about Bitcoin.
0:33:17 But the reason I say
0:33:18 that, like the data
0:33:19 point to look at,
0:33:20 which we do have a
0:33:21 comparison with
0:33:23 assets, including
0:33:24 gold in the
0:33:25 record, if you
0:33:25 look at the
0:33:27 trend, gold has
0:33:27 had a spectacular
0:33:29 last two years.
0:33:29 Yeah.
0:33:29 Right?
0:33:30 Like really spectacular.
0:33:32 That, I think, is an
0:33:33 indicator of the same
0:33:34 phenomenon.
0:33:35 The easiest way to
0:33:36 think about it is
0:33:38 that now, you
0:33:38 know, there’s gold
0:33:39 and there’s digital
0:33:39 gold.
0:33:40 There’s trad gold
0:33:41 and there’s new
0:33:42 gold, right?
0:33:43 And Bitcoin has
0:33:44 really owned that.
0:33:44 And I think it has
0:33:45 found a really
0:33:47 comfortable, sweet
0:33:48 spot as this kind
0:33:49 of digital gold at
0:33:50 a time when people
0:33:51 really want gold.
0:33:52 And evidently,
0:33:53 through probably
0:33:55 the same motivation,
0:33:56 the same impetus,
0:33:58 they want Bitcoin.
0:34:00 Another big theme
0:34:01 for Bitcoin, which
0:34:03 is emerging and
0:34:03 interesting, is that
0:34:04 there have been a
0:34:05 number of attempts
0:34:06 to technologize
0:34:07 Bitcoin.
0:34:08 We’ve talked a
0:34:08 little bit less
0:34:09 about Bitcoin in
0:34:10 prior years, mostly
0:34:12 because Bitcoin,
0:34:13 from a technological
0:34:14 perspective, has
0:34:15 remained more or
0:34:16 less fixed.
0:34:16 It is kind of
0:34:18 ossified, as some
0:34:18 people say in
0:34:20 crypto, where not a
0:34:21 lot of changes come.
0:34:22 those changes are
0:34:23 infrequent, not
0:34:23 huge.
0:34:24 They don’t really
0:34:25 change the underlying
0:34:26 technological
0:34:27 characteristics of it.
0:34:28 We actually see
0:34:30 that it’s attracting
0:34:30 a lot of
0:34:31 developers.
0:34:33 It is in the top
0:34:34 five in number
0:34:34 of developers.
0:34:35 That is something
0:34:36 that has begun to
0:34:37 change a little bit
0:34:38 for Bitcoin.
0:34:40 It never used to
0:34:41 be this way.
0:34:41 It used to be a
0:34:43 very stagnant,
0:34:43 don’t rock the
0:34:44 boat kind of thing
0:34:45 with Bitcoin, but
0:34:46 now there seems to
0:34:47 be more activity
0:34:49 lately focusing on
0:34:49 it.
0:34:49 There is.
0:34:50 I think that that
0:34:51 activity comes from
0:34:52 the fact that because
0:34:54 the price has done
0:34:55 very well, people who
0:34:57 have seen the growth
0:34:58 and success, which is
0:35:00 indisputable, of DeFi
0:35:03 in like Ethereum, in
0:35:04 Solana, in the other
0:35:06 more smart contract
0:35:08 blockchains, they’ve
0:35:09 seen that success and
0:35:10 they’ve said, well,
0:35:10 look, we have this
0:35:12 massive pool of
0:35:13 capital, this gigantic
0:35:15 commodity asset.
0:35:17 how can I make that
0:35:18 accessible to DeFi?
0:35:19 And there have been
0:35:20 representations of
0:35:23 Bitcoin usable in the
0:35:23 rest of DeFi, like
0:35:24 wrapped Bitcoin and
0:35:26 others, but they have
0:35:27 set a set of trust
0:35:29 assumptions because of
0:35:29 the way they work
0:35:31 technologically that
0:35:32 requires the owner of
0:35:33 Bitcoin to maybe
0:35:35 compromise on the
0:35:36 sovereignty of their
0:35:37 holdings, right?
0:35:38 And so the theory has
0:35:39 been for a lot of
0:35:39 people, I’ve heard this
0:35:40 story many times, sort
0:35:42 of the last half of
0:35:43 last year and a couple
0:35:44 times definitely this
0:35:45 year, here and
0:35:47 there, is how can we
0:35:48 make Bitcoin without
0:35:50 importing new trust
0:35:52 assumptions accessible to
0:35:53 DeFi because of DeFi’s
0:35:55 total success, right?
0:35:56 DeFi has continued to
0:35:58 grow, we have slides that
0:35:59 allude to that, and
0:36:01 DeFi is also in a much
0:36:02 better regulatory
0:36:03 position than it was
0:36:04 last year.
0:36:06 So those are serious
0:36:07 tailwinds for
0:36:07 entrepreneurs who want
0:36:09 to sort of unlock the
0:36:11 trapped pooled capital
0:36:13 over on Bitcoin’s side,
0:36:14 despite its relative
0:36:15 lack of programmability.
0:36:18 So the store of value
0:36:20 story plus the DeFi
0:36:22 story has led to some
0:36:23 people to try to get
0:36:24 over that.
0:36:25 There have also been
0:36:25 some interesting
0:36:26 projects.
0:36:28 LightSpark has done a
0:36:29 great job of innovating
0:36:31 on Bitcoin, Lightning,
0:36:33 and trying to make it
0:36:34 like genuinely useful for
0:36:35 financial institutions.
0:36:36 That’s created like a
0:36:37 little bit of buzz.
0:36:38 And then also there have
0:36:39 been some interesting
0:36:41 research projects like
0:36:43 BitVM, which a group of
0:36:44 people have been
0:36:45 collaborating on, trying
0:36:46 to find ways to make
0:36:47 Bitcoin genuinely
0:36:48 programmable without
0:36:49 requiring any
0:36:50 technological upgrades,
0:36:51 right?
0:36:53 So I think it’s an area
0:36:53 to track.
0:36:54 I wouldn’t say that it
0:36:56 has turned Bitcoin into
0:36:57 something that is like
0:36:59 robustly a tech platform.
0:37:01 Again, it still is kind
0:37:03 of in this fixed state,
0:37:05 but it’s possible that
0:37:05 changes.
0:37:07 So it has made it maybe
0:37:08 a little bit more
0:37:09 interesting for builders.
0:37:10 I don’t think it’ll
0:37:11 surprise anybody that
0:37:13 Ethereum, that it’s L2s
0:37:16 like Base, Solana, that
0:37:17 these chains have
0:37:18 attracted so much
0:37:19 interest from builders
0:37:20 and developers, but it
0:37:21 is kind of interesting
0:37:23 that Bitcoin has now
0:37:24 gotten into like the
0:37:25 top five in terms of
0:37:27 interest and developer
0:37:27 activity.
0:37:28 Yeah.
0:37:29 But it’s not just a
0:37:29 fad, right?
0:37:30 It’s like there’s real
0:37:31 reason for that.
0:37:32 Like the store of value
0:37:33 stuff that Eddie was
0:37:34 talking about, like the
0:37:35 fact that it doesn’t
0:37:37 change very often is an
0:37:38 interesting property.
0:37:39 At the very least it’s a
0:37:39 differentiator.
0:37:40 Exactly, right?
0:37:42 The brand of Bitcoin is
0:37:43 unmatched, right?
0:37:45 Like there’s just no other
0:37:47 crypto that has the brand
0:37:48 and recognition globally
0:37:49 that Bitcoin has.
0:37:50 So like there are
0:37:51 properties that make this
0:37:52 interesting.
0:37:54 And they’re also facing,
0:37:56 because of the way that
0:37:58 Bitcoin works, the way
0:38:00 that it’s sort of, you
0:38:00 know, public key
0:38:02 cryptography works, it
0:38:04 also is vulnerable to the
0:38:06 eventual development of a
0:38:06 quantum computer.
0:38:07 Twitter, whenever that
0:38:09 happens, maybe in a
0:38:10 decade, maybe multiple
0:38:11 decades, I don’t know.
0:38:12 We’ve got a slide on this
0:38:13 too, where there are
0:38:15 actually at this point
0:38:19 6.7-ish million Bitcoin
0:38:21 at risk to this threat, to
0:38:23 this quantum threat, which
0:38:24 is like around $750 billion.
0:38:26 That’s a lot.
0:38:27 And the people in that
0:38:28 community are going to
0:38:30 face a choice about whether
0:38:32 to do something about this
0:38:33 or to just sort of, you
0:38:34 know, whoever gets the
0:38:35 quantum computer gets the
0:38:37 Bitcoin, or are they going
0:38:39 to burn stuff or whatever?
0:38:39 I don’t know.
0:38:40 It’s a complex challenge
0:38:41 that I think is worth
0:38:42 getting ahead of for sure.
0:38:44 The good news is, is we
0:38:46 have the tools to be able
0:38:47 to transition to a
0:38:48 post-quantum world.
0:38:50 We know what needs to be
0:38:50 done.
0:38:52 The challenge that Bitcoin
0:38:53 will have to figure out
0:38:55 is, you know, how do you
0:38:56 do it?
0:38:57 And Bitcoin’s community has
0:38:59 been resistant to change.
0:39:01 And, you know, this may end
0:39:02 up serving as a forcing
0:39:04 function to some extent.
0:39:05 There are proposals out
0:39:06 there for Bitcoin’s
0:39:07 transition to the
0:39:08 post-quantum world.
0:39:09 There are ways to do it.
0:39:11 And I think the community
0:39:12 will figure it out, although
0:39:14 I don’t know exactly what
0:39:15 the answer will be.
0:39:15 Yeah.
0:39:16 Open question.
0:39:17 Yeah.
0:39:17 All right.
0:39:19 Let’s talk more about
0:39:19 adoption.
0:39:21 Another big thing that’s
0:39:23 happened is we’ve had a
0:39:24 new trend of these digital
0:39:26 asset treasury companies
0:39:27 that are these public
0:39:29 companies going out and
0:39:31 snatching up tokens and
0:39:32 sort of building up a
0:39:33 war chest, a horde.
0:39:35 They’re kind of aligning
0:39:36 themselves with one chain
0:39:37 at a time.
0:39:37 You know, there’s like
0:39:39 Solana ones, there’s
0:39:40 ETH ones, there’s
0:39:41 Bitcoin ones.
0:39:42 So what are the numbers
0:39:43 around this?
0:39:43 What are the numbers
0:39:45 around these digital asset
0:39:46 treasury companies, these
0:39:48 DATs, and also the uptick
0:39:50 in ETPs, ETFs?
0:39:51 It’s actually, you know,
0:39:53 shocking just how much
0:39:55 crypto today is being held
0:39:56 in publicly traded vehicles.
0:39:58 I think for Bitcoin and
0:40:00 Ethereum, at least, between
0:40:01 the ETFs and the DATs, now
0:40:04 about 10% of the total token
0:40:06 supply is held in publicly
0:40:08 traded entities, you know,
0:40:11 which I think certainly has
0:40:12 had an impact on the market.
0:40:15 I don’t know how this will
0:40:17 all end, but I think it’ll be
0:40:18 fun to watch.
0:40:19 But we’ve fulfilled
0:40:20 the associated vision.
0:40:20 It’s fun to watch.
0:40:21 I’ll say that.
0:40:23 I don’t know if it’ll be fun.
0:40:24 Yeah.
0:40:27 I will say, I think a lot of
0:40:29 things get conflated in the
0:40:30 usage of the term DAT, right?
0:40:33 People often associate it with
0:40:35 the Saylor-esque strategy,
0:40:36 which I don’t pretend to
0:40:38 really understand, but the
0:40:40 issuance of DAT to purchase
0:40:42 assets and so on.
0:40:44 You know, not my thing, this
0:40:45 sort of financial engineering,
0:40:46 I don’t really totally get it
0:40:48 candidly, but there,
0:40:52 putting tokens inside of a
0:40:54 equity vehicle and making
0:40:55 them publicly accessible in
0:40:57 some way does create
0:40:59 opportunities to give
0:41:01 different types of entities
0:41:03 access, like retail and
0:41:04 people who want to buy
0:41:05 things, but, you know, just
0:41:07 want to do it through the
0:41:08 equity channels because
0:41:09 they’re easy to access,
0:41:10 well-established.
0:41:12 There might also be types of
0:41:14 deals that individual
0:41:16 projects that you can make,
0:41:17 right, with another company
0:41:18 and like a partnership
0:41:20 agreement, like a contractual
0:41:21 relationship that, you know,
0:41:22 you can’t make a contract
0:41:23 with Bitcoin today.
0:41:25 There’s no one to make a
0:41:26 business agreement with.
0:41:27 There’s not really for
0:41:29 Ethereum, for any, and for
0:41:31 any truly decentralized or
0:41:32 any project that wants to be
0:41:34 really decentralized, having a
0:41:35 separate entity that is
0:41:37 purpose-built to make these
0:41:39 types of deals creates a
0:41:40 natural counterparty for
0:41:41 people who want to make
0:41:42 productive agreements in
0:41:43 service of the growth of an
0:41:45 ecosystem or a token, right,
0:41:46 a token, a token’s
0:41:46 ecosystem.
0:41:48 So I think it’s a creative
0:41:50 type of tool, and I think
0:41:51 we haven’t really seen all
0:41:52 the ways that they will be
0:41:54 used, and I certainly hope
0:41:55 it’s for more than getting
0:41:57 leverage on tokens, but it
0:41:59 is definitely a growing
0:42:01 phenomenon for sure, so it
0:42:02 should be something that we
0:42:02 track.
0:42:04 One thing that I think is
0:42:05 extremely interesting to
0:42:08 note is BlackRock’s ETF,
0:42:09 Bitcoin ETF, their ETP
0:42:12 product for Bitcoin is the
0:42:14 most successful launch of
0:42:16 any ETP or ETF product
0:42:19 ever, like, period, ever, in
0:42:21 the history of these
0:42:21 products.
0:42:23 Like, that is kind of
0:42:23 insane.
0:42:25 Yeah, it is.
0:42:27 I mean, candidly, a little
0:42:27 surprising to me.
0:42:29 I mean, I say this with the
0:42:30 self-awareness here, but
0:42:32 just like, I don’t know why
0:42:33 you don’t just buy the
0:42:34 Bitcoin, to be honest.
0:42:37 To be honest, but again,
0:42:37 evidently I’m wrong.
0:42:38 You’re a purist, Eddie.
0:42:38 You’re a purist.
0:42:40 Yeah, but I’m wrong, and the
0:42:41 market is, the market is
0:42:43 spoken, so I obey.
0:42:44 The market is always
0:42:45 right.
0:42:46 We’ve talked a little bit
0:42:48 about the market dynamics that
0:42:49 are going on, you know, some
0:42:50 of the trends that are
0:42:51 happening between ETPs and
0:42:52 DATs.
0:42:53 I want to talk about
0:42:54 institutional adoption,
0:42:57 because this really is the
0:42:58 thing I think that sets apart
0:42:58 this year.
0:43:01 It seems like every major
0:43:04 financial company, not every
0:43:06 single one, but a lot of
0:43:08 them, a lot of them are
0:43:10 really getting involved here.
0:43:12 actually, I have PTSD from
0:43:14 previous cycles where, you
0:43:15 know, you had these various
0:43:17 institutions, like, dipping
0:43:18 their toe in the water, getting
0:43:19 a little interested, maybe
0:43:21 they’re, you know, going to get
0:43:23 involved, and then they
0:43:25 retreated, pulled back, and, you
0:43:27 know, things were stalled for
0:43:27 years.
0:43:30 But they are embracing it, you
0:43:32 know, by every measure.
0:43:34 They’re launching products, they
0:43:36 are getting involved, making
0:43:37 acquisitions, striking
0:43:38 partnership deals.
0:43:39 it’s happening.
0:43:40 And I think the big difference
0:43:42 between what you were talking
0:43:44 about historically and today is
0:43:46 that these institutions are no
0:43:48 longer just trying to chase the
0:43:49 hottest trend.
0:43:50 They actually see the opportunity
0:43:52 for crypto to reshape their
0:43:52 businesses.
0:43:53 Yeah.
0:43:55 And I think that is different than
0:43:56 it’s ever been.
0:43:58 I think stable coins are a big
0:43:59 reason why that’s the case.
0:44:00 I think it’s very easy for
0:44:03 financial institutions to see the
0:44:04 stable coin opportunity and what it
0:44:06 could do for their business.
0:44:07 And as a result, we’ve seen
0:44:10 institutions flood in with, you
0:44:12 know, real commitments, real
0:44:15 product launches, you know, real
0:44:17 acquisitions, big IPOs, right?
0:44:20 Like, lots of money at stake here.
0:44:22 And I think it’s really, really
0:44:23 exciting.
0:44:23 Yeah.
0:44:24 I mean, look, I was around three
0:44:25 years ago, Robert.
0:44:26 I was around seven years ago.
0:44:28 I was even following, like, you
0:44:29 know, 10, 11 years ago.
0:44:30 Like, I was following this stuff
0:44:32 before I was doing crypto
0:44:32 professionally.
0:44:35 I always remember hearing the
0:44:37 promises from the institutions and
0:44:38 then kind of wincing a little bit
0:44:40 and being like, OK, OK.
0:44:42 It’s even funny to hear you say
0:44:44 doing crypto professionally, by the
0:44:45 way, just like thinking back to
0:44:46 that, like, 10 year.
0:44:48 Yeah, it’s almost being weird that
0:44:48 I’m saying that.
0:44:51 Yeah, it’s a little cringe I’m even
0:44:53 saying that, but because it’s so
0:44:54 mature in a way now.
0:44:57 But I remember hearing them say
0:44:58 that and not taking it seriously
0:44:59 because there were just too many
0:45:01 questions, the legalities were
0:45:03 unclear, the business opportunity
0:45:05 was unclear, the infrastructural
0:45:07 capability to handle what they
0:45:07 wanted was unclear.
0:45:09 There was layer after layer after
0:45:09 layer of unclear.
0:45:12 You know, seven years ago, if like
0:45:15 a major retail chain, like chain
0:45:17 of retail shops, I mean, not
0:45:19 blockchain, but like tried to
0:45:21 accept payments in crypto, like
0:45:23 the reality was, and this is like
0:45:25 the conversations I was having
0:45:26 with people, is there’s just no way
0:45:27 to do that in a scalable and
0:45:28 affordable way, let alone in a way
0:45:29 that had a decent user experience.
0:45:31 The scalability and affordability
0:45:32 has been solved.
0:45:35 The regulatory is nearly there.
0:45:37 And the UX has a way to go, but
0:45:39 we’re running out of excuses.
0:45:41 And now when I talk with some of
0:45:43 the people like on the slide we
0:45:45 have about some of the largest
0:45:46 financial institutions embracing
0:45:48 crypto, like this is the type of
0:45:49 thing they used to say to me like
0:45:51 three years ago, seven years ago.
0:45:52 Yeah, you know, we see all this
0:45:53 exciting stuff.
0:45:55 You know, the tech is really cool.
0:45:56 We want to show that we’re, you
0:45:59 know, leaders, basically like some
0:46:01 innovation lab, not to be critical,
0:46:02 very nice people, but like the
0:46:03 innovation lab wants to show that
0:46:05 the company is not losers.
0:46:06 Right.
0:46:08 And then they know cool stuff.
0:46:09 That was the problem they were
0:46:10 solving.
0:46:10 Right.
0:46:13 Now I’m hearing people say, you
0:46:14 know, we’re cutting costs in this
0:46:16 area and we’re expanding our line of
0:46:17 business in this area.
0:46:18 We’re going to offer a whole new
0:46:19 bunch of products here.
0:46:21 And then in this area, we can
0:46:23 just like move way faster while
0:46:25 slashing costs like and they’re
0:46:26 being very concrete with me.
0:46:28 That’s just not the same
0:46:28 conversation.
0:46:29 So that’s why I feel a little
0:46:30 differently about it.
0:46:32 I would be shocked if five years
0:46:34 from now we look back and crypto
0:46:36 has not advanced in institutions.
0:46:38 Whereas if you had asked me seven
0:46:39 years from now, if the institutions
0:46:40 have been will be using it
0:46:42 crypto broadly, I think it would
0:46:43 have been like, I think we got some
0:46:43 way to go.
0:46:45 There’s some more cypherpunk stuff
0:46:46 you should look at.
0:46:48 You know, like that’s that’s what I
0:46:49 would have said.
0:46:49 I think so.
0:46:51 The opportunity is massive, right?
0:46:53 Because of how much distribution
0:46:56 these financial giants have, like
0:46:57 if they are serious about these
0:46:58 commitments, if the developments
0:47:01 continue, right, like we could see
0:47:04 crypto deeply embedded into the
0:47:05 financial services that we use
0:47:07 every day and we could see crypto,
0:47:10 you know, seriously being used by,
0:47:11 you know, billions of people around
0:47:13 the world like that is the size of
0:47:14 the opportunity here.
0:47:15 And I think, you know, for the
0:47:17 first time ever, we’ve got got a
0:47:19 chance to make that happen with
0:47:20 these institutions.
0:47:21 Yeah, I think that’s right.
0:47:24 I’d love to know which of these
0:47:25 companies or who has been most
0:47:27 surprising to you getting involved.
0:47:30 I mean, if I’m reading the situation
0:47:33 like casting back to when things were
0:47:34 heating up sort of at the end of last
0:47:37 year, I feel like the starting gun was
0:47:39 Stripe acquiring Bridge, which happened
0:47:42 pre-Genius bill passing, pre, you know,
0:47:45 there being actual rules of the road for
0:47:46 stable coins in the U.S.
0:47:48 And after the State of Crypto report
0:47:48 last year, didn’t it?
0:47:50 And after the State of Crypto, yeah.
0:47:52 And this was after we had gone out
0:47:53 there and said that stable coins have
0:47:55 found product market fit, which is
0:47:56 kind of cool.
0:47:57 We called that one right.
0:47:59 But no, I think Stripe was the starting
0:48:00 gun because they bought Bridge.
0:48:03 And I think this got all the other
0:48:05 players paying instant attention.
0:48:07 They were like, okay, this is a real
0:48:08 thing we need to start to take
0:48:09 seriously.
0:48:10 That’s my read on it.
0:48:11 I’d love to get what you guys,
0:48:13 how you think this has sort of
0:48:15 shaken out among the players and
0:48:16 who’s been very surprising to you
0:48:17 getting involved.
0:48:20 Well, I think Stripe has done more
0:48:21 than that since then, right?
0:48:23 They have their Tempo project, which
0:48:25 could be interesting, could be
0:48:27 Corpo, could be Crypto.
0:48:28 We’ll find out, right?
0:48:29 Yes, their own blockchain that
0:48:30 they’re building.
0:48:31 Yeah, they acquired Privy, which is a
0:48:33 great team working on some wallet
0:48:34 infrastructure.
0:48:36 So they’ve continued to advance.
0:48:38 I’ve been continuously impressed by,
0:48:40 you know, Robinhood has really leaned
0:48:42 into crypto in a hard way, right?
0:48:43 They’ve got their own L2.
0:48:45 Yeah, their own L2.
0:48:47 They want to tokenize stocks,
0:48:48 you know, tokenize equities,
0:48:50 bring them on chain, bring them
0:48:51 into the app.
0:48:52 Super cool plans there.
0:48:55 I’ve remained impressed by it.
0:48:57 The Revolut team, super interesting,
0:48:58 like bridging plans, integrating
0:49:00 with Crypto Rails plans.
0:49:01 That’s part of their plan for global
0:49:02 domination.
0:49:04 Maybe I’ll throw out one to surprise
0:49:05 you a little bit, Robert,
0:49:07 is that, you know,
0:49:08 I had a great conversation
0:49:10 with some brilliant people
0:49:12 at Morgan Stanley not long ago
0:49:15 who were shocking to me
0:49:18 how thoughtful and specific
0:49:20 they were in terms of the types
0:49:21 of products that they want
0:49:23 to offer to their users.
0:49:25 Not like kind of dip our toes,
0:49:27 oh yeah, we’re going to flirt around
0:49:28 with Crypto a little bit.
0:49:29 Not exactly the opposite of that
0:49:30 is what I mean,
0:49:32 is they specifically saw
0:49:32 the opportunity.
0:49:35 they wanted to talk about
0:49:37 technical and regulatory challenges
0:49:38 in offering that product
0:49:40 in a safe and secure way
0:49:41 to their users.
0:49:42 But they wanted to be
0:49:43 as on chain as possible
0:49:45 specifically because they saw
0:49:47 opportunities in DeFi,
0:49:48 opportunities to offer
0:49:49 new types of products,
0:49:52 opportunities to help manage
0:49:53 their customers’ wealth
0:49:55 in an ideal way,
0:49:55 which is, you know,
0:49:57 which is a very interesting
0:49:57 kind of cut on it.
0:50:00 Yeah, many of these.
0:50:01 I mean, BlackRock’s Biddle token
0:50:03 has been an instrumental
0:50:04 building block
0:50:05 for a lot of people
0:50:06 who want to expand
0:50:08 stablecoin issuance
0:50:09 and use that
0:50:10 as sort of the foundation
0:50:12 of their own stablecoin
0:50:13 or settlement between
0:50:15 categories of stablecoins.
0:50:17 That product is the big kahuna
0:50:18 when it comes to
0:50:20 tokenized assets so far.
0:50:21 And I will say
0:50:21 that does surprise me
0:50:22 because when you mention
0:50:23 Revolut and Robinhood,
0:50:24 you know,
0:50:25 it’s not terribly surprising
0:50:27 that these fintech upstarts
0:50:28 are, you know,
0:50:29 trying to explore
0:50:30 this new terrain.
0:50:32 But to have a stodgy,
0:50:34 old, legacy,
0:50:35 incumbent big bank
0:50:36 do so,
0:50:36 like that,
0:50:38 that is kind of surprising.
0:50:39 That’s exactly what I mean.
0:50:39 It’s like,
0:50:40 I wouldn’t have,
0:50:41 I just wouldn’t have heard
0:50:42 a lot from them
0:50:43 that would have impressed me
0:50:43 in prior years.
0:50:45 And remember, right,
0:50:45 like you’ve mentioned
0:50:46 Stripe acquiring
0:50:48 Bridge as kind of
0:50:48 starting all of this,
0:50:50 but upstream of that
0:50:51 is the stablecoin story,
0:50:52 right?
0:50:53 And even upstream of that
0:50:54 is like the infrastructure story.
0:50:55 And stablecoins
0:50:56 have been around
0:50:57 for years now, right?
0:50:59 But it wasn’t until recently
0:51:00 when we,
0:51:00 you know,
0:51:02 with years of infrastructure
0:51:03 development,
0:51:05 improved the underlying
0:51:06 blockchains to a point
0:51:07 where we could actually
0:51:08 make stablecoins
0:51:09 a good product
0:51:10 for payments.
0:51:10 We could do it in,
0:51:11 you know,
0:51:11 less than a second
0:51:12 for less than a cent.
0:51:15 And it was at that moment,
0:51:15 I think,
0:51:17 that all of the pieces
0:51:17 kind of started
0:51:18 to come together.
0:51:20 The institutions then
0:51:21 really saw the vision,
0:51:22 saw the opportunity,
0:51:23 and then started
0:51:23 to make the bets.
0:51:24 And then they saw other people
0:51:25 make the bets.
0:51:26 And now,
0:51:26 you know,
0:51:27 we’re at where we’re at.
0:51:28 And I think it’s sort of
0:51:29 the theme of this year’s
0:51:30 entire report
0:51:31 is that all of the pieces
0:51:32 are now coming together.
0:51:33 I like that.
0:51:34 It’s also a different cut
0:51:36 on the price innovation cycle
0:51:37 where it’s not number go up,
0:51:39 it’s number go down.
0:51:40 Costs go down,
0:51:41 stablecoins become usable,
0:51:43 and now you unleash
0:51:44 this whole wave
0:51:45 of like new innovation
0:51:46 that’s happening.
0:51:47 All right,
0:51:47 so we’ve been talking
0:51:48 a little bit about stablecoins,
0:51:50 but let’s talk a little bit
0:51:51 more specifically
0:51:53 about what’s going on there.
0:51:55 over the past year,
0:51:57 there’s been $46 trillion
0:52:01 in stablecoin transaction volume.
0:52:01 Like,
0:52:02 I can’t even wrap my head
0:52:03 around that number.
0:52:04 It’s so gigantic.
0:52:04 Like,
0:52:06 are those numbers real?
0:52:07 Where is all this activity
0:52:08 coming from?
0:52:08 Well,
0:52:10 I’ll let Darren clarify
0:52:11 a little bit,
0:52:11 but you’ll notice
0:52:13 there’s an unadjusted number
0:52:14 and then an adjusted number,
0:52:14 right?
0:52:15 Yes.
0:52:16 here’s one of these
0:52:18 nuanced sort of
0:52:19 seeming paradoxes
0:52:20 that you need to
0:52:21 kind of be aware of
0:52:22 when you see these things
0:52:24 is when it costs
0:52:25 less than a penny
0:52:26 to move
0:52:27 a million,
0:52:28 10 million,
0:52:29 even $100 million,
0:52:32 then it happens a lot,
0:52:33 right?
0:52:34 Because people are
0:52:35 rebalancing
0:52:36 their internal portfolio,
0:52:37 institutions are rebalancing
0:52:38 their portfolios,
0:52:40 exchanges are recycling
0:52:41 through different wallets,
0:52:42 right?
0:52:43 All these things happen
0:52:44 because they can happen
0:52:44 cheaply, right?
0:52:45 Think about
0:52:46 if electricity
0:52:47 in your house
0:52:50 costs like $10,000
0:52:51 per kilowatt hour,
0:52:52 you would be
0:52:53 incredibly sparing
0:52:54 and careful
0:52:56 with like every single
0:52:56 thing that you do.
0:52:58 If energy costs
0:52:59 less than a penny
0:53:00 per kilowatt hour,
0:53:02 then you don’t
0:53:02 give a shit at all.
0:53:03 Like,
0:53:04 you leave the lights on,
0:53:05 you know,
0:53:06 like blow dry air
0:53:07 for as long as you want,
0:53:08 crank the water heater up.
0:53:09 In other words,
0:53:11 the apparently low cost
0:53:13 affects these numbers
0:53:14 for what may seem
0:53:17 like large behaviors
0:53:17 to people.
0:53:18 To normal people,
0:53:19 and this is reasonable,
0:53:20 you wouldn’t move around
0:53:21 a million dollars
0:53:21 willy-nilly.
0:53:23 But if it costs you
0:53:24 next to nothing,
0:53:25 then maybe you actually do.
0:53:27 So one of the
0:53:28 interesting consequences
0:53:29 of extremely low
0:53:30 gas costs,
0:53:31 mature infrastructure,
0:53:33 institutional adoption,
0:53:34 et cetera,
0:53:35 and stable coin
0:53:36 proliferation
0:53:37 is that you get
0:53:39 huge volume numbers
0:53:41 which may not
0:53:42 necessarily reflect
0:53:44 meaningful economic activity.
0:53:46 Rebalancing my balance
0:53:48 is not real economic activity.
0:53:49 You know,
0:53:50 it’s like taking your wallet
0:53:50 out of your pocket
0:53:53 doesn’t count as spending.
0:53:53 Whereas,
0:53:54 actually,
0:53:56 spending is a different behavior.
0:53:57 This 10 trillion
0:53:59 adjusted number
0:54:00 is our attempt
0:54:00 to filter out
0:54:02 many of the most obvious
0:54:04 sort of not economically
0:54:05 meaningful
0:54:06 transfers
0:54:08 to try to get
0:54:08 something a little bit
0:54:09 closer to,
0:54:10 you know,
0:54:11 someone deposited money
0:54:12 to an exchange.
0:54:13 You know,
0:54:14 that’s meaningful.
0:54:15 Someone making a payment,
0:54:16 that’s meaningful.
0:54:17 Someone depositing
0:54:18 into a DeFi protocol
0:54:20 to lock it
0:54:22 for generating yield
0:54:23 or so someone else
0:54:23 can lend it.
0:54:24 Someone borrowing it.
0:54:25 Like,
0:54:26 those are meaningful uses
0:54:27 because it’s actually,
0:54:27 you know,
0:54:28 changing hands
0:54:30 or going into a mechanism.
0:54:31 I think we typically
0:54:32 like to focus
0:54:33 on the adjusted metric.
0:54:35 We reference it
0:54:35 multiple times
0:54:37 throughout the report
0:54:37 because we think
0:54:39 it’s a better indicator
0:54:40 of real,
0:54:40 genuine,
0:54:42 user-driven activity
0:54:43 and it does filter out
0:54:44 those artificially
0:54:45 inflationary practices.
0:54:46 And we work with
0:54:47 a data provider
0:54:48 called Allium
0:54:49 to come up
0:54:50 with that methodology
0:54:51 and I think
0:54:52 that’s maybe
0:54:54 the better number
0:54:55 to use
0:54:56 in most cases.
0:54:56 But still,
0:54:57 you know,
0:54:57 $10 trillion
0:54:59 over the last year,
0:54:59 you know,
0:55:00 that rivals
0:55:02 some of the largest
0:55:03 global payment networks
0:55:03 that have been around
0:55:05 for decades, right?
0:55:07 Multiples of PayPal’s
0:55:08 transaction volume
0:55:09 right in there
0:55:10 with Visa
0:55:12 quickly approaching
0:55:13 the transaction volume
0:55:14 of ACH
0:55:15 which plums
0:55:16 the entire
0:55:17 banking system.
0:55:17 So,
0:55:18 I think
0:55:20 very impressive
0:55:21 what we’ve seen
0:55:22 in terms of
0:55:22 growth
0:55:23 in this category
0:55:24 in such a short
0:55:25 period of time.
0:55:25 Yeah,
0:55:25 this number
0:55:26 is growing
0:55:26 quickly
0:55:26 and it’s going
0:55:27 to keep
0:55:27 growing quickly.
0:55:28 So,
0:55:28 what’s happening
0:55:29 with stable coins
0:55:30 is because
0:55:31 it’s programmable
0:55:32 on this blockchain,
0:55:33 there’s all types
0:55:34 of behaviors
0:55:35 underneath.
0:55:36 There are genuine
0:55:37 payments.
0:55:38 We have some
0:55:38 evidence and there
0:55:39 have been some
0:55:40 interesting reports
0:55:40 that show that
0:55:41 that is growing.
0:55:42 It’s particularly
0:55:42 growing in
0:55:44 emerging economies.
0:55:45 But there’s also
0:55:46 things that are,
0:55:46 you know,
0:55:47 you might say
0:55:49 you put $100,000
0:55:50 in a DeFi protocol.
0:55:51 Like,
0:55:53 is that the same
0:55:55 as spending $100,000
0:55:55 on Visa?
0:55:56 Probably not,
0:55:56 right?
0:55:57 Because that $100,000
0:55:58 you spent on Visa
0:55:59 is not coming back
0:56:00 but that $100,000
0:56:01 that you deposited
0:56:02 into a DeFi protocol,
0:56:03 you could just
0:56:03 pull it out
0:56:04 the next day
0:56:05 freely.
0:56:05 That’s how
0:56:06 they’re designed.
0:56:07 You know,
0:56:08 so it is a little
0:56:08 bit of an apples
0:56:10 to oranges comparison
0:56:11 but I think
0:56:12 you need to
0:56:13 appreciate the breadth
0:56:14 of the types
0:56:14 of activities
0:56:15 that are possible
0:56:17 just by using
0:56:18 stable coins.
0:56:19 all these types
0:56:19 of things
0:56:20 are possible
0:56:21 behaviors
0:56:21 which is what
0:56:22 makes the network
0:56:24 so potent,
0:56:25 right?
0:56:26 It’s so broad
0:56:27 in its application
0:56:28 as opposed to
0:56:29 other types
0:56:29 of networks
0:56:30 which are so
0:56:31 specific and narrow
0:56:32 in their application.
0:56:34 And to your point
0:56:34 about this growing,
0:56:36 stable coin transaction
0:56:36 volume continues
0:56:37 to increase
0:56:38 even when we
0:56:39 account for the
0:56:40 adjusted numbers
0:56:41 and that is
0:56:42 decoupling from
0:56:43 spot crypto
0:56:44 trading volume
0:56:46 which would
0:56:47 kind of
0:56:48 indicate that
0:56:48 people are
0:56:48 actually using
0:56:49 these things
0:56:50 for reasons
0:56:50 beyond trading
0:56:51 or beyond
0:56:52 speculation.
0:56:53 For a long
0:56:54 time stable coins
0:56:54 were criticized
0:56:55 for only being
0:56:56 used to settle
0:56:57 speculative crypto
0:56:58 trades and I
0:56:59 think that was
0:57:00 the case up
0:57:01 until recently
0:57:02 when stable coins
0:57:03 found product
0:57:03 market fit.
0:57:04 They showed
0:57:04 that they had
0:57:05 many real
0:57:06 organic use
0:57:07 cases and
0:57:08 you know since
0:57:08 then we’ve
0:57:09 really broken
0:57:09 the correlation
0:57:11 and we are
0:57:11 no longer
0:57:13 just going
0:57:13 up and down
0:57:14 relative to
0:57:14 the trading
0:57:15 volume.
0:57:16 weather and
0:57:16 circles still
0:57:17 dominate but
0:57:17 we’re seeing
0:57:19 growth of other
0:57:20 stable coins as
0:57:20 well.
0:57:21 I wonder what
0:57:21 you think of
0:57:22 that trend
0:57:23 how that’ll
0:57:24 continue to pan
0:57:24 out in the
0:57:24 future.
0:57:25 The details
0:57:26 there have a lot
0:57:27 to do with
0:57:28 regulatory conditions.
0:57:30 The passage of
0:57:31 the Genius Act
0:57:31 after it’s had
0:57:32 some time to
0:57:33 cook and
0:57:34 after some of
0:57:35 the more
0:57:35 specific rules
0:57:36 have been settled
0:57:37 by regulators
0:57:38 will probably
0:57:39 open up
0:57:39 opportunities for
0:57:40 more stable coin
0:57:41 issuers to
0:57:42 issue stable coins
0:57:43 and to
0:57:44 distribute them
0:57:45 through a
0:57:46 variety of
0:57:46 channels I’m
0:57:47 sure.
0:57:48 You know Tether
0:57:50 and USDC
0:57:51 have been
0:57:53 popularized by
0:57:54 integrations with
0:57:55 exchanges in
0:57:55 their early days
0:57:56 right they were
0:57:57 primarily used
0:57:59 as a means to
0:58:00 settle a balance
0:58:01 to deposit and
0:58:01 withdraw a balance
0:58:02 from a crypto
0:58:03 exchange but
0:58:04 we’ve seen that
0:58:05 grow since then.
0:58:07 Tether is used
0:58:09 globally you know
0:58:10 we mentioned
0:58:10 specifically
0:58:11 Ethereum and
0:58:13 Tron I’ve
0:58:13 heard at least
0:58:14 anecdotally and
0:58:14 seen a little bit
0:58:15 of evidence that
0:58:16 there’s a
0:58:17 significant amount
0:58:18 of payments
0:58:19 being settled
0:58:19 in certain
0:58:21 countries using
0:58:22 Tether on
0:58:23 Tron like
0:58:23 there’s a lot
0:58:24 of data both
0:58:24 anecdotal and
0:58:25 quantitative and
0:58:26 you can see a
0:58:26 little bit of
0:58:26 that in our
0:58:27 report.
0:58:27 The usage of
0:58:28 stable coins
0:58:30 evolves like
0:58:30 other technology
0:58:31 it starts for
0:58:31 crypto to
0:58:32 crypto exchange
0:58:32 settlement
0:58:34 maybe it goes
0:58:34 to like
0:58:35 developing country
0:58:37 payment for
0:58:37 certain small
0:58:38 medium businesses
0:58:39 right then
0:58:40 it becomes
0:58:41 for like
0:58:41 some DeFi
0:58:42 stuff then
0:58:43 maybe it
0:58:43 becomes for
0:58:44 payment stuff
0:58:45 as it grows
0:58:45 and as the
0:58:46 technological
0:58:47 properties change
0:58:48 like gas
0:58:49 fees like
0:58:50 liquidity like
0:58:51 integrations like
0:58:52 bridges all
0:58:54 evolve the
0:58:55 same thing can
0:58:56 be reused for
0:58:56 another purpose
0:58:57 as going back
0:58:57 to that point I
0:58:58 was saying about
0:58:58 the transaction
0:58:59 volume is like
0:59:00 there’s a lot of
0:59:01 different stuff that
0:59:02 makes up that
0:59:03 transaction volume
0:59:04 it’s expanding and
0:59:05 growing and
0:59:05 becoming more
0:59:06 complicated not
0:59:08 simpler so I
0:59:08 see it just
0:59:09 following the same
0:59:09 pattern as
0:59:10 as everything
0:59:11 else in the
0:59:12 future we’ll
0:59:12 probably have
0:59:13 more stable
0:59:13 coins they
0:59:14 may be more
0:59:15 specialized specific
0:59:16 applications especially
0:59:17 now the regulations
0:59:18 are clear and the
0:59:19 product market fit is
0:59:21 far beyond obvious
0:59:22 speaking of expanding
0:59:23 and growing one
0:59:24 slide I’ve got to
0:59:26 talk about is this
0:59:27 one about the US
0:59:28 national debt which
0:59:29 is also expanding and
0:59:31 growing at an
0:59:32 alarming rate and
0:59:35 probably that has
0:59:35 contributed to the
0:59:37 passage of genius it’s
0:59:38 kind of crazy it’s
0:59:39 like you’re you’ve got
0:59:40 like the government
0:59:42 sort of scrounging for
0:59:43 spare pocket change
0:59:44 underneath like the
0:59:45 couch cushions and
0:59:45 then all of a sudden
0:59:46 you discover like these
0:59:48 gold bars there which
0:59:48 just happen to be
0:59:49 stable coins this
0:59:50 incredible source of
0:59:53 demand for US debt and
0:59:54 you can see in the
0:59:56 data that you know
0:59:56 stable coins now
0:59:57 account for there are
0:59:59 now a top 20 holder of
1:00:01 US treasuries that
1:00:02 puts it ahead of Saudi
1:00:03 Arabia South Korea
1:00:05 Israel Germany like
1:00:07 stable coins as a
1:00:08 category are now
1:00:10 holding more US debt
1:00:12 than many many
1:00:12 sovereign countries
1:00:14 it’s absolutely wild
1:00:15 that there is this
1:00:17 pent-up demand and
1:00:18 I think this is such
1:00:19 an important part of
1:00:20 the stable coin story
1:00:21 on one hand right as
1:00:22 you pointed out we all
1:00:24 know the US national
1:00:25 debt is growing out of
1:00:26 control we know that
1:00:28 the demand for that
1:00:30 debt is fading for the
1:00:31 first time in 30 years
1:00:32 foreign central banks
1:00:34 hold more reserves in
1:00:35 gold than US treasuries
1:00:36 this is about the
1:00:38 everybody’s looking for
1:00:39 this this store of
1:00:40 value now exactly and
1:00:41 on the other hand right
1:00:42 we have now the
1:00:43 stable coin opportunity
1:00:44 which you know as you
1:00:45 pointed out they are a
1:00:47 big source of demand
1:00:47 for US debt they’re
1:00:48 holding all of these
1:00:50 US treasuries the
1:00:51 category is projected to
1:00:52 grow into the
1:00:54 trillions of dollars in
1:00:55 the next few years
1:00:57 yes Citibank has has a
1:00:58 really incredible
1:00:59 prediction on this where
1:01:00 they say by 2030 they
1:01:02 expect it to be growing
1:01:03 almost an order of
1:01:04 magnitude if it’s at
1:01:06 around 300 billion today
1:01:07 that it’ll be three
1:01:09 trillion yep so yeah
1:01:10 trillions of dollars
1:01:11 worth of stable coins
1:01:13 more than 99% today are
1:01:16 denominated in USD and
1:01:18 so you know you put those
1:01:19 things together stable
1:01:21 coins are a clear
1:01:23 opportunity for the US
1:01:24 to sustain dollar
1:01:26 dominance in kind of a
1:01:27 very uncertain time
1:01:28 right now really
1:01:30 amazing let’s talk
1:01:31 about privacy I know
1:01:31 you’re a big privacy
1:01:33 guy Eddie you’ve got a
1:01:34 whole privacy stack that
1:01:35 you personally use
1:01:37 tell us about what’s
1:01:38 going on in the privacy
1:01:39 yeah yeah so a theme
1:01:41 whenever I talk on the
1:01:42 pod and I feel like one
1:01:44 of my like a16s some of
1:01:46 my a16s neurons right
1:01:46 like that have like grown
1:01:48 in my brain have like a
1:01:50 very specific shape okay
1:01:51 and the shape is that
1:01:53 technology develops in
1:01:54 this sort of historical
1:01:56 way the best way to
1:01:57 predict the future even
1:01:58 though predicting is
1:02:00 flawed is to kind of
1:02:02 unfold technology like
1:02:05 one layer at a time and
1:02:06 try to imagine what
1:02:07 happens like what
1:02:10 bottlenecks appear which
1:02:12 second order consequences
1:02:14 occur counterintuitively
1:02:15 right like that’s like the
1:02:16 way to think about it
1:02:18 privacy could not be more
1:02:20 obvious to me has been
1:02:22 for years I will scream it
1:02:23 forever I don’t care if
1:02:26 this uptick in privacy is
1:02:27 a fad and it goes away
1:02:28 it’s going to come back
1:02:30 again later it is
1:02:31 inevitable and the reason
1:02:32 no one has cared is
1:02:34 because if stuff doesn’t
1:02:36 work if no one’s using
1:02:37 it you don’t need it to be
1:02:39 private and at the same
1:02:41 time things being
1:02:43 illegible and confusing
1:02:45 is often a workable
1:02:47 substitute for privacy in
1:02:48 the short term right
1:02:50 crypto has plenty of this
1:02:52 illegibility and confusing
1:02:55 this so the combine a
1:02:57 lack of total mainstream
1:02:59 adoption for consumer use
1:03:00 cases like payments right
1:03:01 which we’ve been saying
1:03:03 may happen has the signs
1:03:04 of happening isn’t
1:03:05 happening yet right
1:03:06 consumers don’t make their
1:03:08 payments with stable
1:03:10 coins but for there to be
1:03:11 payments of stable coins
1:03:12 you need stable coins and
1:03:13 you need stable coin
1:03:14 adoption and you need
1:03:15 institutional acceptance
1:03:17 of stable coins and you
1:03:18 need transaction fees to be
1:03:20 low and etc all these
1:03:21 other things that we’ve
1:03:23 talked about once that
1:03:25 becomes the case people
1:03:26 will demand privacy I
1:03:28 know this is like a hotly
1:03:29 this is like the this is
1:03:30 talked about in crypto all
1:03:31 the time ad nauseam makes
1:03:33 me crazy people say people
1:03:34 don’t care about privacy
1:03:36 whatever no of course they
1:03:38 care about privacy okay they
1:03:39 do care but they won’t
1:03:40 necessarily articulate it in
1:03:42 this way but if someone
1:03:44 comes up and like shows you
1:03:45 like Venmo from 10 years
1:03:47 ago someone shows you all
1:03:48 the transactions you’ve
1:03:49 paid and all the comments
1:03:50 and it’s all out in the
1:03:51 wild people have an adverse
1:03:53 reaction people take it for
1:03:54 granted that’s what they
1:03:55 mean by don’t care is that
1:03:56 they take it for granted
1:03:58 they just assume they have a
1:03:59 functional level of
1:04:01 privacy they don’t demand
1:04:02 specific cryptography they
1:04:04 don’t demand like incredible
1:04:05 definitions about the
1:04:07 distinction between privacy
1:04:09 anonymity pseudonymity
1:04:10 confidentiality they don’t do
1:04:11 that but they have
1:04:14 expectations once these
1:04:15 things become popular
1:04:17 tools blockchains for
1:04:18 payments blockchains for
1:04:20 personal finance blockchains
1:04:22 as neobanks whatever then
1:04:24 people will demand privacy
1:04:26 and institutions will demand
1:04:27 privacy a very clear theme
1:04:30 for me over the last year or
1:04:31 so as I’ve begun to have
1:04:32 more conversations
1:04:33 institutions is that they
1:04:36 consider privacy a non
1:04:38 negotiable property it is a
1:04:39 table stakes property they
1:04:41 must have they cannot
1:04:43 reveal their behavior to
1:04:45 competitors to the public
1:04:46 they cannot make the public
1:04:47 uneasy they need to be able
1:04:48 to offer this to their
1:04:50 customers they’ve made it
1:04:51 abundantly clear to me
1:04:53 now you might say why don’t
1:04:54 we have it yet in crypto
1:04:56 there’s two reasons one is
1:04:57 that the ways crypto has
1:04:58 been popular so far hasn’t
1:05:00 really needed it you know if
1:05:02 you’re just moving a little
1:05:03 bit out of an exchange you’re
1:05:04 putting it in DeFi you’re
1:05:05 just messing around with some
1:05:07 meme coins you’re in an
1:05:08 emerging economy you want to
1:05:09 hold some dollars these
1:05:10 don’t really demand like a
1:05:12 profound privacy and the
1:05:14 illegibility of crypto might
1:05:16 be good enough for you right
1:05:18 but the minute it starts to
1:05:20 get into more private things
1:05:23 salary payments personal
1:05:25 finance then people will start
1:05:29 to do contrived things to get
1:05:30 privacy they’ll start to make
1:05:31 tons of addresses they’ll start
1:05:32 to use apps that offer it’s
1:05:33 just absolutely going to
1:05:35 happen the second is that
1:05:37 privacy is very difficult
1:05:39 technologically and from a
1:05:40 compliance perspective
1:05:42 technologically we’ve needed a
1:05:44 lot of advancements across
1:05:45 different areas in
1:05:47 cryptography to try to get
1:05:48 closer to privacy we’ve
1:05:50 learned a lot of stuff there’s
1:05:51 some protocols we allude to
1:05:53 in the report you know we
1:05:55 have some total flows through
1:05:56 railgun we talk about some
1:05:58 cool stuff with zcash and the
1:06:01 zashi wallet noir developed by
1:06:02 like one of our portfolio
1:06:04 companies aztec these are
1:06:06 incredibly complex projects
1:06:09 that even though the products
1:06:10 work today like railgun is
1:06:12 live evidently right it’s
1:06:14 working it has a pretty
1:06:15 challenging user experience
1:06:17 despite this it is growing
1:06:20 despite this very challenging
1:06:21 user experience that in my
1:06:23 mind is not yet appropriate for
1:06:24 retail it is still growing
1:06:27 right and this is like new tech
1:06:29 new cryptography that they have
1:06:32 struggled to repurpose for
1:06:35 mainstream use as crypto
1:06:36 starts to become useful in these
1:06:38 other domains where privacy is
1:06:40 more important there will be more
1:06:43 demand for the applications of
1:06:44 the new types of cryptography that
1:06:46 we’ve developed to make things
1:06:48 private this is going to happen
1:06:50 everyone needs to be ready we
1:06:52 have this interesting wave now and
1:06:54 I hope it foretells a growing
1:06:56 wave of interest but I’m just
1:06:58 marking marking a spot in the
1:07:00 sand road based on what you’re
1:07:00 saying I mean and these
1:07:02 conversations you’re having with
1:07:03 institutional players are we
1:07:05 getting ahead of ourselves are is
1:07:07 is the adoption running ahead of
1:07:09 the technological capabilities
1:07:12 that crypto can offer it’s not
1:07:13 that they’re running ahead this is
1:07:15 how it works like one one head
1:07:16 yanks the other as they kind of
1:07:18 like are like racing forward right
1:07:19 no one’s going to solve the
1:07:22 privacy problem until there’s a
1:07:23 product that you want to launch
1:07:26 that needs privacy that isn’t
1:07:28 going to work without it and you
1:07:29 need to bang your head against the
1:07:30 wall and fix that problem and then
1:07:32 and then vice versa you know some
1:07:34 products can’t take off unless
1:07:36 they have privacy built in out the
1:07:38 gate and people need to research
1:07:39 and push the research ahead to do
1:07:41 it I don’t think that we’re getting
1:07:42 too far ahead there’s there are some
1:07:44 ways to get like little cuts at
1:07:46 privacy and add incrementally more
1:07:47 privacy and there’s a lot of people
1:07:49 who think about it I just see it as
1:07:51 like a front that’s advancing and
1:07:52 it’s not clear exactly where the
1:07:55 bottleneck will be or if there’s one
1:07:57 specific bottleneck in that but I
1:08:00 just don’t see us in a future
1:08:02 without it one year from now Eddie
1:08:04 what percentage of stable coin
1:08:05 transfers do you think would be
1:08:07 privacy preserving I love it let’s
1:08:08 get them on the record that’s a tough
1:08:10 one that’s a tough one yeah one year
1:08:13 from now less than the percent less
1:08:15 than a percent not much not because
1:08:17 it’s not going to work but because I
1:08:18 think people are headed that way
1:08:19 there’s some really cool projects that
1:08:20 are doing this I’m including
1:08:22 confidentiality by the way like light
1:08:24 kinds of privacy basically just Eddie
1:08:24 and his friends
1:08:28 the current stable coin growth is so
1:08:31 strong that the private growth needs
1:08:35 to outpace it to exceed like more than
1:08:36 a percent or ten percent I think it’s
1:08:38 less than a percent but I think like
1:08:40 three four years from now it’s like
1:08:42 substantial like double digits I don’t
1:08:44 know let’s see I’m probably wrong but
1:08:49 no that’s great and I appreciate your
1:08:50 view that necessity is the mother of
1:08:53 invention so it’s not that adoption is
1:08:54 getting ahead of itself it’s that it is
1:08:57 a prerequisite for these advances to
1:08:59 happen Darren do you have a prediction
1:09:01 on that front I’ll take the over on
1:09:03 Eddie’s one year prediction I think we
1:09:05 could get to more than one percent of
1:09:07 stable coins well we also have to figure
1:09:09 out how to measure it if it’s private
1:09:12 if it’s adjusted or unadjusted and yeah
1:09:15 well yeah but but we’ll see okay very
1:09:18 interesting so that seems like it is the
1:09:21 next frontier for people to to deal
1:09:23 with another thing that is quite
1:09:27 interesting to see is the tokenization of
1:09:29 assets we talked about this before people
1:09:31 call them real-world assets I kind of
1:09:33 hate that term because it makes it sound
1:09:35 like blockchain assets or fake world
1:09:37 assets yeah it’s very infantilizing we
1:09:38 need to come up with a better terminology
1:09:41 here but yeah for the sake of speaking
1:09:43 about it in the way that people do and
1:09:45 this yeah we should just call them big
1:09:48 boy assets Robert big assets that’s great
1:09:51 but let’s talk about this so there’s 30
1:09:54 billion dollars worth of these quote
1:09:57 unquote real-world assets now on chain
1:09:59 obviously stable coins are a whole
1:10:02 separate kind of kettle of fish but if
1:10:04 we’re talking about these other types of
1:10:06 assets you know everything from stocks to
1:10:10 commodities to debt of all different
1:10:13 flavors there’s about 30 billion dollars
1:10:15 worth of that on chain today and it’s
1:10:18 growing very rapidly you know 2020 there
1:10:21 was almost nothing to now 30 billion so
1:10:26 rapid rapid growth in that space what’s
1:10:29 going on there what’s driving the growth
1:10:30 why is this happening what are the
1:10:33 benefits of tokenizing things tell us
1:10:36 about this trend so first of all I think
1:10:38 real-world assets I’ll call them that for
1:10:40 the purposes of this conversation I think
1:10:44 they’re the key to the long-term success
1:10:47 of DeFi because this is the bridge to
1:10:49 traditional finance which as we know is
1:10:53 many trillions of dollars of size in
1:10:56 opportunity and so I think we have to if
1:10:59 we want kind of DeFi to really reach the
1:11:01 levels and scale that I think we we think it
1:11:04 can I do think we need to bring these
1:11:05 real-world assets on chain and I think
1:11:09 this is is pretty critical to to the long-term
1:11:12 success which is why it’s exciting to see
1:11:14 that there are already 30 billion in
1:11:16 tokenized assets on chain the growth that
1:11:19 we’re seeing is is obviously something to
1:11:23 keep an eye on but I think it’s incredibly
1:11:26 early days still here right and there is
1:11:29 so much room to to grow here just given
1:11:33 the size of traditional assets that can
1:11:35 be brought on chain I think the growth that
1:11:37 we’ve seen over the last couple of years
1:11:39 benefits from a lot of the institutional
1:11:41 adoption that we’ve seen I think getting
1:11:45 these big institutions on board like
1:11:47 BlackRock which we which we talked about is
1:11:49 going to be key to to the success here
1:11:51 yep you’ve got Larry think out there the
1:11:52 CEO of BlackRock talking about
1:11:55 tokenizing everything he’s preaching the
1:11:57 gospel of tokenization yeah so
1:11:59 institutions and then also I’d say the
1:12:01 regulatory environment is going to play
1:12:03 an important role here as well and I
1:12:05 think the favorable conditions that
1:12:07 we’ve seen over the last year I think
1:12:09 are going to work in the favor of this
1:12:11 trend so something I’m very excited
1:12:14 about maybe crypto’s biggest opportunity
1:12:16 in front of us right now yeah I mean
1:12:18 this is a this is a big stack of assets
1:12:21 Robert and I think although it’s so easy
1:12:23 to call them just kind of bucket them all
1:12:24 and call them like real-world assets and
1:12:27 sort of generalize over them I think that
1:12:29 the most interesting insights are probably
1:12:32 per category I’m far from an expert on
1:12:34 really any of these to be honest but you
1:12:36 know I have heard colloquially that for
1:12:38 example private credit which is not a
1:12:40 thing that I know a lot about is just
1:12:43 easier to manage in a neutral layer where
1:12:44 you can buy it you can sell it to
1:12:46 counterparties and you don’t have to
1:12:49 integrate like complicated systems or any
1:12:52 specific like third-party broker you can
1:12:56 just trade it on chain right you can send
1:12:57 them some stable coin or pay them out of
1:13:00 band right receive the private credit on
1:13:03 the blockchain and it just becomes an easy
1:13:05 medium like literally just an easier
1:13:09 medium to transact it to hold it to
1:13:12 account for it that type of thing that’s
1:13:14 I’ve heard from two private credit
1:13:15 people and by the way when we’re talking
1:13:17 about private credit private credit
1:13:19 accounts for about half of all of these
1:13:21 real-world assets it’s like yeah which is
1:13:24 amazing to me it’s not a thing I hear it’s
1:13:26 not a thing I hear a lot about but it’s a
1:13:28 thing that when I have heard about it the
1:13:31 explanation is sort of surprisingly simple
1:13:33 to me why they why they like private
1:13:35 credit on chain you know doesn’t mean the
1:13:37 off chain is done but it means that it’s
1:13:38 something that is at least functionally
1:13:41 useful and attractive just to use a
1:13:43 really concrete example you know one of
1:13:45 the assets on here is like Paxos gold
1:13:49 right is like the Pax G token we talked a
1:13:50 little bit about gold earlier in the
1:13:53 podcast not that long ago I’m not like
1:13:55 bragging about my financial acumen here
1:13:58 Robert but like a while back I bought a
1:14:01 bunch of gold right and and I thought
1:14:03 about like how I wanted to buy that gold
1:14:04 actually looked into buying like gold
1:14:06 bullion like physical bullion partly
1:14:09 because it’s hilarious but but also you
1:14:11 know maybe it’s the best thing like you
1:14:13 just hold your backyard yeah you just
1:14:15 hold some gold and like it doesn’t have
1:14:17 fees right you know it just sits there
1:14:19 and you hold it I thought what’s the
1:14:20 best way to get access to gold and there
1:14:22 are some ETF like products where you can
1:14:25 get access to gold GLD is like the big
1:14:27 one I think yeah but you have to pay
1:14:29 annualized fees that is a real financial
1:14:31 innovation take something that you can
1:14:33 own and make you pay fees on it yeah
1:14:35 yeah you have to hold it in a specific
1:14:37 brokerage and so on which is not so bad
1:14:40 maybe but when I looked into it I
1:14:43 genuinely found like the PAX gold an
1:14:45 attractive way to get gold exposure and
1:14:47 like honest to God not just because I’m
1:14:48 like a crypto guy like I thought like
1:14:50 wow actually like the set of trade-offs
1:14:52 here and owning the gold through the
1:14:55 PAX G token is better for me so that’s
1:14:57 like that’s the gold that I have not
1:14:58 even for crypto obviously I’m a little
1:15:00 biased if I want to do all the crypto
1:15:03 stuff but like it really is an easy way
1:15:05 to do it super easy to sell super easy
1:15:08 to buy super easy to hold in Coinbase or
1:15:11 in self-custody if you want right and
1:15:13 that that’s and and no fees and that set
1:15:15 of trade-offs means that it’s just
1:15:17 generally really simple you know the way
1:15:19 I hold my assets that’s just really
1:15:22 consistent and easy for me to tack on and
1:15:23 so that just ended up being a natural
1:15:26 choice I think if there were other types
1:15:28 of assets that had similar financial and
1:15:30 technical benefits I personally would
1:15:32 like to hold them to and I don’t think
1:15:34 of myself as like a representative of
1:15:37 like a mainstream investor necessarily
1:15:40 but that is often a sort of tell to me
1:15:43 that those benefits are very soon going
1:15:46 to be passed on to retail in a way that
1:15:48 really makes a large-scale difference
1:15:50 so presumably some of those benefits are
1:15:52 like more liquidity the ability to trade
1:15:56 whenever 24-7 lower fees and prices 24-7
1:16:00 competitive fees venue independence right
1:16:01 you can dispose of it on chain you can
1:16:02 dispose of it like at a centralized
1:16:05 exchange like I think these properties
1:16:07 are really attractive is there an area of
1:16:09 real-world assets that you’re most excited
1:16:11 about coming on chain I think it’s very
1:16:14 cool and a net plus to bring equities or
1:16:17 stocks you know company stocks on chain
1:16:18 it’s a really cool idea I don’t think
1:16:20 it’s a minus for crypto I think it’s a
1:16:22 big plus for crypto I’ll say to a lot of
1:16:24 crypto people and I count myself among
1:16:26 them it’s maybe like not the most exciting
1:16:29 thing because we’re trying to create new
1:16:31 types of institutions and new types of
1:16:34 things to own new types of networks right
1:16:36 like network tokens like that we’ve talked
1:16:38 a lot about that’s kind of like the most
1:16:40 exciting thing to me tokenizing a company
1:16:42 and putting it on chain is maybe only
1:16:45 incremental improvement but I still think
1:16:48 it’s exciting insofar as it creates an
1:16:51 exciting second-order consequences like
1:16:53 stable coins right like stable coin is
1:16:55 just dollar on chain it’s not a new
1:16:58 asset it’s the old asset but on a new
1:17:01 medium and that has profound consequences
1:17:04 because of all the profound ways that
1:17:06 dollars are used right they’re used for
1:17:07 payments they’re used as a collateral
1:17:09 they’re used for settlement they’re used for
1:17:11 all these things I think for stocks it
1:17:13 could be similar it’s like if people hold a
1:17:16 lot of their assets on chain well now
1:17:17 they’re on chain and that means now
1:17:19 they’re interoperable with a lot of other
1:17:21 things which means maybe they’re useful in
1:17:23 DeFi you know you can go down the whole
1:17:26 list of the consequences of an interesting
1:17:29 and liquid market asset being in someone’s
1:17:33 self-custodial crypto wallet those are
1:17:35 consequences are very very interesting even
1:17:37 if we’re not exactly inventing a new
1:17:38 asset we’re just changing where it’s
1:17:41 located so we’ve talked a little bit
1:17:44 about putting real assets traditional
1:17:46 financial assets on chain let’s talk
1:17:48 about some of the more crypto native
1:17:50 applications that we’ve seen arise over
1:17:52 the past year and perhaps one we could
1:17:55 talk about where there’s nothing backing
1:17:58 it no asset no anything really just some
1:18:01 like funny meme maybe and that would be
1:18:03 meme coins this past year was really the
1:18:05 year of meme coins and we talked a little
1:18:07 bit about this at the start you mentioned
1:18:10 about how you would receive some blowback
1:18:12 for for some yeah which slide is this
1:18:15 Robert I blocked it out of my mind this is
1:18:19 this is slide 29 yeah okay yeah go ahead
1:18:22 yeah I’d like to talk about meme coins I’d
1:18:24 like to talk about perps and prediction
1:18:26 markets these three kinds of areas were
1:18:29 really really hot this past year but we
1:18:31 can take each one in turn and I’d love to
1:18:33 start with meme coins given that that was
1:18:35 maybe the earliest of the three to really
1:18:38 take off what’s going on meme coins are
1:18:41 they here to stay yeah they are here to
1:18:43 stay they’ve they’ve been here for 12
1:18:47 years now by my accounting maybe more what
1:18:49 has been innovated on and the reason they
1:18:53 they came back so hard you know last year
1:18:56 earlier this year was specifically because
1:18:58 the underlying technology has improved it
1:19:00 doesn’t make sense to launch hundreds of
1:19:03 thousands or millions as we have meme coins
1:19:07 if they were to cost you know $100 each or
1:19:10 even $50 each just to even have the idea if
1:19:13 it only costs a few cents then all of a
1:19:15 sudden that becomes a possibility and then
1:19:17 the same with allowing others to buy it and
1:19:20 to speculate it speculate on them so we we
1:19:23 saw a proliferation in these launch pads
1:19:26 these so-called meme coin launch pads like
1:19:30 pump like others like I said earlier I have
1:19:32 been criticized for my being a little
1:19:34 cynical about them it’s just not the most
1:19:36 exciting part of crypto for me other than
1:19:38 highlighting interesting social trends
1:19:40 I maybe would take a little bit more of a
1:19:42 positive stance here and just say the
1:19:45 beautiful thing about crypto is that it’s
1:19:47 this credibly neutral platform where you can
1:19:49 build all sorts of different things on it
1:19:51 right whether it’s you know physical
1:19:53 infrastructure networks through kind of the
1:19:56 deep in category or real world assets or you
1:19:58 know in this case some form of internet
1:20:01 culture right like yeah it is open to accept
1:20:04 all types of ideas and innovations and you
1:20:07 know meme coins popped up as something and a
1:20:10 lot of it was obviously driven by speculation
1:20:14 but I think it’s very worth watching how the
1:20:16 space evolves because as we’ve seen with other
1:20:19 categories like NFTs things can evolve right and
1:20:22 in the case of NFTs we really transitioned from
1:20:25 speculation to more collecting and we have some
1:20:30 data that supports that and you know I am unsure what
1:20:32 will happen with the meme coin story but you know it
1:20:35 is cool that anybody can come in and build whatever
1:20:38 they want on these blockchains and whether you like
1:20:40 them or hate them I think they’re an important part of
1:20:41 crypto story.
1:20:43 Yeah I totally agree with that and I’ll say like
1:20:46 just to counterbalance myself a little bit too is
1:20:50 that you never quite know how the most important and
1:20:52 impactful lessons will develop.
1:20:55 Often the most interesting things start off looking
1:20:56 really really stupid.
1:20:59 Now often stupid things start off looking stupid
1:21:02 too so you have to you have to you have to balance
1:21:03 you have to balance that but.
1:21:06 Chris Dixon likes to say the next big thing starts
1:21:07 off looking like a toy.
1:21:09 Yeah which is one of his great aphorisms.
1:21:12 So I think it’s important to watch and I have
1:21:14 actually seen a lot of interesting and important
1:21:16 lessons to learn but you know it’s going to come and
1:21:17 go and we’ll see.
1:21:19 Let’s talk about a couple of the other applications
1:21:21 that have found.
1:21:23 Like perps and prediction markets right?
1:21:26 Yeah those two I think are unignorable.
1:21:28 They’ve really risen in the past year.
1:21:32 Perps for one thing you know it was not always clear
1:21:34 that perpetual futures that’s what we mean by
1:21:36 perps it wasn’t always clear that perpetual futures
1:21:39 were going to be the product that people who
1:21:42 want to speculate on crypto use.
1:21:44 Over the past year it’s kind of become
1:21:46 clear that people have gravitated toward it.
1:21:47 Why is that?
1:21:49 What about perps has been so appealing
1:21:52 to people looking to place bets on
1:21:53 the price direction of crypto?
1:21:58 I kind of think it’s emerged as like you said really the ideal product for crypto
1:22:01 speculators from a product experience standpoint.
1:22:06 It is like the easiest and most intuitive way to open a leveraged position
1:22:09 long or short on an asset in crypto.
1:22:29 and I think you know protocols like hyperliquid have done a very good job of building the product experience for those type of crypto speculators and we’ve seen the results of that which is trillions of dollars of volume and hyperliquid is now on a billion dollar revenue run rate.
1:22:31 Yeah I agree with that completely.
1:22:42 When we say perps of course perp dexes also right it’s not just perpetual futures it’s perp dexes so it’s perps as powered by some kind of decentralized system.
1:22:44 They’ve been around for some time right.
1:22:54 I would say the first perp dex in a form that is very similar to the current form it was DYDX.
1:23:11 DYDX was definitely a popular product for its time and there have been innovations by DYDX, by hyperliquid, by lighter, by these projects that are really trying to layer on incremental improvement after incremental improvement
1:23:14 to make them into better and better products.
1:23:33 Maybe to capture kind of what they are like what you really get out of one for the audience is that there have been a variety of ways as Darren was talking about to take $100 and try to get more than $100 of exposure, leveraged exposure to some assets for the purposes of speculating.
1:23:40 When I say speculating I mean more like gambling speculating right kind of a little bit less than value investing maybe not what Warren Buffett would be doing right.
1:23:44 for like a kind of way to be playing in the market.
1:23:46 He might want leverage but yeah probably not for this purpose.
1:23:47 Yeah right right yeah.
1:23:51 To do that requires composing together several types of tools.
1:23:57 It requires some mechanism for lending right for depositing collateral and then lending.
1:24:05 some way to actually exchange and to like you know represent some type of order and get matched with the counterparty for that order.
1:24:14 Some way to handle automatic liquidations for that as in your position is no longer supported by enough collateral so we have to sell the collateral.
1:24:24 The PERP DEX is a highly refined product to deliver the composition of those things while maintaining as much liquidity as possible.
1:24:31 Liquidity as in counterparties who you can trade with so that you can get something as close to the fair price for that asset as possible.
1:24:51 And I think maybe to connect with what we were saying about meme coins I think maybe the falling off in meme coins has come partly because people have been able to get this wild asymmetric exposure to assets without needing to get the meme coins.
1:25:00 You don’t have to go and identify some obscure brand new meme coin that you think is going to take off to get that huge asymmetric upside.
1:25:08 Now you can get a highly levered position against a blue chip asset you know like an ETH or a Bitcoin or something like that right.
1:25:18 Which means you maybe don’t need to to wade too deeply into the swamp or the trenches as they say right in order to to get that that that risky exposure.
1:25:26 You can do that in a more orderly system where there’s maybe less like asymmetric information and less predators lurking in the forest.
1:25:38 So I tend to think that’s not a coincidence right is that the speculator kind of like casino-y side of crypto has long wanted this type of way to risk some bucks to make megabucks.
1:25:45 And PERP DEXs are a really really highly engineered way to deliver that product.
1:25:57 One question that I have about this given that we’re now on the other side of what was not quite a flash crash but was a pretty large market drawdown.
1:26:00 Are people playing with fire here?
1:26:01 Has this introduced something dangerous into the system?
1:26:03 Well anytime you’re playing with leverage you’re playing with fire.
1:26:07 Let me say that incredibly clearly and this is of course not financial advice ever.
1:26:15 But anytime you’re taking a lot of leverage you’re taking a lot of risk major caveats there right like leverage is crazy.
1:26:17 I think leverage is a great way to lose everything.
1:26:19 So yeah you are you are playing with fire.
1:26:21 There’s no question about that.
1:26:28 Now as far as whether the PERP DEXs specifically are culpable for the flash crash it’s a little harder to say.
1:26:33 We haven’t done like a you know some sort of deep analysis that could say that.
1:26:40 I will say that anytime a system has a lot of leverage which the system has gotten better at creating more leverage right.
1:26:45 That like it has become more effective at delivering more leverage at a lower price.
1:26:55 Then when there is a market shock where market makers need to pull back and protect themselves and there’s a you know an unwinding of leverage.
1:26:59 Then yeah that can exacerbate crashes to some degree.
1:27:06 But of course better design systems are better able to handle that type of instability as well.
1:27:11 They can liquidate faster more efficiently you know in a way that protects the users more.
1:27:13 And I think that that was also true.
1:27:24 There is a subtle or slight irony in that you know crypto this thing that was sort of invented out of a desire to move away from the fractional reserve banking system.
1:27:29 And now we’re we’re back at kind of introducing all this leverage back into the system.
1:27:33 It’s sort of like one way to put it one way to put it Robert is that why do they get to have all the fun.
1:27:36 That’s a good point.
1:27:37 That’s a good point.
1:27:45 There was a really funny Gwart tweet about this about how like I’m sorry that you lost your son’s college fund.
1:27:55 But you know isn’t it marvelous how gracefully the dealer swept away the chips and how you know effectively you know you were liquidated at the casino.
1:27:56 Yeah.
1:28:02 So I would I would caution people against against using leverage unless you really know what you’re doing.
1:28:18 Let’s move on to prediction markets because that is been another big story and you know the irony there with prediction markets is that if you were a betting man a betting person and you were going to say whether prediction markets would stick around after the election.
1:28:24 And a lot of people said that they expected it to fizzle out that there wouldn’t be interest to sustain this thing.
1:28:27 And that seems not to have been the case.
1:28:40 Prediction markets have I think one of the most fascinating histories of anything in crypto like starting in the early days of Augur which actually came out of after the rise and fall of in trade.
1:28:58 There was early experimentation in this category that like essentially didn’t work and then we had Polymarket come onto the scene and they were sort of doing stuff and it wasn’t clear what would happen and then you know it was popular around the elections but then it wasn’t and it was this weird history.
1:29:17 And I think like many things we’ve talked about today a lot of the pieces just finally came together in a very interesting way and now it’s become one of the hottest categories in crypto right like Polymarket and Kalshi are fiercely competing for what seems to be a growing pie of users.
1:29:38 Like the intersection with sports betting has now become inevitable right there are some regulatory tailwinds that have really like unleashed this category still kind of to be determined the exact role that crypto is going to play although we think there are some really interesting avenues to explore further there.
1:29:54 But it’s just a very interesting kind of weird history with this space and it’s awesome to see that it’s finally having its moment and you know I personally couldn’t be more excited to finally kind of be seeing this in more of a mainstream way.
1:30:00 So I personally got into crypto from my exploration with Augur back in 2016.
1:30:02 That’s what I was going to say.
1:30:02 It’s come full circle.
1:30:06 You are a crypto convert because of prediction markets.
1:30:07 I mean you shouldn’t bury that.
1:30:09 That is like that’s what brought you in isn’t it?
1:30:14 Absolutely yeah and it’s fun to see that 10 years later we’re here.
1:30:15 It’s finally manifesting.
1:30:23 Okay well on the subject of predictions what predictions do you two have for 2026?
1:30:33 Let me preface this by saying I asked you this last year and Eddie you said that you hoped that all of the new block space would be put toward productive ends.
1:30:36 We did get meme coins after that.
1:30:37 We’ll put that aside.
1:30:51 Darren you said that you hoped that the application section of this report would be longer than the infrastructure section and I think maybe that did come to be the case because we didn’t spend too much time talking about infrastructure here.
1:30:53 We were mostly talking about how people are using this stuff.
1:31:00 So I think you both were on the money last year with your predictions and I would love to hear what you think is going to happen in 2026.
1:31:03 Yeah that’s a really interesting question.
1:31:13 I mean yeah I mean taking productive charitably of course the spirit of my comment last year was that we have all this new capacity the capacity needs to be used.
1:31:29 The pattern of the history of technology has been that we figure out how to create some surplus and then some time passes during which entrepreneurial types figure out how to exploit that surplus and use it for something.
1:31:36 What they use it for can be difficult to predict but surpluses don’t sit around long like nature doesn’t tolerate this.
1:31:40 So I feel that that has been vindicated to some degree.
1:31:47 If I had to predict like the next year to me is where you know we continue to see advances in the places we’ve seen them.
1:31:50 There will be more infrastructural improvements more capacity all those things.
1:31:53 You know we haven’t talked too much about that today but I think that will continue.
1:32:05 But what I think we will really see is all the integrations and promises and applications and wirings together that we’ve started to hear about like this year those will be tested.
1:32:07 They will launch.
1:32:08 They will be live.
1:32:12 We will see interesting uses of them and we will see their flaws as well.
1:32:21 I alluded to one of them today which is like maybe we will see the emperor has no clothes and privacy is actually a very strict prerequisite for many people.
1:32:28 Maybe maybe we will maybe we won’t maybe we’ll have some band-aid solutions while more sophisticated cryptographic solutions come online.
1:32:39 You know when financial institutions start putting assets on chain because of the way regulations shake out maybe some of them will require certain types of credentials maybe certain types of KYC to access them.
1:32:40 You know I don’t I don’t really know.
1:32:54 But the point is as people get to the finish line in launching these new products and showing the culmination of these interests that have been exposed we will figure out what shortcomings exist.
1:33:14 Whenever there are obvious bottlenecks obvious problems in the development of new goods and services entrepreneurs come and try to fix them right and they say okay you have this huge problem that’s blocking you okay I can actually solve that problem for this person this person this person this person this person and that makes a business right.
1:33:29 So we will start we will see the evolution of those things I also cautiously think that we will see maybe more applications maybe that looks more like self-custodial neobanky stuff maybe agentic paymentsy stuff you know I’m not exactly sure.
1:33:55 But my feeling is that as stable coins get wired up and payments become a possibility and more people have wallets that it will get easier from a user experience perspective to shift them from like actually I only have like a little savings in this thing into oh I can make a payment with it and oh I can like use this product easily or oh I can defer to some agent to spend on my behalf which is controlled by blah blah blah blah blah.
1:34:02 I’m not exactly sure but I think we will see the consequences of the applications and the partnerships.
1:34:17 Excellent okay so we’ll see new application areas open up and we’ll also be able to identify bottlenecks and shortcomings with the current state of the technology and coupling this with your statement earlier your earlier bet with Darren on on privacy.
1:34:26 I’m hoping privacy will be a big shielded stable coins yeah people will recognize that we need privacy but maybe still won’t be using it all that much in a year’s time.
1:34:31 Yep all right Darren let’s hear from you what are your predictions for 2026.
1:34:41 So I’ve been saying that crypto is a 17 year old so next year it’s going to turn 18 which means it’s going to become a it can finally vote right a full-on adult.
1:34:46 And now it’s fully legally liable for its own actions.
1:35:10 And I think that will kind of I think it’ll present itself on the regulatory side right I think it’ll become an adult with kind of real clear rules and regulations I think it’ll come and become an adult with respect to institutional adoption kind of the commitments will materialize people really will take crypto seriously as an industry.
1:35:16 And kind of I hope that that just kind of continues from the early signs that we’re seeing this year.
1:35:29 Maybe the one thing I’ll say a little bit more specific in terms of predictions this year we’ve heard a lot of talk about how kind of stable coins and other things can make things faster or cheaper or better than the traditional way of doing things.
1:35:50 And while that is all true and we’ve got a lot of data to support that I think the real opportunity for bringing the world on chain the real opportunity for kind of rebuilding these global payment rails around stable coins the real opportunity for for crypto is the ability to now do things differently right.
1:36:07 Like the experimentation that we will hopefully see around new ways to do payments all together things that we’re not even thinking about today that’s what I’m most excited for not kind of bringing the fees down from you know two percent to less than one percent right.
1:36:18 Like I think the new opportunities that get unlocked as a result of us kind of rebuilding the financial system creating this new internet that’s what I’m excited for and I hope we start to see that.
1:36:23 Yeah I think I think people come for the savings and they stay for the network you know that’s that’s what’s really going to happen.
1:36:33 The consequences of people having custody having keys having programmable assets having composable assets those are much larger.
1:36:39 When you say come for the savings you mean flocking to the to the sort of store of value narrative and then.
1:36:42 Oh no I mean I mean saving on transaction fees saving on payments.
1:36:43 Oh cost savings.
1:36:47 Payment processors you know treasury management all these sort of basic things.
1:36:56 I think those popularize stable coins and the consequences are much bigger than just the savings.
1:36:57 Very interesting.
1:37:01 All right we’ll have to see next year how things shake out.
1:37:06 Thank you to Darren Eddie thanks so much for joining this has been a pleasure.
1:37:21 And for everybody who is listening we will put links in the show notes to our 2025 state of crypto report just released as well as our new state of crypto data dashboard which updates these numbers more regularly.
1:37:24 And you can follow those metrics that we’re tracking there.
1:37:27 Eddie, Darren thanks so much for coming on.
1:37:27 Thanks Robert.
1:37:28 Of course pleasure.
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