Ryan Selkis - The Crypto Barbell and Token Curated Registries - [Invest Like the Best, EP.98]

Ryan Selkis - The Crypto Barbell and Token Curated Registries - [Invest Like the Best, EP.98] This week’s conversation is for those interested in the nitty gritty of cryptocurrencies and for those who, like me, are fascinated by that world but more than a bit skeptical of the investing prospects for the many cryptocurrencies now in existence. My guest is Ryan Selkis, who I met at an event hosted by Union Square Ventures and Blocktower Capital. At that event, in a crowd of many brilliant people, Ryan was consistently asking hard questions and raising counterpoints. I love his perspective because he is both passionate, but realistic, excited about crypto, but worried about many aspects of the ecosystem. We discuss many new topics like his barbell analogy for thinking about different kinds of coins, token curated registries, and the need to better transparency around decentralized projects. Hash Power is presented by Fidelity Investments Please enjoy our conversation. March for the Fallen Want to meet other curious investors, get in good shape, and support a fantastic cause? Consider joining a great group to hike 28 miles in honor of those who have fallen in defense of our nation. Learn more and sign up at alphaarchitect.com/mftf. For more episodes go to InvestorFieldGuide.com/podcast. Sign up for the book club, where you’ll get a full investor curriculum and then 3-4 suggestions every month at InvestorFieldGuide.com/bookclub. Follow Patrick on Twitter at @patrick_oshag Show Notes 2:55 - (First Question) – how he best explains blockchain technology 4:12 – How does he categorize each cryptocurrency 9:11 – How Numeraii is valued 10:04 – Explaining token curated registries (TCR) 12:58 – How Token Curated Registries are being applied 15:05 – Innovations that will protect against nefarious actors in the crypto space 16:37 – How do you convince investors to commit to TCR’s 18:40 – Biggest headwinds to this industry 22:12 – What are the quality filters to root out the bad actors 25:42 – Thoughts on the ICO market as an alternative to capital raising 29:23 – Litmus test for who should use an ICO to raise capital 34:28 – What is unique about creation of a token vs the normal exchange of cash to determine if a company needs a token 36:21 – How many ICO projects are really necessary 38:28 – How should people form an investment opinion about this space 41:35 – Core mission of his company 44:28 – What are some of the reasons his goals won’t happen 49:30 – Lessons learned while working at Coindesk 49:58 – What is he most excited about for the future of this space 52:56 – Kindest thing anyone has done for Ryan Learn More For more episodes go to InvestorFieldGuide.com/podcast. Sign up for the book club, where you’ll get a full investor curriculum and then 3-4 suggestions every month at InvestorFieldGuide.com/bookclub Follow Patrick on twitter at @patrick_oshag

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Patrick O'Shaughnessy?

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• 0:32Patrick O'Shaughnessy?

  This episode of Invest Like the Best is brought to you by Paxos. I have personally interviewed Paxos' CEO Chad Cascarilla on this podcast before and am excited about how they're changing the crypto landscape. Whether you're a small fintech or a large financial institution, with Paxos Crypto Brokerage, you can offer your customers crypto buying, selling, transferring and more, all with Paxos' easy to integrate APIs. Paxos takes care of everything in the backend, from licensing and compliance to custody and exchange. You can start offering crypto to your customers within months. I've gotten to know Paxos over the years and have been personally impressed with their track record. With clients that include PayPal, Venmo, Revolut and Bank of America, they're the most trusted infrastructure provider for crypto and blockchain.

• 1:16Patrick O'Shaughnessy?

  I'm excited that more fintechs and banks are starting to offer crypto features and Paxos Crypto Brokerage is the best way to get to market quickly and safely. To learn more, visit Paxos.com/Patrick. That's P-A-X-O-S dot com forward slash Patrick.

• 1:31Speaker 02

  Want to meet other curious investors, get in good shape and support a fantastic cause? Consider joining a great group to hike 28 miles in honor of those who have fallen in defense of our nation. Wes Gray, a past podcast guest and Marine, came up with the idea to bring people from finance together to march. He's posted all the information you need about the event and how to train at alphaarchitect.com/mftf. Stands for March for the Fallen. Wes arranged for food and lodging for our large group and we have around 100 spots left. Both male and female barracks will be available for lodging. Come for a hard hike, amazing camaraderie and most importantly, to share in thanks of the fallen men and women who served on our behalf. We hope to see you there.

• 2:18Patrick O'Shaughnessy?

  Hello and welcome, everyone. I'm Patrick O'Neal and this is Invest Like the Best. This show is an open-ended exploration of markets, ideas, methods, stories, and of strategies that will help you better invest both your time and your money. You can learn more and stay up to date at investorfieldguide.com.

• 2:39Speaker 04

  Patrick O'Neal is the CEO of O'Neal Asset Management. All opinions expressed by Patrick and podcast guests are solely their own opinions and do not reflect the opinion of O'Neal Asset Management. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions. Clients of O'Neal Asset Management may maintain positions in the securities discussed in this podcast.

• 3:14Patrick O'Shaughnessy?

  This week's conversation is for those interested in the nitty-gritty of cryptocurrencies and for those who, like me, are fascinated by that world but more than a bit skeptical of the investing prospects for many cryptocurrencies now in existence. My guest is Ryan Selkis, who I met at an event hosted by Union Square Ventures and Block Power Capital. At that event, in a crowd of many brilliant people, Ryan was consistently asking hard questions and raising counterpoints. I love his perspective because he is both passionate but realistic, excited about crypto but worried about many aspects of the ecosystem. We discuss many new topics like his barbell analogy for thinking about different kinds of coins, token-curated registries, a fascinating topic, and the need for better transparency around decentralized projects. Like the Hash Power documentary, this episode and other Hash Power singles are brought

• 3:57Patrick O'Shaughnessy?

  to you by Fidelity Investments, a company that is constantly researching and experimenting with emerging technologies like crypto assets and blockchain to improve the lives of their customers. Fidelity provides a comprehensive set of products and services to individual investors, employers, and financial advisory firms. For more information, please visit fidelity.com. Please enjoy this conversation.

• 4:26Patrick O'Shaughnessy?

  I'm always curious how people that have a lot of experience in this world, actually especially non-engineers, describe the entire ecosystem to someone that's unfamiliar with it. It's been a while since I've done this at a basic level. So how do you do that?

• 4:38Speaker 05

  Oh, man. And you know what? This is always like a tough one. You know, you'd expect like the old guys to have like the perfect one-on-one and we end up just getting like so far in the weeds that I'm going to completely botch the shit out of this. The way that I think about it at like a super high level is that we are just awash in information and there's so much pollution on the internet. And the original information on the internet was to make information flow freely and kind of make it accessible to anybody. And what that's led to is just a glut of information. So, you know, I always think of blockchain technology and cryptocurrencies in general as the thing that finally makes, you know, value flow as freely as information, scarce value flows freely as information. And that is, I think, the truly revolutionary thing that you'll hear

• 5:23Speaker 05

  about when you talk to anybody within the industry. So how do you kind of quantify the value of scarce digital assets, whether that's currency, whether that's digital resources like file storage or computing? It's a truly novel way to, without a central intermediary, have some degree of trust in the scarcity of some intrinsically valuable digital asset.

• 5:43Patrick O'Shaughnessy?

  How do you categorize, everyone has their own kind of interesting way of doing this, of Bitcoins one thing within a big ecosystem. How do you sort of plug different cryptocurrencies into categories? What are the major things that you think about?

• 5:54Speaker 05

  So I've written about this a little bit and I like to call it the crypto asset barbell. And, you know, I was thinking about this quite a bit last summer. I'm sure we'll talk more about this, you know, ICOs and kind of that whole market in particular. But I was really trying to just think how the market was getting so insane. And what became pretty obvious was that pretty much every project that was raising money, every team, every new asset, they were all talking about these new assets as if they're truly currencies. And this is something I'd spent a lot of time thinking about just originally with Bitcoin. Like, what is money, right? Like the classic like Bitcoin rabbit hole. And what I kind of came to think and realize was that there's really two Massive multi-trillion dollar opportunities with respect to this industry. There's cryptocurrencies, which are like true money currencies.

• 6:39Speaker 05

  That's Bitcoin, Monero, Zcash, some of the privacy focused ones. I'd even put Ethereum and Ether in that bucket because it's kind of become this reserve currency for the ICO boom. And we can talk about maybe that's starting to subside a little bit. But there's kind of those true money like crypto assets. On the other end, there are these crypto securities, basically traditional securities that have, that give people the ability to have a claim on an asset or a claim on cash flow and residuals, whether it's a business or a new type of security like instrument. And that is really, I think overtaken the whole blockchain, not Bitcoin meme. Now it's all crypto securities, right? You're basically talking about the same thing from different angles.

• 7:22Speaker 05

  It used to be like, we're going to issue all these things using blockchain, not Bitcoin. Now it's, oh, all of these digital assets are now crypto securities and they're part of the crypto assets bucket. So it's been like a very interesting like reframing of that, but I kind of feel like it's the same movement. And it is interesting, but I don't know how much new value is unlocked there necessarily.

• 7:40Patrick O'Shaughnessy?

  Maybe it's just a repackaging or a retracking of existing value streams.

• 7:44Speaker 05

  Yeah, it is. And there's going to be marginal benefits, but you're not talking about introducing entirely new asset classes generally. And there might be some exceptions to that.

• 7:51Patrick O'Shaughnessy?

  What might the exceptions be?

• 7:52Speaker 05

  I like to think about cross border, cross jurisdiction, kind of mutualized risk pools, right? So could you create new securities around different kind of global risk pools where those kind of insurance products or securities might not necessarily fit under a very neat

• 8:09Patrick O'Shaughnessy?

  Jurisdiction.

• 8:10Speaker 05

  Or jurisdiction. Yeah, exactly. Jurisdiction in any one region. Additional like securitization of purely digital goods in some of these virtual reality, like Decentraland and some other purely online platforms. Like you could have purely digitally native securities. They don't fit in the U.S. or they don't fit in Asia or Europe because they exist only in ones and zeros online. So those are interesting. Those are maybe new models, but at the end of the day, you can still price them like securities. You can look at the book value of the asset. You can look at the cash flow. Exactly. So that's still a massively exciting opportunity, but obviously very different from currencies. And both of those you can value using traditional frameworks. It's in the middle where it gets kind of really hairy.

• 8:55Speaker 05

  And I've written about this quite a bit, but generally speaking, I still think most tokens that fall into the quote unquote, utility token or consumer token bucket are overvalued by orders of magnitude still, even with kind of the recent correction. And the reason is quite simply for most of these tokens, you don't actually need to hold them like for any length of time. And I think people are starting to realize that. So you see teams that are actually post ICO. Now they're starting to go back to their communities and think, okay, how can we rejigger the economics of these tokens? So that they capture more value instead of just letting the tech that we're building kind of create value. Right now it's about like, how do we actually have value capture here? So that's been kind of super interesting to study.

• 9:37Speaker 05

  And I have a few different categories that I find very interesting in that kind of like subset. In the utility subset? In the utility subset. So that would be computation and kind of file storage. So digital resource tokens, I mentioned, you know, kind of Filecoin, Golem, things like that. I think staking tokens that are used primarily for work. Can you explain what that means? Are interesting. Sure. So basically like right to work tokens. In Augur, if you wanted to stake tokens to become an oracle and basically represent that you know the true outcome of a given situation, you can actually based on the value that you could capture in terms of network fees,

• 10:15Speaker 05

  you can kind of work your way into what's the value to hold and kind of stake this token in this new kind of prediction market model. Numerai, their token is another good example, right? The data scientists need to use the Numerai tokens to basically put skin in the game and say, and represent, I'm betting on my own model that it's going to outperform all of these other fools. And if I'm right and I win this game, then I'm going to kind of collect everybody else. So you're kind of betting on your own, on the quality of your own work. In that case, is the, in the case of Numerai, is the

• 10:46Patrick O'Shaughnessy?

  Value of those tied to an underlying cash flow at the parent business, at the asset management business?

• 10:51Speaker 05

  I haven't looked at it recently. I mean, they're making a number of upgrades, but traditionally that hasn't, I don't believe that's been the case. Yeah, I think that makes a lot of sense, but I think that would start to get into like the

• 10:59Patrick O'Shaughnessy?

  Yeah, sure.

• 10:59Speaker 05

  Security realm, right?

• 11:00Patrick O'Shaughnessy?

  Securization, yeah, of course.

• 11:01Speaker 05

  Exactly. And like, does that make a hell of a lot of sense to incentivize the people who are building the models to actually have some of that upside? Of course, but our securities laws are fucked, right? So, you know, there are people that are actually, you know, working on these ethical solutions, but they're just getting kind of handicapped by 80-year-old securities law. And, you know, that's, you know, probably an entire hour conversation I'm sure you've had with

• 11:19Patrick O'Shaughnessy?

  We're gonna get into it, yeah.

• 11:20Speaker 05

  With multiple guests, I'm sure. And then, you know, I guess I'll kind of give one, you know, subset example that we really like at Messari, and we can punt on the exact mechanics of what we're thinking, but this concept of curation markets or token curated registries. And the way to think about a token curated registry is, you know, we've been, listen, credentials might be the one-use case that's older than money, which is super exciting. You know, ever since we've been hunter-gatherers, like, who's in your tribe, kind of part of your mental list, what plants should you eat? We have these heuristics for making decisions. And usually, from kind of time forever, throughout, you know, kind of human history to now, people have trusted central authorities.

• 12:00Patrick O'Shaughnessy?

  Lists.

• 12:00Speaker 05

  The village elders, the SEC, the, you know, the American Medical Association, right? Like, there's these kind of centralized sources of truth and trust that we just, you know, rely on for certain credentials. And with curation markets and TCRs, you basically decentralize the actual creation of that credential, in some cases. So, the way that I think about it is, if you were to take kind of Peter Thiel's assumption that college is a tournament and an insurance product, and it's not actually like an education resource, and you price it like an insurance product, how could you, at scale, reward Thiel fellows with a credential that would have the same kind of clout forever as like an Ivy League diploma? Right? There is no, there is no piece of paper that you have if you drop out of college, which

• 12:44Speaker 05

  is like kind of your fallback insurance product. And one way that you might do that is you might get all the big tech firms together, and they might say, you know, "We're gonna run this application process," similar to a college admissions process, but You know, would basically allow super high octane candidates that really don't need college. It could go directly into training programs or work with us. We're going to give them this credential. So no matter where they go in Silicon Valley, like everybody's going to know this person is legit, they're qualified, and that kind of follows them around forever, much like a diploma would. There's intrinsic value in that credential. But the question becomes like, without a board of trustees at the university level, that's maintaining the integrity of the institution, the integrity of the diploma, who certifies that, right? So, so one way to do that might be to have, you know, the top 10 tech companies

• 13:27Speaker 05

  all buy tokens in the system that allow them to vote on the quality of applicants. Oh, and by the way, whoever does the curation of the candidates, the actual work, is going to earn all the application fees that these candidates append to their actual applications. So you've got a pool of, of real revenue, real economic value that would flow to any validator in that system. And the kind of long-term upside is that you've got an intrinsically valuable information resource. And, and maybe to give a more concrete example, you know, a diploma like that would be, it's not worth zero. I don't know if it's worth 200,000 that you spent on college because college isn't worth 200,000, right? But it's probably worth

• 14:09Patrick O'Shaughnessy?

  Something between.

• 14:09Speaker 05

  10,000 or 20,000. You can probably back into, you know, what, what's the intrinsic value of that? From like a personal, like brand perspective. And that's what we're kind of thinking about with Messari. But we're thinking about actually, you know, credentialing quote unquote, or whitelisting projects that meet certain transparency standards in terms of, you know, what they communicate with, with their communities.

• 14:29Patrick O'Shaughnessy?

  I want to get into detail on, on that model.

• 14:32Speaker 05

  We can come back to that.

• 14:32Patrick O'Shaughnessy?

  On that model in particular, but this is an opportunity to talk about something completely new because I've never talked about token curated registry before on the podcast. And it is a fascinating idea that the history of the power of lists and authority really interests me. So maybe another couple of examples, that first one was great as a, as an introduction. But any other favorite examples of how this TCR idea is being applied? And maybe even like the mechanics, again, you did it one time already, but the mechanics behind like where the value is created and like the different stakeholders in a given registry.

• 15:05Speaker 05

  Yeah, I mean, we didn't create this, right? So this is the consensus team, the AdChain team over at Consensus kind of pioneered. Mike Golden and then the folks at MetaX in California, I think they partnered on it. But Mike Golden and Simon Dela Ruvia, who are both over at Consensus, have kind of been working on this curation markets, token curator registry concept for a while. It's been fascinating, the research that they've done. And other folks to watch that are working on this are at ZeroX, Aragon, I think Zeppelin might be tinkering with TCRs as well. So it's starting to become a little bit more in vogue as like a governance mechanism for decentralized projects. But the general mechanics I just walked through, AdChain is basically trying to use community governance to verify a whitelist of websites that do not have malicious, dangerous

• 15:50Speaker 05

  or fraudulent advertisements on the site. So this is particularly for media companies. And it's an interesting idea in theory, right? It's like basically like a veriSign checkmark for websites and making sure that you're not leaking all of your personal data when you visit a certain site, where you're not going to be followed around the web. One of the issues that you've seen kind of in the wild, though, with TCRs is it really matters how you distribute the tokens initially and like what the ongoing distribution is because it can degrade into very unpredictable populism pretty quickly. There are no real checks and balances. So you might design the system in one way, but people will vote another just because they can, because they have stakes, so they basically make all the rules. So there's kind of some interesting upgrades and additions that I think people are working

• 16:31Speaker 05

  on with respect to actually voting on these different lists and curation markets.

• 16:37Patrick O'Shaughnessy?

  One of the beautiful things about when you first study Bitcoin down to its depths, as deep as anybody can get, is how people always use to throw around this term anti-fragile, but the rules are so clearly defined. There's not a lot of subjectivity to the future of what's going to happen in it. Now, of course, it could get forked, or there's always some subjectivity. But TCR strikes me as being an area where there's quite a bit of subjectivity. And like you said, if you hand out the tokens to the top 10 tech firms, like, how do you know that that's going to ensure the quality that you're trying to build? So I'd love to hear more about what those innovations are, kind of that you just referenced at the end there. Like, how can this be viable? And how can you protect? One of the beautiful things about decentralization is you protect against nefarious actors. This seems like something that could be subject to.

• 17:21Speaker 05

  Yeah, so the game theory here is that if you're voting in your own kind of self-interest long-term, you would be wise to only pick candidates that are actually going to add value to the list long-term. Because if you accept anybody into Harvard, Harvard's diploma doesn't really matter anymore. And so the whole exclusivity of lists is something that's always been important. So the governors of these systems, the curators of these systems have every incentive to only admit onto their nice lists, projects, or companies, or people, or whatever, that kind of meet certain thresholds. And they have every incentive, on the other hand, to kind of actually set standards and make a certain bar, you know, high enough

• 18:06Speaker 05

  that it's valuable for folks to clear that.

• 18:08Patrick O'Shaughnessy?

  You mentioned at the beginning in this barbell idea, and you've given several examples of this middle part of the bar, the utility tokens, broadly speaking, where this is like a big question mark, maybe they're orders of magnitude overvalued. How do you begin to think about that? And this is more of like an investor-centric question for the future. So something like TCRs, like, why should an investor care about this? It sounds really interesting for the participants, for the stakers, for the people that might benefit from the digital asset, the Thiel fellow, or whatever. But why should it matter to people that are interested as investors in this ecosystem?

• 18:39Speaker 05

  Do you trust Facebook or Twitter anymore?

• 18:40Patrick O'Shaughnessy?

  Uh...

• 18:42Speaker 05

  As companies?

• 18:44Patrick O'Shaughnessy?

  I don't know. I don't know.

• 18:45Speaker 05

  I don't, because they make the rules, right? Their algorithm, I'm not even getting into the politics of it, right? But just in general, their algorithms are basically encoded and programmed so that we get more dopamine hits and more visits and more tweets.

• 18:57Patrick O'Shaughnessy?

  I definitely trust that they're optimizing for dopamine, for sure.

• 19:00Speaker 05

  Right. So, well, I would argue, like, I don't trust that, right? Because, like, you know, you are the product, and so, you know, you're not actually getting the most valuable information.

• 19:07Patrick O'Shaughnessy?

  Right.

• 19:08Speaker 05

  Right? You're getting, you're basically just getting plugged into their system, and you're just part of the flywheel that allows them to sell more advertising dollars. So it's actually, you know, I think the reason that, you know, some of these social media platforms have gotten so much backlash is because their incentives have become misaligned. And by the way, that's kind of the same with traditional media, too, right? Like, that's why you see this bifurcation of like MSNBC and Fox News, and like, there's never any intersection. The Venn diagram anymore. So it's like two alternative realities and it's because they're, you know, for the most part infotainment. So I think the goal with TCRs, whether you're talking about content, whether you're talking about credentials is ultimately to have people that are interested in paying for high quality synthesis of information, like reliable, like truly reliable

• 19:52Speaker 05

  synthesis of information, like give them a way to actually pay for it. That is an indirect roundabout way where they're paying for it because they're offering up their data and in return, you know, they're they're being sold advertising. I think that's true in in many of the other kind of early TCR applications. There's a company called Relevant that's working on this for kind of curated content.

• 20:13Patrick O'Shaughnessy?

  I'm curious to hear your, you mentioned the SEC, your antiquated securities law and some of the things that you've been thinking about for a couple of years now. What you see as the, like the scariest things or the biggest problems in this ecosystem. We'll get to Missouri and how they're solving one of those problems again in a couple of minutes. But generally speaking, what what scares you? What do you view as the darkest sides of the crypto asset world as it stands today?

• 20:36Speaker 05

  Well, you know, what what's the SEC's mandate? It's, you know, capital formation, fair and efficient markets and consumer protections. Capital formation is not the problem. Like, I think the industry's got that well in hand. This is, you know, clearly, you know, it's been proven that this is, you know, some disruptive innovation. I think there was just something out in Forbes yesterday. ICO volume in Q2 was 45% of the IPO market in the US. So I mean, yeah, it's real. Like, it's got people's, it's got people's attention. The problem comes down to kind of the fair and efficient markets piece, which is more on like the exchange front, and then the consumer protections piece, which is really where we're focused on. I think the most of the answers to protecting consumers, and I tend to lean more libertarian. So in my

• 21:21Speaker 05

  eyes, many of the protections that you could give to consumers are just by offering better transparency and more kind of consistent, findable data on these projects. And a lot of retail investors, you know, don't care, right? They just, they want to know, is something going to pump? Is it going to dump? Right? Like, you know, I think we have this like lofty ambition that everybody's going to become like a You know, Warren Buffett of crypto and like really study the token documents and great detail and it's all bullshit, right? We all know that, but at least optically like leveling the playing field a little bit more and making it easier for people to actually understand what's going on at these projects. So I think that to me is probably the area that the SEC has come out most vocally and most clearly and said, you know, here's an area where you guys could self-police. Jay Clayton in his kind of initial remarks in

• 22:06Speaker 05

  November said, there may be ways for these different markets to kind of self-regulate, market actors to self-regulate via transparency measures. And he wasn't just talking about crypto, he was talking about penny stocks and a few other areas. But I mean, he said, he like explicitly said, you know, self-regulate, you know, via improvements in transparency measures. And I think, you know, the most transparent projects generally are going to rise to the top anyway. So where do you start? Well, you start with extremely remedial information. How are you managing your token supply? Who are the people on your team? Where are you located legally? Do you have legal counsel? What are your verified web assets and web addresses? So you can't get, you know, people don't get phished or spoofed

• 22:49Speaker 05

  and they can kind of easily verify when they're sending money to a legitimate project versus a Twitter bot and, you know, ETH giveaway scam. If you just start there, you can pretty much immediately find the 20% of outright frauds and 20% of best-in-class. These should be the examples. And what we're trying to do is we're trying to highlight the best examples and kind of going through this process, it's going to be very, very obvious which ones are just outright fraudulent or exit scams. And frankly, just let's think about this from a practical level. The SEC, when they take action, they want to win the cases, number one. So they're not going to go over the biggest projects because the biggest projects can afford hundreds of millions of dollars of legal fees right now. And they want to be able to make examples of people. So let's give them like the clear

• 23:33Speaker 05

  fraudsters and hopefully that gives the industry time to self-regulate and actually come up with some solutions for the people that are actually in this for the right reasons.

• 23:41Patrick O'Shaughnessy?

  One of the things we're talking about sounds to me like what an investor would call a quality filter, right? That the step one of a process might be just eliminate all the crap, the junk. This is something we certainly find effective empirically, and I think it makes sense intuitively. So maybe talking a little bit more detail about the strategy behind quantifying quality of these projects. You mentioned some of the remedial information, but how do you decide if you're on the whitelist? What gets you there?

• 24:06Speaker 05

  We're not even looking at quality right now. We're Switzerland in terms of reporting. It's like, here are the things that we're trying to track. They're either true or they're false. You either input them or you don't. You either have this information or you don't. You either have these policies or you don't. Let's make it as black and white as possible for the first iteration. And then over time, you can add complexity and you can borrow from other innovators within the space regarding, you know, what logic you incorporate and how you can automate the reporting and disclosures for some of these projects. But, you know, we call them our NOVA principles: non-controversial, objective, verifiable, actionable material. What's going to move the needle? What can we immediately check? What's that clear binary? And then, you know, really important right now, it's what's not going to piss people off, right? What's easy? Because you take something as simple as token supply over time.

• 24:50Speaker 05

  Some of the best projects out there have been extremely transparent with how they're managing their token supply. In some cases, in many cases, they actually embedded in the original ICO code. So, you know, you know that the founder's reward vests over a four-year period, and this much goes to the foundation, and this much goes to the community pool, and this much goes to the founding team and whatnot. That's really valuable information that isn't really available anywhere unless you're a computer science guy, right? So like, actually getting the projects to just, you know, verify that these are the contracts. Pull directly from these contracts any kind of information that you need about the financials,

• 25:30Speaker 05

  and particularly the supply, and we will fill in the details that only we can fill in, which would be, okay, once they vest, do you necessarily sell them? What does that process look like for kind of exiting on the open market? Because if you were talking about a security and an insider was selling a significant amount of stock, well, that would be disclosable. And in crypto, that could be Be a significant amount of inflation in whatever system you're talking about. And a good example of this is, and Vinny's great, he's a friend of mine and known him for a long time, Vinny Lingam from Civic, but his team like emailed us and they're like, hey, you know, fix, you gotta fix the market cap. We wrote this blog post. We talked about how we're doing our treasury. No one picked it up, but it's basically 33% inflation if they were to sell it like immediately.

• 26:12Patrick O'Shaughnessy?

  Right.

• 26:13Speaker 05

  And they're not, but that wasn't picked up anywhere. And this is, you know, a hundred, multi hundred million dollar asset. I forget where it's trading now, but it's a lot of money. And now all of a sudden you've potentially added tens of millions of dollars of inflation overnight, which is many multiples of daily volume. So in terms of like those early principles, you talk about table stakes. I mean, in the public markets, supply is something that's like on the cover of the 10K. Let's get the fucking cover of the crypto 10K first before like worried about the computer science elements of these different economic systems, right? It just doesn't matter at some point. So, so I think that's kind of where we come in. And part of that thesis is that like any of this matters eventually. And right now, the truth is everybody's just treating these as

• 26:53Speaker 05

  binary bets and, and trades. But ultimately there will be a right sizing of these different network tokens and people will start to think, you know, about these on a more fundamental driven basis. And so that's what we're positioning for, which is really the five, 10, you know, 15 year infrastructure play.

• 27:08Patrick O'Shaughnessy?

  Given that obviously you're approaching this as someone interested in crypto assets, but also as a person running a business in the space, talk a little bit about your thoughts on the ICO market as ICOs as an alternative to capital formation versus selling equity in a business. So I guess this is two questions in one. How do you view that market in general? Maybe problems that you see with it or have seen in the past? And how do you think about it yourself as somebody running a business that's both equity and I think will be also, you know, have token issuance as well?

• 27:36Speaker 05

  I think the key is just alignment. And the problem with the current ICO market is that you've got instances where the documents say these are donations. You have no rights. You don't exist. The tokens don't exist. They never will, right? Like these are like the fucking disclaimers that we have in the industry and these, in some of these ICO docs. And we're laughing, but it's true. Like you know it to be true. You've seen some of these and, and so it's Totally skewed and nobody cares or nobody has cared just because you know 2017 was such a monster year and everybody made money. Now that that's starting to cool off, now is when you're starting to see the teams think much more closely about incentive alignment. If we deliver on these milestones, how does that value get captured by the people that invested in the token?

• 28:19Speaker 05

  Sorry, purchase the token. Everybody knows that they're investments, right? So I think that that is, you know, kind of super, it's important in business and economics anywhere. But there has been no incentive alignment between kind of communities and the token holders and the issuing teams and kind of the early investors. And one of the kind of corollaries to that is very important messy structural issue. Is the issue of how do you set standards around venture capital lockups for these pre-sales? Because what you've had to date is a dynamic where you know, VCs have been given preferential kind of inside access to different token sales. At a significant discount, in many cases, mere months before kind of a broader launch.

• 29:05Speaker 05

  And they, you know, they basically know they're in the money from day one because they know there's a flip. And to date, there hasn't been really any restrictions on when they can exit. And this isn't an ethical problem, right? It's a, it's a structural one and it goes back to the incentive alignment issue because if you think about your responsibilities as a money manager, you've got fiduciary obligations. So you invest at 10% of what the ICO price is. And then three months later, there's the ICO and it shoots up 20X. You're fiduciary, you know, you gotta take chips off the table, but at the same time, you know, you've basically, you know, the, one of the reasons that this just went up 20X. Isn't because the fundamentals of the project changes because, you know, you as like a blue chip brand investors have clearly given a signal that this is a high quality project. Your own brand, basically.

• 29:49Speaker 05

  Yeah, right. Yeah. So it is, it's exactly that. It's like arbing of your own brands. And, and I think people recognize this is like a structural issue, but the issue is one of kind of continued access. Because if you're, if you're doing your own kind of back of the napkin, well. If you're in a position where you know that you can exit quickly, then you can pay more on entry. If you're gonna like draw a line in the sand and nobody else does, well, you're never gonna invest in one of these projects unless you have like a USV or Andreessen type of brand where you're so far in the money anyway that you can afford to hold for multiple years, just so you kind of preserve your institutional integrity. And in fact, many of these, like the blue chips have said that they haven't sold. But the thing is, we don't know on a, on kind of a per investor basis. And it's important, going back to the founder's

• 30:33Speaker 05

  supply issue, it's important when you think about not just kind of fairness of the initial distribution, but ongoing inflation and, you know, ongoing dumps on the market potentially that are unseen.

• 30:44Patrick O'Shaughnessy?

  One of the ridiculous but understandable questions that I hear, overhear or am asked directly is people that are in business that are used to adapting to changing conditions, asking like, well, you know, like, should we do an ICO? You know, is this something that we should take advantage of? Some new way of forming capital, as you said? I'm curious if you have a framework or a litmus test for thinking about who and what should be considering this as a means to raise capital. So what are the conditions under which ICOs make sense? And how will that evolve in the coming, you know, one to three years, whatever period you think is appropriate?

• 31:16Speaker 05

  I think this is the whole problem in the industry right now. The ICO market has become like a capital raising tool primarily. And in theory, they're not, you know, these tokens aren't supposed to be equity or any equity like instrument because that makes some securities. And so this is like the, the issue that everybody dances around. And when, when we're thinking about doing something for Messari, a couple of things kind of stand out with how we're considering structuring this token curator registry. The first is, we kind of see it as an enabling feature to kind of fulfill the mission of boosting transparency and, and, you know, getting to more fundamentals focus. And the reason I say that is there is no SEC or equivalence that can mandate Edgar like disclosures from

• 31:58Speaker 05

  token projects. And then you get into the issue of how can you even pick and choose? Because Bitcoin, who's going to register Bitcoin? Who's going to register Ether? You know, and, and maybe some of these other tokens that got out the door early, maybe they're kind of sufficiently decentralized. So like who? Actually claims that they can even report on behalf of these networks. So you know, you've, you've, you've got some pretty tricky issues there. But I think at the end of the day, what we're trying to do is ensure that in the absence of that regulator, or even the self regulator that they might be able to bless to do this work of, of kind of enforcing standards. The TCR, the owners of the TCR are able to basically come together and, and ultimately create that out of thin air. Right. So there, there's a little bit of, you know, fagots, you make it like, create this aura of inevitability. There's, you know, I think a tremendous flywheel that would kick in.

• 32:43Speaker 05

  If you can get a critical mass of funds, of exchanges, of regulatable entities around the table saying, yeah, this is how we should do things. This is very obvious. It's, you know, we're not talking about, you know, 150 page 10 Ks. We're talking about very remedial type of information. Right. So that's, that's number one, and then they're very, very important. Number two, because I know I get crucified all the time because I've been so outspoken on ICOs and how they're overvalued. It's like, oh, now you're going to do a shit coin. So, um, so the other thing that I think makes us very, very different is that, you know, one, I'll, I'll make the argument that everybody else makes all day long is like, you know, truly the token holders in our system are using the token, not just speculating. If the long-term value goes up, that's fine. But I believe that very strongly. That's a, you know, another hour that I can make that argument. But people can take that with a grain of salt.

• 33:27Speaker 05

  But the thing that really matters is that it's only, all of the natural users that I just outlined are all accredited institutional investors. We're not talking about mom and pop investors that are, you know, going to suddenly take interest in, in basically creating FINRA or, or the SEC, you know, type of, of enforceability. It just doesn't make sense for them to hold the token because they, they have no skin in the game strategically. And all the other token users would be a little bit more strategic. So that's, I think, how, how we try to, you know, separate what's interesting about our token. I think any other project that it's purely for, like, it really is for utility. I think will do well, but I think the, the kind of hand waving around, oh, well, we're using it for this, but really we need to raise $5 million or, you know, like that's, or, or a lot more, right?

• 34:13Speaker 05

  Like, that's where people get into trouble. And, and, and I will give a shout out to one group that I think is really doing a good job on, you know, how do you actually prove that people are using these tokens? Just speculating?

• 34:22Patrick O'Shaughnessy?

  Basically what I was gonna ask.

• 34:23Speaker 05

  I think what Token Foundry did with the foam space ICO, and I think it's the 27th today. I think it's kicking in. You can register until like 31st. I'm not recommending it, but it's kind of ongoing. So hopefully this airs after that. But I think the way that they structured, the way that they tried to basically create like suitability standards. If you were kind of doing this as an investment advisor or broker, you'd have kind of suitability standards that you'd have to check to see if a certain investment made sense for even an accredited investor. And so now this isn't accrediting people by wealth. It's basically accrediting, are you actually going to use this token for its intended use? So that's very interesting to me.

• 35:02Patrick O'Shaughnessy?

  So really clean answer to this idea of who should do an ICO, right? Or why should? The bigger question is, why should you introduce a token into the world? Basically, and the litmus test being it can't be for speculation. It needs to be for some actual underlying use. It raises the question.

• 35:15Speaker 05

  And people will still speculate, right?

• 35:16Patrick O'Shaughnessy?

  Of course.

• 35:17Speaker 05

  So that's, that's, that's, yeah, you can't. I don't think you can stop it, but I do think that you can.

• 35:20Patrick O'Shaughnessy?

  Motivation matters.

• 35:21Speaker 05

  Yes, yes. And I thought that about, I think it was one of the longest posts that I've written. I wrote, why I invested in Filecoin, right? And it was basically like a protest investment almost, because I thought that they did things the right way. And like you need, in their system as designed, you need Filecoin to actually prove that space and certain storage capacity has been committed for a provable length of time. And so if there's a holding period, there's kind of real world comp in AWS. You know, if you, you know, you've got this Airbnb type of model, so you can figure out what the replacement cost would be. There's a lot to like about that. And that system doesn't exist without Filecoin, in theory. We're starting to see more projects like that, but it's a valuation issue.

• 36:00Patrick O'Shaughnessy?

  It reminds me of another one of these kind of basic, and I apologize for some of the basic questions, but it's just helpful for me as someone, as an outsider, to remind myself of these ideas, sort of like me asking, you know, how do you just describe this whole ecosystem to people? Same question applied.

• 36:12Speaker 05

  I'm glad you're asking them because I know I'm probably getting like way, way too like.

• 36:16Patrick O'Shaughnessy?

  No, I love it. It's good. This shows a lot of detail.

• 36:18Speaker 05

  And you know, the funny thing is people that aren't familiar might be like, oh, that sounds like really interesting, but I don't understand it. And then everybody in the industry is like.

• 36:25Patrick O'Shaughnessy?

  Like so basic.

• 36:25Speaker 05

  Tubidity, you're such like a dumb fuck. Like you didn't explain any of that correctly, you know? So. So you know, I'm sure that I'm going to disappoint a lot of people in the industry every single time I open my mouth. That's just kind of my like my operating assumption, right? So keep, keep, you know, bringing me back down to earth.

• 36:40Patrick O'Shaughnessy?

  So, so the very basic question is, is just this idea of use, like what is it that's unique, same idea of a litmus test, or however you want to think about it, what is it that is unique about the creation of a token as a means to do something relative to just like the normal exchange of cash or money or whatever that you think is a good way to think about whether or not a business should be, should have a token that enables something that is truly differentiated versus what they can already do. Basically, so they're not just capitalizing on like a popular category.

• 37:09Speaker 05

  So I guess people in the industry talk about censorship resistance a lot. So I think there's certainly a category of applications that you could argue you must do this on a decentralized basis if you want, you know, truly

• 37:25Patrick O'Shaughnessy?

  tamper free.

• 37:26Speaker 05

  tamper free computations or storage or funds flow. So I think that's one element. And then, you know, probably the other element is, are there coordination problems that exist within a given market that monetary incentives might be able to solve? And so this is something that, you know, people a lot smarter than me have talked about, but, but, you know, basically like blockchains and cryptocurrencies as coordination mechanisms. I think it's probably the best way to think about it. Is there a, like a structural issue in a given market that requires a better type of economic incentive system and coordination mechanism that that just would be very hard to replicate on kind of like a company basis?

• 38:03Patrick O'Shaughnessy?

  How dire do you think this, like the overall ecosystem is if you were to, if you somehow had the time to go project by project and assess whether or not it should be a token at all versus a normal mechanism. And then your first litmus test of, you know, it shouldn't be designed just for speculation, but actually to be used. How many do you think actually, as a, maybe just in percentage terms or something like this, fit this criteria?

• 38:24Speaker 05

  Should we do like a lightning round where I just talk about like all the terrible projects that are on the top page of coin market? No, actually, I'm not going to do that because that would totally, you know, maybe over beers, I'll do it.

• 38:34Patrick O'Shaughnessy?

  You could talk in abstraction.

• 38:35Speaker 05

  At some point, things become so overvalued that they've kind of become indistinguishable from really terrible Projects and assets because it's just tough to see some of even the interesting projects like growing into their value simply because at the end of the day, when the tide goes out, are these tokens actually capturing the value? You know, the implied valuation of the network suggests that they are. And the answer almost universally is no. And that's why I think the categorization of securities, which look at the cash flow, look at the, you know, even if it's speculative cash flow, or look at the asset value, you can do that. Currencies, it's like, what are they replacing? Is this better than gold? You know, so should it be some percentage of the gold market? Should it be some percentage of Bitcoin as like a replacement to Bitcoin? Those all make sense, but it's this kind of middle bucket where, you know, you can bang

• 39:20Speaker 05

  your head against the wall as much as you want. You can run whatever models you want, but you're just not going to get there under almost any circumstances. And there will be a few outliers where I think the outliers will really be in situations where they don't really start with any intrinsic value, but then the team likes at some point has like a pivot and like, oh shit, like we should do this instead. And now like, it's really helped improve alignment across the entire stakeholder base. And it just like something clicks and it really takes off. I think the important thing there is that's only going to happen if there truly is some innovation in the incentive scheme where it's an alignment improvement. And that's what's missing.

• 40:01Patrick O'Shaughnessy?

  I'm reading into a lot of what you've said, and I'm just curious to hear your take if I've got it right. So if we go with this barbell theory of sort of monetary security tokens or securitized tokens, and then this middle wasteland, if you will, of utility tokens, if I'm thinking from the perspective of an institutional investor, all of whom now know what's know that this exists and probably need due to like careerist problems to have some opinion of it. And I'm forming and I'm trying to form an opinion, an investing opinion of this ecosystem. What would your recommendation be in terms of just posture for like how to how to begin to attack this problem where the question that they're facing is, okay, this thing is big now. It's in some big drawdown. It seemed to survive like a lot of things that

• 40:45Patrick O'Shaughnessy?

  maybe we wouldn't have thought it survived. And we need to have an opinion. How would you suggest people go about forming that investment opinion, generally speaking?

• 40:52Speaker 05

  I kind of feel like I was a few years early to this and like this type of framing. But my framing was if Marc Andreessen and Fred Wilson are wrong, I feel like less bad about being really stupidly wrong about crypto and Bitcoin. If they were making a career bet and brand reputational risk bet, even probabilistic one that's ended up turning out very, very well. If they're good making this leap, then I am as well as, you know, at that time, like, you know, 27 year old. So I think now you multiply that by like a million in terms of where the tech stacks are, where kind of mainstream consciousness of this is kind of an innovative new asset class. I think it's much less risky to get behind something like one of the cryptocurrencies, Bitcoin, Ether, Zcash, Monero.

• 41:37Speaker 05

  I don't think that's a bet your career type of risk anymore. What is, is, is, okay, if we buy this and then there's a hack and we lose all of it because it's a faulty custody solution, all right, that's like, you didn't, you didn't, you didn't figure out custody and we don't really care whose fault it was, like off with your head, right? So, but so I think that's like the most important thing that's going on this year is can we figure out institutional custody? Now Coinbase has their solution, you know, we're starting to see like, you know, bigger, bigger money funds kind of pile in with what they're doing, you know, Ledger is, is doing a lot, you know, Zappos always been kind of at the forefront with Bitcoin. I love Wences, he's a purist and he, you know, he doesn't believe in Ether, so he doesn't custody it. And it's like costs him so much, I'm sure, but he's just like, no, we're not doing it. So good for him. But there, you know, there are plenty of like those actors out there that are, are working

• 42:22Speaker 05

  on these institutional grade custody to kind of get over that hurdle right now.

• 42:26Patrick O'Shaughnessy?

  And outside, so you mentioned, you know, from institutions perspective, it probably doesn't feel like a career risk move on the currency side, but maybe in the other two, let's, actually, we've talked a lot about the middle layer of the utility, so maybe.

• 42:37Speaker 05

  Well, they're just done, they're just bad, they're just dumb investments for the most part. I mean, and, and if you're going to make, if you're going to take that exposure, the smart play and, and, you know, I think this is the pitch of most crypto funds is to, you know, invest as an LP. Sure, you're going to take a little bit of a haircut, but you're going to do it in a vehicle that's tried and true and you're going to basically offload all the risk onto the VCs, the hedge funds. So I think that makes a lot of sense. So, you know, it's basically a tax on the folks that can't take the professional risk. Right? And that's fine, but that's going to fund a whole lot of infrastructure.

• 43:07Patrick O'Shaughnessy?

  I want to talk a little more depth about Messari and I guess the bigger vision and ambitions, right? So you've talked a little bit, we've talked around it a little bit, but it might be helpful just to state like the simplest version of the core mission and then the steps that you're going to take to get there.

• 43:21Speaker 05

  We want to build an authoritative data resource for the industry. So if you think about building a new financial system, what type of infrastructure needs to be built, high quality, standardized, universally consistent, you know, reference data is a core component of that. And I think we're tackling that from a few different angles. So there's all the on-chain FX which we just acquired that has pricing, volume, market cap data, and then on-blockchain transaction data and things like, you know, developer activity. And we're kind of adding a whole slew of metrics to give people a better dashboard and sense of, you know, how these assets are doing comparatively, speaking. Obviously with with Messari, with the TCR product, what we're really trying to do is

• 44:01Speaker 05

  bring more regular enforceable disclosures, because many of the newer projects are kind of quasi-private, quasi-public. So the insiders really, you need to know what they're thinking and what they're doing, or you don't have a complete picture of the economics or kind of the fundamentals of the project. And then, you know, another kind of core piece is just curating content and information and trying to curate research, whether it's ours or someone else's, giving people a single dashboard where they could cover to cover, do their investment diligence, and make, you know, come to some type of decision.

• 44:31Patrick O'Shaughnessy?

  Is it fair to use the analogy that you probably hear all the time that you're trying to effectively build like a Bloomberg of?

• 44:36Speaker 05

  Oh, man, yes, it's great. Because there's like 50 entrepreneurs right now that are building Bloomberg crypto, right? So.

• 44:41Patrick O'Shaughnessy?

  I hesitated, smiled.

• 44:43Speaker 05

  No, no, no, no, no. It's, uh, our investors like want to kill me because I always say, no, no, we're building Edgar. Before you can build Bloomberg, you need to build Edgar. And they're like, well, that's not sexy enough. It's like, I know. That's why when I talk to people that need like sex appeal, I say Bloomberg. But it's, you know, it's really like more foundational than that. At the end of the day, like the Bloomberg of crypto is not going to look like the Bloomberg of Bloomberg, right?

• 45:03Patrick O'Shaughnessy?

  My analogies suck.

• 45:04Speaker 05

  Yeah, well, no, I think it's a fair analogy, right? Like that's, I would say where we ultimately want to be from like a kind of leadership standpoint and kind of building this base layer, it's something between a Wikipedia, a Bloomberg, an Edgar, and then I'd even say maybe like a little bit of like a World Economic Forum type of system. Because I don't want to say like SEC or like FINRA or anything like that. Because basically those type of entities are very different because they are kind of top down and they will always be top down regulatory and self regulatory bodies. But if you think about something like World Economic Forum, they don't really have any teeth, but they have a shit ton of influence and that's, you know, where a lot of the kind of world's issues are addressed and, you know, we kind of make fun of Davos and,

• 45:49Speaker 05

  you know, out of touch elites or whatever a little bit. But yeah, I think there's some merit to building something that kind of incorporates those different elements. And frankly, you kind of need to if you're going to just hurt cats.

• 45:58Patrick O'Shaughnessy?

  One of the things I like about the crypto world is there's no shortage of skepticism and of people looking at other projects and coming up with the reasons why they might not work. So if you had to force yourself to be like your own skeptic, or maybe there's someone specific you can think of and a skeptical view of what you're trying to do, what would you say the pitfalls are? Like, what are the reasons that something like this might not work?

• 46:18Speaker 05

  It's a political challenge. We will not be successful if we don't get a critical mass of exchanges, funds, underwriters eventually bought in. And so that's why when we did our initial fundraise, we went out and we looked at globally, who are some of the top funds that can get us boots on the ground in Korea, in China, in Europe, in North America, right? And we did that. We got a, you know, fantastic syndicate together of, you know, really smart investors. That's kind of step one. Step two is kind of, you know, how do we expand upon that? How do we start to get more of the exchanges and, you know, other infrastructure providers behind us? And it's a distribution problem and it's a political problem. And you know, all these assets are kind of reflexive in some sense, right? So the more we sell, the more valuable it is, right?

• 47:01Speaker 05

  It's a lot of marketing, but it's, I think the right kind of marketing. But the challenge is what's the value of this network today that doesn't exist? This is like the whole like venture capital dilemma. If you back in and you say, and these are just kind of high level numbers. And these are not what we're, what we're raising at. So I'll just, but I'll use it for kind of illustration. So we need, we're going to raise, you know, $10 million and we're going to sell 20% of the tokens. So, you know, basically the other 80% will, will sell over the next, you know, five years. We have constraints just on a nominal basis to like, how many partners we can pull in? Because if you have 40 different partners that want to come in, is anybody really going to care if they put in like a quarter million dollars? And they're running a, you know, $400 million fund? No, you, you have to give people enough skin in the game and like interest and like excitement.

• 47:45Speaker 05

  Like, oh, this is going to be a billion dollar network, but you can't concentrate too much power on any one hand. Cause so much of the importance of, of how we build these governance systems relies on the initial distribution of, of governance. And ultimately the ongoing distribution of governance. So it doesn't get, you know, centralized prematurely before it has kind of escape velocity. So that's one thing. Now, the nice thing that I always like to joke about is if there's anyone that's done more faking it till you make it in the industry. I'd like to, I'd like to see them, uh, particularly around like consensus, the conference, right? Like that's, it's a lot, a lot of it's kind of like the same pitch, right? With consensus at CoinDesk, you know, the big flagship conference in crypto. You know, I ran CoinDesk prior to Messari, and that's really the lifeblood of CoinDesk right now. But the first, you know, year that we really blew it up, you know, we go to kind of all of our friends in the industry.

• 48:30Speaker 05

  And basically the pitch was something to the effect of everybody's coming. You should get your ticket before prices come up and before we run out of speaking slots. And then like the next week, you basically have the same conversation with the same people. And be like, oh yeah, so, so, so and so, so and so, and so and so are like on the main stage and you're not, and you know, you should.

• 48:43Patrick O'Shaughnessy?

  You're describing every business, every good business ever, by the way.

• 48:46Speaker 05

  Yeah, it's just like selling like FOMO and like just kind of playing people off each other, like horse trading, whatever. And like, that's basically this, this is not, this is not today, that technically complex to do the TCR. It's very like politically complex, I guess, to, to get the right initial distribution. So if you can get aligned investors that will kind of like make the leap with you, it almost becomes, I think, self fulfilling because you just need to solve that kind of political coordination problem. And then a lot of good things happen. And when it comes to, you know, value capture for us, whether you're talking about the token economics or anything else. Look, if we can build an open data layer, the authoritative like data source for a new financial system, like that business is going to make money.

• 49:28Speaker 05

  Like we'll find ways to make money and, you know, 50 different type of verticals. And so I'm not too hung up about it right now, but you know, you always have to be kind of conscious of the tension between how do we capture value? And how do we make this open source? Right? So, so those are like some of the big sticky issues that I think a lot of teams in the industry face. And we're cognizant of them.

• 49:47Patrick O'Shaughnessy?

  Aside from the hustle that you just described, what were the big lessons that you took away from your time at CoinDesk? Were the big lessons learned?

• 49:54Speaker 05

  The people that work on the team that actually put everything, implement the thing and kind of put things into action. They never get any credit, right? It's just like the face of the franchise. And, and I think like most good, especially like younger, you know, CEOs or executives will basically say like, I don't know what the fuck I'm doing. Right? Like honestly, but luckily I've got a knack for like hiring the right people to do. And, you know, so, so ultimately like they're the ones that like get the brand off the ground. And I'd say, you know, when we acquired CoinDesk, we were basically down to six full time.

• 50:20Patrick O'Shaughnessy?

  I think one of the questions I always think about in crypto is the tendency towards concentration and centralization. Whether it be the credit that somebody gets, like it's remarkable.

• 50:31Speaker 05

  The thing is it's human nature. So

• 50:33Patrick O'Shaughnessy?

  Completely.

• 50:33Speaker 05

  I think making centralization and decentralization, making that process more liquid, maybe that's the real

• 50:40Patrick O'Shaughnessy?

  That's the real killer app. Yeah.

• 50:41Speaker 05

  Yeah. It's not, oh, we've built this censorship resistant decentralized currency. Most of the hashing power is with one company in Bitmain, right? So, uh, you know, and, and up until very recently, like most of that capacity was behind the great firewall. So yeah, so much for your, you know, censorship resistant currency that can be co-opted and earned by the, by the Chinese government, right? Like, you know, so I think that's, that's one of the bits of marketing language that everybody uses, but, um, but isn't quite true. But yeah, I think if you can make that a little bit more fluid, right? You can't disrupt Facebook. Today, right? Maybe, you know, it'll, it'll take some time, but like the boats that some of these big tech companies have are pretty, pretty sizable, right? So it's not like you have really

• 51:22Speaker 05

  low switching costs if something like, you know, Cambridge Analytica happens or worse. It's almost like they're too, too deeply entrenched.

• 51:29Patrick O'Shaughnessy?

  Back to just like a big, big question, big picture question. Outside of your own work and project, what going on in this world today has you most excited about the future? Well, most people I know that are, have devoted their careers now to the crypto asset world are big believers in its potential, but the sources of that potential seem to, like you said earlier, they're morphing every week. Things change all the time. What has you most excited and engaged outside of Masari?

• 51:54Speaker 05

  Well, my kid's learning to talk.

• 51:56Patrick O'Shaughnessy?

  That's a good one.

• 51:57Speaker 05

  That obviously is, but I know you're asking about economic sectors. It might be more interesting. I think AI, like machine learning is like, you know, the, all these like really, you know, there's a lot of buzzwords and jargon and fascinating stuff that's happening there, but that, watching that unfold is, I kind of go back, like I can't really think about it that much because I kind of just, you know, I worry that like everything is going to be machine driven and we're basically coming back to the matrix and the singularity is near and kind of all that. For me, you know, just watching all of these AI assistants pop up and how sophisticated they're getting.

• 52:30Patrick O'Shaughnessy?

  How well they work.

• 52:31Speaker 05

  That's, I remember testing out X.ai, which is a company based in New York four years ago. And then Amy, the, the AI assistant, you know, it kind of worked, it kind of didn't. And I tried it again like another six months ago. I was just like, oh my God, man. If this is the pace of, you know, innovation, like this is like how smart things are getting, you can kind of see this freight train, this freight train of change to the economy that's really scary. I can't remember if it was like Tim Ferriss or Sam Harris had a podcast with someone on, on universal basic income that's really good. I think I've been thinking about the combination of AI and UBI. It seems like if you don't figure out UBI and like how to fix this ugly populism that we've got right now and like reconcile those two different visions,

• 53:14Speaker 05

  then like I really am like a tinfoil hat guy in terms of what that means about a Mad Max future. And like, yeah, so I don't really like to bring it up at cocktail parties. Like what do I think of the future? Cause it's just, you know, it's, it's, it can be bleak.

• 53:27Speaker 05

  And so I get really excited when I see people working on the, let's tap the brakes a second, right? Like where are the kill switches? And in some cases, you can kind of think about. In a world in 15, 20 years where you know, blockchains replace, you know, a lot of different, you know, traditional financial markets and you have things like autonomous agents and, and decentralized autonomous organizations that like become these unstoppable forces. Augur this past week is a great example. It's prediction market that pretty much immediately got a million dollars in bets placed and then assassination markets popped up pretty much on like day two for Donald Trump and a number of other like high profile individuals. These autonomous agents, you know, they sound great in theory, but like what happens? Like, how do you avoid the Black Mirror episodes that come from, you know, from some of these

• 54:10Speaker 05

  like innovations? Like who's developing the kill switches? Like who's thinking about like how to actually keep this in check? Those are the people that I get excited about working with.

• 54:17Patrick O'Shaughnessy?

  So we'll go from bleak to something a little more positive, which is my closing question for everybody. Just to ask for the

• 54:24Speaker 05

  I've joked around, this guy Annie from Fabric VC, he and I were joking that I think, I forget who came up with the title, but for my autobiography, it'll be something like my entire life has been an accident. Right? So I've, I've just caught a tremendous amount of breaks, but I think that by far the, so obviously, you know, my parents, wife for family reasons, but I would say when I've started my career was in the like throes of the recession and my offer at the JP Morgan Investment Bank was deferred. It was just, I think it was like, it would have been like a pretty significant like setback, just, you know, psychologically and kind of career wise, but I accepted on the spot the summer prior. And so I went back to the well for like the friends that I had that, you know,

• 55:07Speaker 05

  would have recruited me, I thought. And this guy, you know, JP Sanday, who's a friend of mine at Boston College, he was like, yeah, we'll get you in like right away. And so he like fast tracked me at a venture firm called Summit Partners, which I'm sure most of your listeners probably know. And it worked out, right? Like within like two weeks, I went from like, okay, my career's got like a major setback. We're going to the, the throes of like the worst recession and like, you know, since the, the Great Depression. And then somehow miraculously went from like that to I just skipped two years of banking and got like right into venture and like the best like job that I possibly could have had out of school. I was totally underqualified for it. And pretty much everybody at Summit that hired me and then didn't fire me in the first three years. And then, you know, my manager, Pete Connolly, who was, you know, just terrific first mentor and, and coach, I'd say.

• 55:52Patrick O'Shaughnessy?

  Awesome. Well, this has been a ton of new information for me on crypto. So I really appreciate the time and insights. It's been fun.

• 55:57Speaker 05

  Yeah, it was fun for me. I think that's the first time I've told that story. Awesome. So that's a great closing question. Always elicits interesting stories. That's great, man. Well, it's been a pleasure. Thanks so much and we'll see you on Telegram.

• 56:10Speaker 06

  Hey, everyone. Patrick here again. To find more episodes of Invest Like the Best, go to investorfieldguide.com/podcast. If you're a book lover, you can also sign up for my book club at investorfieldguide.com/bookclub. After you sign up, you'll receive a full investor curriculum right away and then three to four suggestions of new books every month. You can also follow me on Twitter, at Patrick underscore Oshag, O-S-H-A-G. If you enjoy the show, please leave a quick review for us on iTunes, which will help more people discover Invest Like the Best. Thanks so much for listening.