113 - How to Be Early | Olaf Carlson-Wee

Olaf Carlson-Wee is the Founder and CEO of Polychain Capital, a crypto investment firm that he founded in 2016. Olaf is a brilliant independent thinker which has led him to be the first in many things, one being the first employee of Coinbase. In this episode, we dive into how he utilizes and became a contrarian thinking, which blockchain he believes has the potential highest likelihood to accrue the most value, the future of work and decentralized governance, and so much more. Because of Olaf’s OG crypto tier status, he’s seen the evolution of the space from the very beginning. His experience—combined with the way he uniquely thinks—makes his vision for the future not only inspiring but promising. ------ ✨ DEBRIEF ✨ | Ryan & David's Unfiltered Thoughts on the Episode https://shows.banklesshq.com/p/113-olaf-debrief ------ 📣 CONSENSYS | M·A·C: NFT Collection for a Good Cause https://bankless.cc/MAC ------ 🚀 SUBSCRIBE TO NEWSLETTER: https://newsletter.banklesshq.com/ 🎙️ SUBSCRIBE TO PODCAST: http://podcast.banklesshq.com/ ------ BANKLESS SPONSOR TOOLS: ⚖️ ARBITRUM | SCALED ETHEREUM https://bankless.cc/Arbitrum ❎ ACROSS | BRIDGE TO LAYER 2 https://bankless.cc/Across 🏦 ALTO IRA | TAX-FREE CRYPTO https://bankless.cc/AltoIRA 👻 AAVE V3 | LEND & BORROW CRYPTO https://bankless.cc/aave ⚡️ MAKER DAO | THE DAI STABLECOIN https://bankless.cc/MakerDAO 🦁 BRAVE | THE BROWSER NATIVE WALLET https://bankless.cc/Brave ------ Topics Covered: 0:00 Intro 6:27 Has Crypto Played Out the Way Olaf Thought 10:15 Why Olaf Caught the Crypto Bug 17:35 Olaf’s Interest in Smart Contracts & Ethereum 23:50 Views on Vitalik 25:40 Independent Thinking 30:27 Why is Olaf is Here 32:40 The Common Traps of Crypto 34:12 The Wins Olaf’s Most Proud of 41:18 Which Chain Comes Out on Top 55:11 The Blockchain Spectrum 58:52 Forecasting Value Accrual 1:01:27 Olaf’s Thoughts on Ethereum & Decentralization 1:12:30 The Future of Work & Scaling DAOs 1:18:01 Crypto vs. The Nation State 1:21:50 Lightning Round 1:23:55 What’s Currently Obvious to Olaf 1:26:19 Closing & Disclaimers ------ Resources: Olaf Carson-Wee https://twitter.com/zxocw Polychain Capital https://twitter.com/polychain ----- Not financial or tax advice. This channel is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. This video is not tax advice. Talk to your accountant. Do your own research. Disclosure. From time-to-time I may add links in this newsletter to products I use. I may receive commission if you make a purchase through one of these links. Additionally, the Bankless writers hold crypto assets. See our investment disclosures here: https://newsletter.banklesshq.com/p/bankless-disclosures

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

• 0:00Speaker 00

  I love that inherent futurism embedded in crypto, which is sort of we're all building for this future that doesn't yet exist, but we all are confident, you know, will exist someday.

• 0:14Ryan Sean Adams?

  Welcome to Bankless, where we explore the frontier of internet money and internet finance. This is how to get started, how to get better, how to front run the opportunity. This is Ryan Chon Adams. I'm here with David Hoffman, and we're here to help you become more bankless. Guys, we have a fantastic episode with Olaf Carlson Wi. We are picking his brain. This is an OG investor of OGs. He was first to just about everything. We're going to talk about all of that and more, what he thinks about the space. A few things that you want to take away from this episode. Number one, how did Olaf get in early to just about everything in crypto? The contrarian investor, independent thinking. He talks a lot about that in this episode. Number two, who's going to win the crypto chain wars?

• 0:57Ryan Sean Adams?

  Is it ETH? Is it Bitcoin? Is it alt layer ones? Which chain is going to accrue the most value? That is a very relevant topic in 2022. Number three, how DAOs will look in the long run? Will decentralized governance actually work as a bonus? Really fun section near the end. David and I play a game we call overrated or underrated and get Olaf to name some things that are overrated and underrated in crypto. I think you will enjoy this episode and like those answers. David, what were some of your thoughts on this episode with Olaf?

• 1:29David Hoffman?

  It's always fun to pick the brain of people that got into the space really, really early and clearly saw it right. And Olaf definitely saw crypto unfold like relatively accurately for how it actually did unfold. And it takes a special kind of person to come into crypto early and really be able to call some of the things that happened. Of course, no one gets everything right, but the consistency of which Olaf's ideas and concepts and practices about how to operate in this space worked out for him is just something that's fantastic to learn about. I think the hottest take, the take that I appreciate most, Ryan, was his long-term model for DAOs and how DAOs are going to collectively, rather than just being a bunch of discords where people,

• 2:14David Hoffman?

  you know, shuffle around and do stuff and then tighten settle up at the end of the month, or however DAOs do it. He talked about how DAOs are going to be, you know, companies that apply for grants from a protocol. And I asked him after that about like, you know, what, what kind of example do you have that would doubt that's really getting something right? And I have my answer and I was waiting for his answer. And the fact that he said that he hadn't seen any answer yet was actually surprising to me, but I think that is something that we will save for the debrief.

• 2:42Ryan Sean Adams?

  Yeah, we've got a lot to talk about in the debrief because, you know, Olaf shared some views that are sort of, I guess, counter to some of the ideas in in bankless, like, concepts around sort of money when all assets are the same. There's not sort of, you know, crypto monies versus other assets. His ideas around sort of a multi L1 world as well.

• 3:04David Hoffman?

  It's called polychain for a reason.

• 3:06Ryan Sean Adams?

  Yeah, exactly. That's kind of what he said. So anyway, some really interesting ideas and a little bit of back and forth on on that. But basically, David, this this episode was everything I wanted it to be because we'd never had Olaf on the podcast. And he's just someone you have to talk to in crypto and you have to, you have to pick his brain. We'd never had an opportunity to do that. And I feel like we got all of the questions in that we wanted asked, even if it got into like rapid fire mode near the end. And they were kind of, you know, short, pithy responses. So it was just a fantastic episode from that perspective.

• 3:41David Hoffman?

  We've been hunting for Olaf for a really long time and kind of had just like given up, like couldn't figure out how to get to him. And then one day he just shows up in our inbox. It was like, hey, can I come on bankless? We're like, oh, fantastic. Great. And that's how this episode happened.

• 3:55Ryan Sean Adams?

  Yeah, it's sometimes it just works that way. So guys, we think you're really going to enjoy this episode. As always, if you're a premium subscriber, hang with us on the debrief where we talk about the episode after the episode. Guys, we're going to get right into our episode with Olaf. But before we do, we want to thank the sponsors that made this episode possible.

• 4:14David Hoffman?

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• 4:59David Hoffman?

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• 5:43David Hoffman?

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• 6:27David Hoffman?

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• 6:54Ryan Sean Adams?

  Hey, Bankless Nation. Super excited to have our next guest on. He's actually never been on the Bankless Podcast before. That's why this is a special treat to talk to Olaf Carlson-Wee. He's an OG of OGs. He was early to Bitcoin, back when Bitcoin was this weird obscure thing. He was early to Ethereum as well, figuring that out. He's one of the first investors in DeFi projects like MakerDAO, one of the first, maybe the first crypto fund manager as well, starting Polychain Capital. He was one of Coinbase's first employees. A lot of firsts in Olaf's background. And I know when I was getting into crypto space, Olaf was a key person for me to listen to, to really wrap my head around the mental models for this industry and what's going on.

• 7:39Ryan Sean Adams?

  So, Olaf, it is a pleasure to have you on Bankless. How are you doing?

• 7:42Speaker 00

  I'm doing great. I'm very excited to be here and thanks for all your kind words.

• 7:46Ryan Sean Adams?

  Yeah, I think what we want to do is like pick your brain. I think we want to understand how you've been so consistently early to everything and understand your thesis now. Because of any investor in crypto has been dedicated. I feel like you've seen the most. Like you've seen all of the cycles, like all of the cycles play out, basically. You've seen the development of Bitcoin and smart contracts and crypto banks and DeFi and now NFTs and DAOs. And so we're really looking to understand your thesis on the space. But let's start here. I want to zoom out and ask you this question. How about this whole crypto thing? Has this crypto thing played out the way you thought? And what have been some of the surprises along the way?

• 8:31Speaker 00

  Yeah, I mean, I think it's, it was hard back in 2011, 2012, when I was really getting deep into this. It's very hard to have, you know, back then, I could not have imagined all the various ways this has gone. Now that said, you know, my thesis from the beginning was that this was going to grow a lot and get very big, right? I think that the specific way that has happened is extremely surprising. You know, I think that the kind of advent of smart contracts and all of the various applications that those lead to, you know, driving a lot of what is now kind of the mainstream adoption through things like NFTs

• 9:12Speaker 00

  and DeFi was, you know, totally off my radar at the time, right? That was just a Bitcoin world. You know, I was interested in some alternative systems like Namecoin at the time that was basically a, you know, similar system to ENS today, like a DNS registry on the blockchain. But really, that was the limit of what people were kind of imagining. We were talking about things like colored coins, which you could sort of think of as NFTs now. It's sort of, you know, I still have somewhere probably like some blue Bitcoin or something like that. So I, I think some of these ideas have percolated from the beginning, but at the same time, just the way it's played out and the sheer magnitude that we've reached

• 9:57Speaker 00

  in such a short period of time, I think it's faster than anyone could have predicted. Like, I think if I would have said, this is how fast and this would happen and how big this would get, 10 years ago, I think I would have sounded like a crackpot. And I, and I probably did sound like that.

• 10:14David Hoffman?

  It's always interesting to me to peel back the layers of the OG crypto culture back like pre 2015, because there's a lot of things, you've named some of them, that were really prescient of things to come, like color coins were just an early version of NFTs, as you said, Namecoin where it was an early version of ENS. But then also at the same time, there were many, many other things that came about that no one really ever could have predicted back then, like, you know, I think DeFi Definitely could fall in that camp. But one thing I definitely think is true about you, Olaf, is you're not necessarily patient zero, but you're definitely really close to one of the earliest people that caught the bug, whatever the bug was. And so, you know, we can talk about like all these different use cases

• 10:58David Hoffman?

  that were, you know, exciting and made you optimistic about the future of crypto. But catching the bug is something a little bit more holistic. When you, when you kind of zoom out and not really focus on any one specific use case, what made you catch the bug so early?

• 11:11Speaker 00

  Yep. So 2011, I read, you know, my first introduction was this Gawker article that was about Silk Road. And it talked about Bitcoins in that article and how people were using Bitcoins to sort of transact. And I, you know, I had some background in, you know, just internet, deep internet stuff, call it. I was always interested in video games and weird forums and stuff like that. And so I, you know, identified like, okay, this seems like the critical thing that makes this possible. I was familiar with the Tor network and all of these sorts of systems that something like Silk Road was built on. And when I started reading more about how Bitcoin worked,

• 11:55Speaker 00

  my immediate reaction was this is sort of too good to be true. This concept of an internet sovereign monetary system that's sort of run by an algorithm and not controlled by any central person. It just sounded like too sci-fi to be real. But once I really dove into how it worked and started using the software and everything, I realized that it worked, like this actually was possible. We have this decentralized monetary system. Everybody can investigate, you know, how it all works. And while Bitcoin is, is complicated, I've always held that it's a lot less complicated than fiat money and the sort of shadowy mechanisms by which every fiat money in the world operates,

• 12:41Speaker 00

  you know, through unelected people that are in closed-door meetings, basically deciding the fate of the monetary system of a given nation state. So I was really drawn to this idea of

• 12:54Speaker 00

  You know, taking away control of the monetary system from, you know, what are basically global elites and putting it in the hands of, you know, regular people who can kind of opt into this internet-based monetary system. Again, you know, I think one of the beautiful things here is that it's an opt-in system. Nobody has to use it. Everyone can just sort of voluntarily go sign up for it if they want to. And the fact that anybody in the world can relatively easily audit how it works. Again, it's relatively easy. It's not the easiest thing in the world, but you can audit sort of how many Bitcoin will exist at any given date in the future. You can figure out, you know, exactly what you own and it can't really be taken from

• 13:39Speaker 00

  you in a sort of network level way. And so all of those things added up to me feeling like this was both sort of, one, the technological mega trend of my lifetime. You know, I felt like I was a little too young for, you know, the early internet. I was a little too young for mobile, I guess, in the shift to mobile. And I felt like this is, this is going to be this sort of big technological mega trend. At the same time, you know, I've always loved the fact that crypto, you know, in its core, it's deeply anti-authoritarian. I really do view it as a technology which has the capacity to sort of free people from

• 14:23Speaker 00

  systems that they didn't even know they were trapped in. And you really just transform, you know, the entire substrate of global finance and global monetary systems. So all of those ideas were just very big to me and deeply appealing to me. I mean, they still are. The idea that we could sort of take away power from central locus of control and return it to decentralized voluntary systems just feels like, you know, it is very hard for me to imagine who is against that. And fundamentally, the only people that are really going to lose in that situation are the ones who can Control the current system, right?

• 15:06Speaker 00

  Um, and it, you know, I, I think broadly, the other ninety nine point nine nine percent of people benefit um from a, a removal of central locus of, of power and a return to distributed systems that are kind of opt-in, open source, and anybody can interact with freely. So um, that's really what, you know, it's the, it's what got me interested in this and it's how I sort of caught the bug, so to speak. Um, and so you combine sort of all that ideological, um, you know, stuff that I, I think is, is really cool and I really think it's, it's genuinely like a capital G good thing for the world. Um, you combine that with the fact that this is sort of this

• 15:51Speaker 00

  new high-growth um tech area where you can actually be a software engineer and deploy, you know, what are basically banks or, or trading systems or lending systems, you know, directly to the internet, have a global user base from day one without any sort of registration or licensure or permission from any particular nation state or government body or anything. It's just an absolutely fascinating universe to me. And so when I first got it involved in this, um, I felt like, you know, I can be part of this mega trend and I can change the world for the better um, by doing this. So I just found it, you know, extremely appealing. The entire Bitcoin universe also

• 16:33Speaker 00

  filled with, you know, very odd, interesting people. Um, and that was fun as well, you know, once I started going, you know, on the forums a lot, um, going to Bitcoin meetups and stuff. You know, I just felt like, okay, this is really like a ragtag group of very interesting people, um, extremely intelligent and often very unusual beliefs. Um, but really fundamentally, I, I think driven for the right reasons, you know, especially back in twenty eleven, twenty twelve, like there was no opportunism here. Um, there was no opportunity, really. It was just

• 17:14Speaker 00

  Sort of an open source software project and everybody who was invested in it was, you know, just interested in what was maybe possible for the future. And I love that inherent futurism embedded in crypto, which is sort of, we're all building for this future that doesn't yet exist. But we all are confident, you know, will exist someday.

• 17:35Ryan Sean Adams?

  Well, I think many Bankless listeners and certainly David and myself are deeply resonate with everything you just said, like the capital, the capital G good in crypto and the reasons we're here. It's funny that, that you call the fiat system shadowy because some in the fiat system use that same word to describe us, you know, shadowy super coders. But really, I mean, I think folks in crypto don't take enough opportunity to flip that around and, and say things like what you just said, which is no, the existing banking and fiat system, that's the shadowy thing. Everything we do is fully transparent, auditable in code and embedded in a consensus engine that, that don't privilege the, the elite few who can control the dials.

• 18:18Ryan Sean Adams?

  So that's a great description. I guess maybe in, in sort of a, a next stage of your crypto journey, I'm curious to hear because a lot of people who got into Bitcoin for some of the reasons that you mentioned, actually stayed in Bitcoin. And so there was this development of what some might call Bitcoin maximalism, where it's sort of Bitcoin is the only asset in crypto, there shall be no other assets. And, you know, that is the thing that we're here for. But you didn't fall prey to Bitcoin maximalism and just keep contained to the Bitcoin space. You made the jump into Ethereum, into, into other chains later, ultimately into DeFi. Can you talk about that? What was it that attracted you

• 19:00Ryan Sean Adams?

  about Ethereum and about smart contract platforms? And how did you get out of the, the rut that some found themselves in of Bitcoin, Bitcoin maximalism?

• 19:11Speaker 00

  Yeah, so I think philosophically, I think every one of these blockchain systems has kind of two components. One is the ledger of who owns what. And the other is kind of underlying tech platform that people can build on and transact on and interact with. And I think part of it is a divergence of which of those two things is is sort of more important. I do think that an unusual thing you see across all of crypto is not, you know, your underlying beliefs or thesis about the world or the future informing your investments, but rather the investments that you have chosen informing

• 19:53Speaker 00

  your sort of worldview. It's sort of this opposite thing, which I think is very unusual because it's so easy to move around, you know, assets that people hold or systems that people interact with. And so I do think there's, you know, a belief that every time you launch a new blockchain or any sort of new system, you sort of restart the ledger of who owns what. In that, you know, Ethereum wasn't airdropped to the existing Bitcoin holders. It was sort of a new group of holders launching a new parallel system. And so I do think that that's a lot of the mentality is that the ledger of who owns what is sort

• 20:33Speaker 00

  of the most important thing and that all the sort of tech that underlies it is secondary. I do think, you know, there is some sort of interesting argument to be made that if every altcoin had been airdropped, you know, to Bitcoin through like an equivalent equivalency system, we might have a much more cohesive and happy, happy world or something among all the various coin holders, because there's not this feeling that that sort of Etch A Sketch was shaken every time a new technology was launched. But I, you know, broadly have just always been interested in what's possible here. And the reality is, when I met Vitalik

• 21:17Speaker 00

  in 2013, you know, read the Ethereum white paper the day it came out, and, you know, was following the Ethereum development progress until the system launched in 2015 and then was was using it. I just, you know, it felt like this is going to enable new things that weren't possible on Bitcoin. And it's it's just that simple. It's not Litecoin, right, where it's sort of like a couple of simple variable changes and it's like tweaked. It's really a fundamentally new platform. You know, and I think similarly, that same mentality has has infected a lot of people that were early investors in Ethereum, actually. That now there's these alternative sets of trade offs and and novel systems that are launching.

• 22:02Speaker 00

  And people that are sort of wholly about the Ethereum ledger and of who owns what and and don't like the idea that we're going to do a new Etch A Sketch on on who owns what every time we launch a new technology. I I think that broadly, though, I just care about enabling new behaviors. And I think that efficiency improvements, so cost reductions and throughput improvements lead to new types of applications that weren't possible before. A lot of micropayment or like very fast payment type applications, you know, really aren't possible on Bitcoin or Ethereum. And, you know, just always looking at how can we make smart trade offs to expand the universe of what is possible?

• 22:47Speaker 00

  Because every time you build something new in crypto, it it it comes with trade offs of some kind, right? Just the fact that there is programmable software on Ethereum adds complexity to reasoning about the core Ethereum mechanism. So concepts like minor extractable value really alter your reasoning about like core Ethereum security. And those types of problems don't really exist on on Bitcoin. So every every time you expand the system, you know, it comes with trade offs. And I've always wanted to explore that trade off space and see what's possible. A lot of the things that have been built since Ethereum make further trade offs about, you know, various hardware requirements, for example, to run a node.

• 23:33Speaker 00

  And, you know, those bigger hardware requirements might mean there's fewer at home, you know, hobbyist node operators. But at the same time, it might lead to interesting applications that aren't possible on Ethereum. So I just broadly want to see all the experiments run. And I'm not religious about, you know, the ledgers of who owns what. You know, being sort of the most important thing here.

• 23:58David Hoffman?

  See all the experiments get run and maybe let the market decide at the end of the day. I'm curious about something. You've known a lot of people in this space for a long time. You said you met Vitalik in 2013 and you've been able to observe him since that time. What do you think about Vitalik? What's your take on the guy?

• 24:16Speaker 00

  I mean, I think he's a genius. Everybody agrees on that. You know, I just, like, when I first met him, he showed me a Python tool that he'd written to make Bitcoin multi-sig. And this is back in 2013. I'd actually never seen multi-sig before. Before that, we didn't have multi-sig at a blockchain level. You had to do something called Shamir's splitting in order to do multi-sig on like a private key level. So you could do multi-sig, but it was like an offline multi-sig. You couldn't get a multi-sig that was enforced by Bitcoin economic security. And he was the one who first showed me like this command line tool to do that.

• 24:59Speaker 00

  So, you know, I think I recognized right away that he was ahead of the curve on maybe what's possible here. And he just struck me as incredibly intelligent. You know, I think, so yeah, I mean, I also think that he's like a missionary. So, you know, I don't think any part of what Vitalik is working on is is sort of a mercenary approach to the world. I think he really just cares and wants to invent new things and wants to improve the world. So I have a lot of respect for Vitalik and really anybody who approaches the crypto space or really anything with that mentality.

• 25:41David Hoffman?

  One of the interesting things about your trajectory, Olaf, is that you had conviction. It appears that you had conviction on Bitcoin really, really early. Where most people, they see Bitcoin come across their feed and then they read the white paper and then they don't buy it. And then they buy the top later. But one of the interesting components about you is that you had conviction very, very early. And I think you also had conviction on Ethereum very, very early in its lifespan as well. What would you say is, what would you say about Ethereum is what lent you to have so much conviction about it early in its history? When so many people were talking about how this would never work, it's way too ambitious, can't be done, stuff like that.

• 26:21David Hoffman?

  What aspects about the crypto industry at the time told you like, yeah, this Ethereum thing is kind of cool?

• 26:28Speaker 00

  Yeah, I mean, I think the main thing is people listen to what other people chatter about. Like way more than they just download the software and interact with it and, you know, see how it works. Um, maybe read a, a paper that describes how it works. Um, so I just have always felt, you know, crypto is so young, yet 99.9% of the consumption by people in crypto is sort of secondary sources. Um, for whatever reason, I just think most people spend a lot

• 27:07Speaker 00

  more time on Twitter than they do just downloading software, um, you know, interacting with apps and sort of reading papers about how this stuff works. Um, so to me, it's actually really easy. It's just quit paying attention to all of this noise and nonsense and chatter, um, a lot of which comes with vested interests. Um, and just go actually use the damn thing and see if it makes sense to you. Um, I, I just think that, you know, it, it takes a certain amount of independent thinking to open the door and, and get into crypto on some level. Um, but then I'm always amazed

• 27:51Speaker 00

  at how little independent thinking there is after that. Um, with just sort of like, go look at it, see, see if it makes sense to you, um, see if it's would be useful to you, see if it's fascinating to you. Um, so I, I just am a big believer, you know, in crypto and everything in independent thinking, you know, you just have to, um, you know, go to primary sources and use your mind to decide what you think. Um, and in, in crypto, um, there's just a huge amount of sort of talking heads, um, that determine what, you know, a lot of people think. Um, and so I, I just think

• 28:30Speaker 00

  it's this very weird, one, one way I've described it is like 1999. It's like 1% of people are like Actually doing stuff, nine percent of people are watching them really closely and understand broadly what they're doing. And then those nine turn around and talk to the other 90% of people. So the vast majority of people are listening to people who aren't even the ones doing the thing. They're like the ones. So it's kind of like this vast majority of the information is coming from like second or third source. And so there's just all this chatter and very little attention being paid to that. You know, 1% of people that are actually sort of just building stuff.

• 29:11David Hoffman?

  So there's alpha there. It sounds like that you've you've you've exposed through the course of your work in crypto and in like going to the primary sources, doing the the deep dive, rolling up your sleeves and downloading software, actually using crypto networks and being close to that 1%.

• 29:26Speaker 00

  But I, you know, it feels crazy to call that alpha. It's just super basic to me, like super, you know, like to say like, oh, you want to, you know, be better at investing, like just go use the thing that you're thinking about investing in is like, you know, I feel stupid saying that's alpha, right? It's it's super basic, but if there's, you know, one thing I've I've done it, you know, real, you know, for a long time, it's basically that. You know, stop listening to all of the chatterbox and and the troll box. And just just go like, check it out, like for real and decide if you like it.

• 30:10Speaker 00

  I don't even think it takes more time. It just maybe takes a little bit more focused effort. You know, you have to troubleshoot some stuff, especially if it's early and kind of buggy or something like that. But yeah, if that's if that's alpha, then I, yeah, I guess that's what I would say.

• 30:28David Hoffman?

  You talked about how you appreciated the non mercenary aspect of Vitalik, kind of alluding to, you know, he's here for the right reasons. He's not here to to make a profit and leave. He's here to build something really cool and see something better for the world. What would you say you're here for, Olaf? If you like that aspect about Vitalik, what about you? In this crypto space, do you particularly find resonant with your goals and your aspirations for the future of this industry?

• 30:55Speaker 00

  Yeah, I like, I like being, you know, a believer in the first really radical experiments. So whenever I meet somebody who has a really radical new worldview or new set of beliefs about appropriate trade offs, or like a new weird business model that they want to try, just that kind of tip of the spear stuff, I really love thinking through reasoning about, and I love partnering with people to sort of have, you know, enable them to try to go fulfill, fulfill their vision and hire a team that's unified around the vision and go build it.

• 31:37Speaker 00

  And I would broadly say that the best investments I've ever made in crypto have been, you know, if there's one theme, it's the ones that sounded too crazy or too good to be true. You know, or just the visions that seemed like too big in a way. So I don't think there's, you know, if there's one mistake all of us have made in crypto, it was basically not thinking big enough. You know, I think no one really could have seen like how big this would get, how fast it did that. And I think that, you know, partnering with people who have that early vision and being

• 32:19Speaker 00

  able to enable their vision, I gain, that's makes me super happy. Just the fact that I can be sort of an early believer in radical systems, radical beliefs, and try to, try to see it just grow and blossom in the world is really exciting for me.

• 32:40David Hoffman?

  Why do you think we all fall into those traps? Because I definitely see that everywhere. It's humans just can't seem to comprehend how big this thing is. Why do you think that's such a universal truth with most people in crypto?

• 32:54Speaker 00

  I don't know. I like, you know, there's a deeper conversation about like schooling and brainwashing, where basically it's, you know, I think independent thinking is like this incredibly scarce resource across the world. I think most people just look to their left and look to their right and basically do whatever their peer group does and believes whatever their peer group believes. You know, this, this goes way beyond crypto and I think you just see it play out in crypto, which is, you know, it's, it's not like I'm going to go read it for myself and figure out what I think or what I believe. It's just sort of like, what are my friends doing?

• 33:36Speaker 00

  What did my parents do? And, you know, I'm just going to broadly like fit nicely into that worldview. So I, I think there's a lot of, you know, group think and like voluntary, like sign me up for the brainwashing that happens, you know, outside of crypto, but I think you see it play out in crypto just the same, where people don't have appropriate, you know, it's, it's this weird mix of like skepticism and incredible optimism. It's sort of, I'm going to be extremely skeptical about everything I hear, but at the same time, I'm extremely optimistic about what is possible.

• 34:12Ryan Sean Adams?

  Yeah, absolutely. I think we forget how, how much we're social creatures, yeah, as, as humans and how much we, we value and care about consensus, particularly group consensus. And it's that contrarian thought that can really give us an edge in this industry and just in life in general. But you mentioned some of the wins that you've had in the past and being kind of tip of the spear, being early. I imagine you count like early to Bitcoin as, as part of your, your wins. Also, early to Ether as part of your wins. I think you were also pretty early to DeFi as well. I remember Polychain getting in early on like Maker Investment with a, like a Maker Governance Proposal. Can you talk about DeFi in general,

• 34:56Ryan Sean Adams?

  but, but also maybe more like zooming out a little bit and talking about some of the, the wins in crypto that you're most, most proud of and seeing things before other people saw them?

• 35:09Speaker 00

  Yeah, I think I was always excited about what I called back then programmatic finance. This was like two years before the word DeFi was coined. And so, you know, I was, or as Polychain was kind of the first, you know, real investor in MakerDAO. We were the seed investor in Compound, we were the seed investor in DYDX. You know, in a whole host since then, like more than I can even name. So I think I always just felt we have this great elegant decentralized system,

• 35:51Speaker 00

  but then at the same time, this incredible reliance on gargantuan centralized platforms to execute trades and other sorts of things, other sorts of financial tools in crypto, things like loans. And so I always felt like it was going to be possible to embed all those financial toolings inside of the blockchain also. So we have this money system in the blockchain. Why can't we have a finance system in the blockchain too? And it's a pretty logical conclusion to me if you understand a programmability and sort of the ability not just to encode transactional logic, but also financial logic and have it be secured in that same very nice economic security you get with, you know, Ethereum block rewards and things like that.

• 36:33Speaker 00

  So, you know, I don't mean to say that DeFi seemed kind of obvious to me, but in a way, it always felt like this is a very promising area. You know, and I, once it started really working, the other thing that I had been really excited about was DAOs. And one thing that I didn't totally see, and now it feels so obvious, is the fact that DAOs and DeFi are like two sides of the same coin. That basically the best way to house a DeFi application is inside a DAO-like ownership structure and governance structure. So to me, it's, it's really cool where we have these two separate use cases in crypto and it turned out that.

• 37:19Speaker 00

  The perfect use case for DAOs was basically to house DeFi applications. You know, among other things, but I think that's been like the breakout way to to use the DAO governance and ownership structure.

• 37:32Speaker 00

  So I I think there's more radical experiments around the the corner as well. I I'm very excited about

• 37:43Speaker 00

  this use of a kind of block reward style mechanism to reward other types of behavior. So I was always really excited about liquidity mining in DeFi, which is basically, you know, this bootstrapping mechanism to get liquidity. But I think you can more broadly, you know, I call it network mining, where you can sort of apply this block reward distribution scheme to all sorts of human behavior to build network effects. Because solving this chicken egg problem to bootstrap network effects rapidly is one of the things that creates, you know, kind of a natural monopoly effect around modern web platforms,

• 38:23Speaker 00

  where network effects are very powerful in a system like Twitter, say, and it's very hard to sort of break those and create a competitor. Using the sort of network mining block reward system, I think it's possible to do that, both in a a gaming context, in the social media context. And once you sort of get the financial framework right, I think you can apply that financialization to lots of different web platforms. Mark, you know, any sort of e-commerce marketplace, whatever it might be, to sort of bootstrap those network effects. And so, you know, this financial tooling, I think, continue, we continue to see like the design space that this can be applied to.

• 39:05Speaker 00

  All sorts of crowdfunding that originally was just sort of these simplistic ICOs now is doing so much more. So we see these experiments like Constitution DAO that I think are are really cool, where you can raise huge amounts of money in a short period of time with a bunch of aligned people. So just this capital coordination around things that, you know, you would never be able to sort of do that through any other mechanism. You can't, you couldn't like IPO a system to buy the Constitution in a week. It's just, it's just not possible. So I think that we continue to see, you know, DeFi expand and that design space, I think, is still very, very young, frankly.

• 39:47Speaker 00

  And we need to get a lot of things right around DAOs and governance and capital allocation inside DAOs. I think we can improve a lot.

• 39:56Speaker 00

  You know, and but broadly, like, the other things that I think I'm very excited about is is basically like, you know, we were seed investors in Avalanche, seed investors in Terra, you know, and these kind of alternative systems to Ethereum that have have trade offs that lead to sort of better performance properties. And then I think there's even more exotic experiments, you know, the some of our seed investments here are like Filecoin, Polkadot, Definity, where it's not just about the financial logic being embedded inside the blockchain, but also the web application interface. So we're we're in this unusual

• 40:41Speaker 00

  place in DeFi today where you go to a centralized website in order to interact with the underlying financial system that's embedded in the blockchain. And if we could shift that to a system where the interface also had that same sort of blockchain based logic. So it means that you could, the the interface itself is open source, forkable, censorship resistant, etc. I think that's potentially another very big step coming up for crypto, which is so the full stack sort of gets decentralized. And then you have full like web and mobile style applications that are embedded inside blockchains.

• 41:19Ryan Sean Adams?

  So Olaf, I think we want to kind of switch switch gears to to 2022 and kind of the here and now. And so the typical individual who's trying to navigate crypto in 2022 is is thinking about different things than the individual trying to navigate in crypto in 2013, right? Or even like 2017 and 2018. Every every year, every era, every generation has a new set of questions that that need to be answered in order to understand how this how this industry, how this crypto thing is going to shape up. And so we have like five big questions that we want to

• 41:57Ryan Sean Adams?

  Pick your brain on. And I don't know if we'll have time to hit them all, but let me just read them out really quick because I think we want to touch on as many as we can and go in depth on the ones that make sense. Number one, I think in people's mind, the question of who's going to win the smart contract wars. Maybe that's a simplistic framing, but this idea of who's going to be the ultimate winner of the smart contract wars is a big question in people's mind. Another question is who's going to win the crypto money wars? Is that different? Like is Bitcoin the asset with the highest monetary premium? A third is we're seeing the advent of the multi-chain universe and kind of L2s as well. Will we have the same DeFi winners in this universe?

• 42:40Ryan Sean Adams?

  Or will we have a new set of winners, a new set of applications? So that's the third question. Number four.

• 42:45Speaker 00

  So let's, let's, let's, let's stop there actually, because I think those three answers are super related and I'm happy to just kind of dive into them.

• 42:53Ryan Sean Adams?

  Well, let's do that. And then I want to set up two more and then we'll come back to this. Can DAOs really scale? And also, how about crypto and the nation state? How do these things interact? But let's take the first, the first three. Okay. So this is smart contract war winners, crypto money wars, and then DeFi winners. This is all in the same category of like, who's going to win as the biggest, baddest chain? What are your thoughts on this?

• 43:18Speaker 00

  Okay, so.

• 43:21Speaker 00

  This is a complicated question that has to do with. It's actually related a little bit to what I said earlier about the state of who owns what relative to the underlying technological platform. So we've had this system that's pretty simple in the past where there's kind of ETH the asset and ETH the protocol. There's Bitcoin, the asset Bitcoin, the protocol, and it's always been pretty obvious and, and simple that. There's value accrual to ETH, you know, if people use Ethereum. But that's mostly speculative, right? In a post EIP 1559 world, transactional volumes, smart contract volume on Ethereum does drive value to the ETH asset.

• 44:07Speaker 00

  But the vast majority of the value here is speculative in these assets.

• 44:14Speaker 00

  So what we're getting into is this very weird world where utility and assets are sort of divorced. And one of the big reasons is bridges. So the ability to move, you know, protocol assets across chains with different utilities means that you can use Bitcoin on Ethereum, you can use Bitcoin on Solana, you can use ETH on Solana. And so then you start to sort of get this divorced system where you no longer have the tech protocol and the protocol assets so neatly tied in. And as these bridge protocols proliferate,

• 44:55Speaker 00

  I think it's going to become easier and easier and easier to move protocol assets across these different utility systems. So then when you're thinking about this as an investor, how do we think about value accrual? Does use of an underlying system lead to value accrual of the native asset? Well, Ethereum for literally years has had way more use than Bitcoin, way more transactional volume. At this point, you know, it's hard to measure, but with addresses, there's way more active addresses. And yet Bitcoin remains more valuable than Ethereum. So just very simply saying, wherever there's

• 45:34Speaker 00

  the most use, you know, that equals the most value, I think is oversimplified. And in the system where you have so many underlying chains with very easy bridging of assets across them, you know, that question is actually a very deep and big one for crypto investors, which is, you know, how much is use of a system and utility of a system tied up with value accrual to the underlying asset? This is why I've always been very focused on, you know, how can we have the utility in these systems drive value directly to the underlying asset? And so these systems like Polkadot parachains that lock up dots based

• 46:16Speaker 00

  on the number of parachains launched, you have a similar burning mechanism in the Definity system as to the Ethereum system. You get to a bunch of complicated questions about value accrual. The other broad belief I have is that, you know, we talk a lot about layer twos in crypto. But really, I think all those layer two systems that are built, say, on top of Ethereum, broadly, I think they'll end up integrating with other layer one blockchains. I think most of them will end up launching their own native token. And you'll quickly realize, wait a second, the difference between a layer two on Ethereum

• 46:56Speaker 00

  and, and say Avalanche is a lot less, it's, it's a lot smaller difference than I thought. Right. It's really just bridge UX. It's sort of the bridge experience is, is very tightly integrated in a quote layer two. But broadly, I just view it as chains and bridges. I don't really view it as layer one, layer two. At the end of the day, everything becomes its own sovereign system. I mean, you're even going to start seeing this with the really, really large DApps on Ethereum. I think more and more they're going to start going to their own sovereign chains. And so then you're just left with the system that's a massive number of underlying chains, massive number of bridges.

• 47:40Speaker 00

  Then it gets more complicated because you're going to have bridge protocols, right? Rather than having hundreds of these bespoke one-off bridges that are based on, you know, broadly multi-sig, right? I, I think most bridges at some level are based on multi-sig. So it's, it's still a security framework that is sort of a server security. So like, if you can hack the server, you can hack the bridge. By contrast, I think a lot of these bridging protocols that are trying to generalize the ability to bridge will have economic security. And so the, the security there isn't hack a server. It's more like the equivalent of rolling back the Bitcoin blockchain, which is a much stronger security posture.

• 48:21Speaker 00

  So I think a lot of these bridge protocols, again, they start out as kind of a layer two for everything, right? Or a bridge for everything. But then over time, you start to say, well, wait a second. If everybody's using this bridge protocol to move assets across. All these different chains, why don't I just deploy my app straight to the bridge protocol, right? If it's kind of the meta system that's moving asset and application logic across the underlying systems. So at the end of the day, I think that what I'm trying to say is there's a lot of different sort of go to market paths, so to speak, with launching a new sovereign chain, launching a layer two, launching a bridge protocol. At the end of the day, though, it just sort of feels like a whole bunch of different chains with assets fluidly moving across them.

• 49:06Speaker 00

  And in that world, like, where's the value accrual? And so that, anyway, that's, that is, I think, the big macro question for crypto investors over the next maybe five years.

• 49:17Ryan Sean Adams?

  I want to get back to that question. I want to actually hear your answer on, in that world, where's the value accrual? Like, at least, maybe it's uncertain at this point, but like, some different ways it could play out potentially in this scenario. But I want to ask the question of, you're talking about this world of it's all just bridges and chains, basically. One follow-up question I have, or one maybe pushback on that, is like, you were talking about the ability to just move an asset from one chain to another. But the reality is, in moving that asset, the security profile of the asset can drastically change, right? So, I mean, we saw that just this week with the hack of the Ronin sidechain, right?

• 50:02Ryan Sean Adams?

  Where, I don't know, 173,000 ETH was just like yoinked, because it was on another chain, I guess bridged across to the Ronin sidechain, but the security profile of the ETH on this sidechain was much less than the security profile of Ether on Ethereum, of course. We've also seen this with Solana and Wormhole in the past. And so there is this, I guess, counter idea that, actually, it's more than just bridges and chains, because when you port an asset from one chain to another, you change the security profile of the chain. And so there are these like zones of sovereignty. And the idea behind layer twos and rollups is basically, well,

• 50:44Ryan Sean Adams?

  You can kind of preserve a lot of the economic security of the asset when you move it from Ethereum main chain to, say, a rollup that's very closely tied to Ethereum. You preserve most of, if not all of, the security profile of that given asset. Do you buy into that at all? That, hey, it's more than just chains and bridges because we're actually needing to understand and address the security profile of these various assets when they cross those bridges to these different chains?

• 51:17Speaker 00

  Yeah, I mean, I totally agree that when the native asset moves around, it basically has a different value. But I think that's essentially up to market makers to decide and price in. Like, you know, if I move this Bitcoin to Ethereum, you know, is it worth 98% of a Bitcoin on the main chain? And so I do think it's basically going to be up to market makers to decide how to price in the change in security posture. But yeah, I agree with that absolutely. And this is true, by the way, just of the assets themselves on the native chain.

• 51:59Speaker 00

  You know, Bitcoin has a different sort of set of security properties than Ethereum, which has a different set of security properties than every other system. So I do think we're going to see that all priced in. But it really mostly is a pricing thing. I think at the end of the day, for the average user, they're not going to be in these siloed worlds where they're like, well, I need the Solana software to interact with the Solana apps, and I need the Ethereum software to interact with the Ethereum apps, and I need the Ethereum asset to interact with the Ethereum apps. I just think for the average user, we're going to move to a more abstracted system

• 52:40Speaker 00

  where they're less siloed, they're less aware of the underlying infrastructure. Like, I just want this NFT, I don't care which chain it lives on. And then the underlying application logic sort of handles the complexity under the And it all will come with different prices. So I totally agree that it leads to different prices that the market makers will decide.

• 53:04Speaker 00

  But you know, I think it mostly is a pricing change.

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• 53:52David Hoffman?

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• 54:33David Hoffman?

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• 54:48David Hoffman?

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• 55:32David Hoffman?

  In pursuit of answering these first two big questions, which are which chain's going to win the smart contract wars? And which one's going to win the crypto money war? A lot of people use this mental model to understand the crypto industry as one... Some blockchains are about money, and some blockchains are about technology. Like Bitcoin is certainly a blockchain about money, right? And maybe a technology blockchain might be something like Terra Luna, where they're not trying to make a new sovereign store of value because they're pegged to the dollar. They're really trying to make something like a fintech platform. How do you think about this spectrum? And do you think that the winners of these chains are going to be optimized for money versus technology?

• 56:15David Hoffman?

  Or do you think it's really going to be the change that can figure out how to do both?

• 56:20Speaker 00

  You know, I mean, I think they're all the same. Like, every asset is just an asset. It's all just like, kind of, group think, marketing branding to try to decide which one's money and which one's a technology. It's, you know, that said, economic properties matter a lot. So, you know, there have been interesting technologies that have fully flopped because they screwed up the economic system. So, I think a good example of this was the Grin or MimbleWimble launch of 2018. Cool technology, really poor economic design, like, nobody could use it because of that. So, it's not to say that...

• 57:03Speaker 00

  The economic design doesn't matter. I think it matters a lot. You've also seen a lot of systems in crypto that have actually really cool and innovative economic design with very little else. You know, they're not pretending to enable new applications or be really a new technology. It's just like a really spiffy economic design. And those often, you know, end up working pretty well, even though there's no kind of new tech, so to speak. So broadly, I mean, I, I think it's all just, it's all the same. Everything's trying to be valuable, and it's all money, sort of. I just think that it's, the reality is, it's just so new

• 57:46Speaker 00

  and such a new asset class. Our attempts to label all of these things as existing things we understand, like money, is, is, again, it's backwards looking. Like, in the, in the future, I don't think people, like, again, this is a longer term future. I think people won't view crypto so much through the lens of like comparing it to fiat. It's just like a completely new category. And it's, it's really that all we've known growing up and everything is fiat. So we're sort of trapped in that lens and try to say, this is kind of like fiat, right? But the reality is, it's just a completely new thing. So I think

• 58:27Speaker 00

  the economic design matters a lot when it comes to value accrual. And in crypto, value accrual is very tied into functionality, because the systems have to be valuable in order for the operations in the network to be secure, right? The entire system is based on economic security. So the project of making the native asset valuable is a critical component of making the system usable and scalable.

• 58:53Ryan Sean Adams?

  How do you make the native asset valuable? And maybe while you're answering that question, let's pick up on that thread of, in this world that you were just describing, where does the value accrual happen? Where does the value pool? And what happens if you extrapolate these things forward to like Bitcoin right now is the reigning monetary asset? So let's say in crypto, if we're going to categorize things, Ether and Ethereum, the reigning smart contract platform right now with with L2s and alternative ones also dueling it out and battling out. Play this forward a little bit. How do you think value accrual happens across all of these ecosystem players and all of these chains?

• 59:34Speaker 00

  Yeah, I mean, I'm trying to figure that out myself because I do think we're getting to a very, we are approaching a very confusing world where there's so many different platforms with utility and so many different assets. You know, I actually think a Bitcoin maximalist, so to speak, argument I've never heard before, but I think is relatively coherent is like there's going to be so many different systems with utility that there's really only going to be one asset with speculative value. And that's most likely to be Bitcoin. So it's sort of like the, it's this weird bet where the more bullish you are on a bunch of different smart contract systems and a bunch of different DeFi systems.

• 1:00:16Speaker 00

  Like the value accrual will all be Bitcoin, right? Bitcoin to asset, right? So it's this, that's like, for example, a very weird argument, I think, but I think it doesn't strike me as impossible that you could have, you know, a system that has relatively small amount of on-chain activity still accruing way more value than an alternative system with way more on-chain activity. So I, I think, I'm trying to figure it out, too. I think it's, it's complicated, but the main thing is to realize, you know, I think we're going way beyond this basic system where, you know, you just sort of see use, so you speculate on the asset.

• 1:00:59Speaker 00

  Which is, I think, the world we've lived in for 10 years. It's more like, okay, there needs to be a value accrual system where the more transactions and users there are in a system, the more it directly derives value to that native asset outside of just speculation. Which is why these systems, like, you know, burning coins per transaction, I think is, is so critical to build like a sustainable system in this new world.

• 1:01:27Ryan Sean Adams?

  So Olaf, I want to get your reaction to this. And the Bankless listeners will know that Dave and I are very Ethereum bullish and ETH bulls. And part of the reason we're ETH bulls is because we think a lot of the economics that you're talking about, if you get past the speculative value, kind of come to play in Ether as an asset. And part of the reason we think so is like, we pay very close attention to like blockchain revenue, transaction fee revenue. And Ethereum is far and away the leader in terms of the amount of transaction fee revenue it generates. Right now, it's like 20 million or so per day. I mean, previously, it's like 75 million per day.

• 1:02:09Ryan Sean Adams?

  But you look, you scan the list of competitors, and you know, the Solanas and avalanches of the world are just doing a very small fraction of that. At the same time, they're issuing a lot in supply as far as block space rewards, right, to their stakers and to their validators, that sort of thing. And so if you look at sort of the supply, the cost of issuance, and then you look at the revenue, you find that none of these chains are profitable, Ethereum included. But then you get to a world of post-the-merge with Ethereum, where issuance falls from like 4.5% to like, in the negative territory potentially after burn. And you start to get into some really interesting economics and value accrual for Ether, the

• 1:02:53Ryan Sean Adams?

  asset, right? And so that combined with like additional demand of Layer 2 feels like something like Ether stands apart from the pack, right? So you've got Bitcoin over here as a meme value narrative play, monetary asset, that's really cool. And then you've got Ethereum playing the game of like block space demand and utility, and it's becoming like a productive asset, and its economics look really good. But it's also under attack by these alternative Layer Ones, who they don't have the economics down yet, but they are starting to attract some usage and total value locked. I guess my question is, what do you think about Ethereum in this world in the future?

• 1:03:36Ryan Sean Adams?

  Like post-merge, it's got this list of competitors, it's got Bitcoin on the other side, it's kind of getting squeezed from both sides. How do you think Ethereum fares?

• 1:03:47Speaker 00

  Okay, so there's a few things there. So one is that, you know, if you go back to how old a lot of these alternative systems are, a lot of them are less than two years old, right? If you go back to Ethereum when it was very young, it probably was not accruing the sort of revenue, quote, revenue you're talking about. Really, though, when you say revenue, you just mean paying miners, right? Like, so paying miners is not driving demand. It's not actually accruing value to the underlying asset. Burning ETH is accruing value to the underlying asset. The other thing is that frankly, like, the reason there's so much revenue is because people are having to pay a lot

• 1:04:31Speaker 00

  for transactions because, you know, the throughput is so low relative to these alternative systems. So I think, like, using that metric as something, I think it's a mixed bag. It's showing there's substantial demand for block space in Ethereum. But at the same time, like, if we could, you know, 10x block space in Ethereum safely, that number would drop precipitously even if, but it might mean there's actually more users, more applications. So it's kind of a weird metric, I think, to optimize around because it just shows that the system is at its scaling capacity in a way and is, you know, relatively speaking, very expensive to use.

• 1:05:16Speaker 00

  It does show that there's like a lot of, you know, competition for block space. But these other systems are not having a lot of revenue for miners through transaction fees because, one, they're more in the young bootstrapping phase, which Ethereum and Bitcoin went through as well. And, you know, they have more throughput so that there's really not the same kind of fees, costs, you know, paid to miners. The other thing is that revenue that goes to miners, you know, basically goes straight to the order book as a sell, effectively. So it's, you know, revenue to miners, I don't think props up the value of Ether. Burned Ether props up the value of Ether in my mind.

• 1:06:00Speaker 00

  So what I do care about a lot is Ether burned through EIP1559. I don't think that... You know, revenue to miners is a good case for purchasing.

• 1:06:12Ryan Sean Adams?

  I will say one thing. One thing about like post-merge, of course, staked Ether. It becomes not revenue to miners, but revenue to validators who hold Ether and are validating that Ether and can be value accrual from that perspective. But I agree with you, revenue to miners is kind of a lost and sold. But I think, David, you wanted to say something.

• 1:06:34David Hoffman?

  Yeah, leaning into the whole, like Ethereum makes a lot of revenue because it has constrained block space, right? And one of the common denominators of the blockchains that have arisen in the latter half of 2021 was that they all have super high throughput generally from reducing the total number of nodes count, right? Like reduce the number of nodes that need to participate in the network. You can push more transactions through the network. So, Olaf, I'm wondering your position on just how important it is to preserve decentralization in some of these newer chains. Like, we have this hyper-decentralized Bitcoin. We have this decently decentralized current version of Ethereum and hopefully this hyper-decentralized future version of Ethereum.

• 1:07:17David Hoffman?

  And then we have some of these newer alternative layer ones, which really have achieved scalability and also sacrificed revenue, to use Ryan's frame of mind from a second ago, to really just allow for more block space to be created so that their transactions are free. How do you think about that choice? Is that like a short-term choice? Or do you think that these things, these newer layer ones, can maintain a compromised version of decentralization over the long term?

• 1:07:45Speaker 00

  So I think decentralization, really, the goal is security properties, right? And I think it's very difficult to measure what those types of security properties might be. I think every one of these systems makes trade-offs of one kind or another to achieve security properties. So broadly, like, number of nodes, I think, matters. I don't think it's like the single metric that everyone should be optimizing for. You know, I think it's just complicated. Like, if you look at Bitcoin, you know, the number of mining pools that you have to add up to be over half the hash rate is not a ton.

• 1:08:29Speaker 00

  And you look in some of these alternative systems that... You know, don't use a proof of work or a proof of stake type civil resistance. You know, then you have maybe a lot more people that have to add up to 51%, but of course you don't have this, you know, provable like civil, civil resistance in using a proof of work or proof of stake type system. So I just think that the question of decentralization is a very complex one. And I think there's a big trade off space and I like that experiments are being run in that trade off space. I, I don't think it's as simple as like a, you know, just a spectrum from A to B.

• 1:09:13Speaker 00

  And we're sort of moving along from really decentralized down to, to less decentralized. I think that there's a whole bunch of trade offs. The other thing is I think it takes time. So Bitcoin, you know, when it was two years old, I would argue was not a very decentralized system at all. It, it over time became extremely decentralized, like Satoshi left and everything. I think Ethereum similarly has become progressively way more decentralized over time. And a lot of that is social. It's like, who has the right to kind of push a hard fork? And everyone will opt into it. I think over time it gets harder and harder and harder to hard fork these systems.

• 1:09:56Speaker 00

  And I think you can view that as, again, depending on your perspective, a feature or a bug. I, I think that it does take time though.

• 1:10:05Ryan Sean Adams?

  So Olaf, tie this section off for us. So what do you, what do you think is more likely that we live more and more in kind of a multiple layer one type world? Or do you think it's more likely that the Ethereum plus L2 vision plays out and begins to claw back its market share? So in a way, does Ethereum lose market share? Or does it gain market share in, in, in the future years?

• 1:10:33Speaker 00

  I mean, I, so as I said earlier, I kind of think these alternative layer ones and the layer two systems are over time not going to look quite so different. I think one of them is effectively really neatly integrated into Ethereum. But once you have these layer two systems launch their own native token and start to think about integrating into other layer one systems, it starts to once again be, well, wait a second, why shouldn't I just deploy my app, you know, straight to this layer two? Maybe that's where where all the usefulness is and there's a native token there and everything. So, um, you know, I don't think it's as simple as every layer two is, is good, you know, is,

• 1:11:15Speaker 00

  I just think that the difference between like an EVM compatible chain with a really good bridge and a layer two system is, is not as, as big, um, is, as a lot of people think, but at the same time, you know, broadly, I do think, um, you know, these layer two systems are absolutely necessary for Ethereum, like nobody can build low value apps on Ethereum today. Um, so yeah, I mean, it's so, it's complicated. I'm sorry. That's a bit of a non-

• 1:11:49Ryan Sean Adams?

  No, it's good. I guess, I guess the move here is like the strategy would be to bet on all the chains. If that's the world that plays out, you kind of have to have bets everywhere.

• 1:11:58Speaker 00

  Yep, that's, that's why we're Polly Chain. Um, from the-

• 1:12:02Ryan Sean Adams?

  I was waiting to make that joke.

• 1:12:03Speaker 00

  Yeah. Now, from the beginning, this has always been my, um, general thesis and I, I don't think it's changed. I think my conviction in that, I think back in 2016, when I launched Poly Chain, that was not very well supported by evidence. I think now that approach is way more supported by evidence. Um, and even just in the investment performance, I think it's been the best approach over the last five years.

• 1:12:30David Hoffman?

  Olaf, about a year ago, I think we were both at the CoinDesk Consensus Virtual Conference, and you were giving a talk, and I was giving the talk after you. And your talk was all about DAOs and how it's going to change what it means to work. And I was in the green room as you were giving your talk, because I was up next, listening to that, and I was like, wow, this is brilliant. And that was actually one of the inspirations for an article that I wrote later on the Bankless newsletter called DAOs and the Future of Work. And so the next question that we have is, can DAOs really scale? But before I get to that question, I'm wondering if you could just kind of summarize your thoughts on the future of labor in the world, when we live in a DAO-enabled world. How is this going to change what it means to work? How is this going to change culture?

• 1:13:14Speaker 00

  Yeah, so what I was talking about earlier with this concept of network mining, where you can use block reward style mechanisms to incentivize lots of different types of human behavior, not just like hashing or staking, but like playing a video game, or executing some task, or tweeting, or whatever it might be. I think there's this future world where a lot of work, like just as a percentage of all labor, it increases substantially the percent of people that basically work for a protocol, right? On some level. And it might not be like a base system like Ethereum, it might be an application with its own logic.

• 1:13:58Speaker 00

  But I think, you know, the number of people that are kind of working for a protocol, I think will only expand. And I think that could be a surprising percentage of global labor if you look long enough into the future, especially if you think, like, many, many different types of modern web applications could move to that model over the long term, right? Now, the thing, the question with DAOs and scaling them, I really think that DAOs just need to perfect. Governance and capital allocation. I think if they can perfect decision making around capital allocation, basically, everything else falls into place.

• 1:14:43Speaker 00

  I don't think that DAOs should be imagined as operating businesses that are sort of scaling an operating team and like everyone's voting on each individual person's salary. I think that's not, not the right envisioning. I view it more like DAO as fund, where startups like get started to work for the DAO and then the DAO funds them. And if they perform, they get more funding. And if they, you know, start to fail, the DAO can cut off funding, et cetera. So I think that DAO as kind of fund and DAO as capital allocator is the best way to imagine them scaling. And I think it's just the best way to imagine DAOs functioning over the long term.

• 1:15:28David Hoffman?

  Are there any DAOs that really are emblematic of this philosophy of scaled DAOs that are really just executing on, on kind of the vision that you see for the future of DAOs? Anything that comes to mind now?

• 1:15:41Speaker 00

  I actually wouldn't say that any DAOs today, like nothing has, is close to the platonic ideal. Everyone is sort of working through it, figuring it out. So, you know, I, I think there's a lot of DAOs making great progress, but I think that we're going to probably look back in a few years at the way we do it today as relatively simplistic.

• 1:16:07David Hoffman?

  One of the things you said is you think that labor will end up working for many, many more DAOs than what people think today. And I'm wondering if you can kind of just illustrate the patterns as to, to that belief. I, I think something to go on is something like successful DAOs will find ways to just reduce the barriers to what it means to actually work for them. Just like, like you said, talking about like tweeting or just doing these like, you know, very basic labors. And a quote that Ryan always gives out is, you gotta give the protocol what it wants, right? Like Uniswap wants liquidity, you know, Compound wants deposits. These future DAOs are going to want things.

• 1:16:45Speaker 00

  Cardano wants YouTube marketing?

• 1:16:46David Hoffman?

  Cardano wants YouTube marketing. Like, can you kind of illustrate how like one person might actually ultimately accidentally work for hundreds of DAOs? If that's kind of what I'm getting at from what you're talking about?

• 1:16:59Speaker 00

  Yeah, I mean, I think there will be layers. So let's say I start a startup to improve the value of a DAO. And I start doing something, let's say something as simple as marketing, just to give a basic example. I'm running this whole marketing thing and the DAO is like, you know what, you're doing a good job. And we're going to grant you a million dollars in seed funding to sort of expand. Then I might hire somebody that has no idea, or like, doesn't really care about or know about the fact that the funding is like from a DAO. So they, you know, technically work for this for-profit startup, but really the the sort of capital behind the

• 1:17:41Speaker 00

  curtain is a DAO. So I think you're going to see a lot of kind of trickle down capital like that, where not everybody necessarily realizes all the intricacies of how the capital got there, or is interfacing with the DAO, but you know, ultimately is is getting paid with money from the DAO.

• 1:18:02Ryan Sean Adams?

  Olaf, our last question is is kind of talking, not our last question in the podcast, but of the big questions that were on our mind, is about crypto versus the nation state. And I'm wondering if you see this as kind of a power struggle, like, will crypto come disrupt the nation state? And will the nation state be okay with that? From the early stages of crypto, a lot of people in like, you know, 2012, 2013, thought, oh, the government's never going to allow Bitcoin to happen. Yet here we are with more institutional support than ever, even even in some weird ways, governmental support, at least in some some corners in some districts. And we haven't seen

• 1:18:41Ryan Sean Adams?

  many outright bans of crypto at the nation state level. So talk to us about this crypto in the nation states. Crypto going to disrupt the nation state? Are they going to coexist? What's your take

• 1:18:54Speaker 00

  Yeah, I mean, there are disruptive elements to crypto, like it has to alter some of the logic. But I, you know, I don't think that crypto is like this singular thing that will end the concept of nation states. However, you know, I do think that crypto has the potential to divorce the concept of money and state in a way. You know, we used to have church and state, right, as a tied up thing, and eventually those kind of got divorced and they both coexisted.

• 1:19:34Speaker 00

  We still have, you know, religion and churches and we still have the state and the government. So I think you're going to potentially see that sort of, you know, the inextricable link today between like fiat money and the nation state control of it. I think you could see it be divorced. I don't think that means that the state goes away. I do think, like I said, it alters the logic, though, of how it all works.

• 1:20:05David Hoffman?

  There's a common trope these days that people have lost trust in their institutions. And I'm wondering if you are seeing, me and Ryan definitely see this, is like, there's a yin, there's an equal and opposite force between crypto and the nation state, where crypto certainly isn't coming to, you know, eliminate the nation state. Crypto will never fund like the police or the roads or all the things that we need to live our lives. But also, at the same time, there seems to be some sort of like poetic transformation from the decline of nation states. People generally think that nation states are in a decline of relevancy, which is happening at the same time of the rise of the relevance of cryptocurrency. Do you see kind of like this poetic balance? Or are these just two different things that are happening in different areas of the world?

• 1:20:51Speaker 00

  I don't think it's a causal effect today. I mean, I think it's just, you know, I just think the speed of technology and the speed of culture is so fast now that it's outpacing the ability for the bureaucratic mechanisms of the state to keep up. So I just think there's like a pacing, speed problem where technology is moving too fast. And related to that, you know, I just think culture changes really fast. So beliefs, individual beliefs or group beliefs about what's acceptable or what is ethical or something like that

• 1:21:31Speaker 00

  is evolving way more rapidly than like our legal system evolves. So I think that a lot of the feeling that the state is becoming sort of slow or incompetent or irrelevant or something just stems from the fact that the rest of the world is moving at such a faster clip.

• 1:21:51Ryan Sean Adams?

  Olaf, I'm hoping you have some time for a quick lightning round where we ask you some questions, overrated or underrated questions. You have a few minutes for that?

• 1:22:00Speaker 00

  Ah, sure.

• 1:22:01Ryan Sean Adams?

  Awesome. All right. So how about this Bitcoin as an anti-inflation hedge going into the 2020s? Do you think that idea is overrated or underrated?

• 1:22:11Speaker 00

  Ah, underrated.

• 1:22:13Ryan Sean Adams?

  Interesting.

• 1:22:15David Hoffman?

  ETH as ultrasound money, overrated or underrated?

• 1:22:19Speaker 00

  Underrated.

• 1:22:22Ryan Sean Adams?

  How about ZK EVN, EVMs and some of the ZK technology that's coming out these days, overrated or underrated?

• 1:22:31Speaker 00

  Underrated.

• 1:22:32David Hoffman?

  Oh, boy, I'm sensing a theme here. All right. Alternative layer ones, overrated or underrated?

• 1:22:38Speaker 00

  Underrated again.

• 1:22:42Ryan Sean Adams?

  How about, how about, I already know the answer to this, NFTs in their current state, overrated or underrated? And maybe focusing on in their current state.

• 1:22:52Speaker 00

  In their current state, overrated.

• 1:22:56Speaker 00

  I'll give you guys one. I'll give you guys one.

• 1:22:59David Hoffman?

  Algorithmic stablecoins, overrated or underrated?

• 1:23:03Speaker 00

  Um, underrated.

• 1:23:05Ryan Sean Adams?

  Okay. How about crypto hedge funds, overrated or underrated?

• 1:23:09Speaker 00

  Overrated for sure.

• 1:23:11David Hoffman?

  Okay, that, we're gonna have to take that one out of the lightning round. Why are crypto hedge funds overrated?

• 1:23:16Speaker 00

  Uh, no, I mean, I'm, um, I'm, I'm half joking, but, um, you know, I, I think that, um, I like the concept of total democratized, um, capital formation in crypto. So, you know, I, I like the structure of the kind of so-called ICO and group crowdfunding. Um, I do think crypto has moved towards a system of, of private fundraising. And I would like to move towards a system that's a little bit more open access funding.

• 1:23:53Ryan Sean Adams?

  All right, Olaf, so let's, uh, let's kind of close this out and, um, put all of these ideas together and, and give us kind of a, a synthesis. So, we, you've been first to a lot of things and, uh, you, you talked earlier how, uh, a lot of the things you were first to were actually obvious to you. And it's because you were part of the 1% that was actually digging into these systems and, and, uh, in figuring them out. So I gotta ask the question, what is obvious to you right now? Cause we want to know what's obvious to, to Olaf. You've seen these things in advance. What's obvious now?

• 1:24:26Speaker 00

  Um, you know, I, I think, um,

• 1:24:32Speaker 00

  you know, I, I think one thing that feels inevitable is that a, a crypto game that is really high quality and in itself is a really great game that grows really quickly, combined with sort of crypto economic incentives.

• 1:24:50Speaker 00

  I think something like that is going to grow just about faster than anything in the world, like faster than anything has ever grown. That feels like it's just going to happen.

• 1:25:01David Hoffman?

  Is this like an Axie or something different than this?

• 1:25:03Speaker 00

  Yeah, it's kind of, it's a, you know, it's, it's taking some lessons from Axie, which are, you know, economic design features. Um, it's refining those economic designs and it's layering on top, you know, a substantially more sticky game experience.

• 1:25:19Ryan Sean Adams?

  You've also survived in crypto for a long time, Olaf. Any keys or insights for people who maybe this is their first cycle, they haven't been in crypto for a while. What does it take to survive in crypto for a decade?

• 1:25:32Speaker 00

  I just stopped trading and start reading and like using software. I, I, there's just a lot of talk of trading in crypto. And when you're in a macro category that you believe is going to compound rapidly over the next set of years, I think it's very odd to try to outperform that by active trading rather than just by buying and holding.

• 1:25:56David Hoffman?

  I think everyone on that, on this call can agree that that's probably the best move. Just because you're in crypto does not mean you're a trader.

• 1:26:04Ryan Sean Adams?

  Absolutely. Olaf, thanks for all the insights, man. This has been really fun to talk with you and pick your brain on all of these important issues. We, we appreciate it.

• 1:26:13Speaker 00

  Yeah, thanks for all the good questions, guys, and the great conversation. It's been a pleasure.

• 1:26:19Ryan Sean Adams?

  Awesome, guys. We will include a link to find out more about Polychain and Olaf. Of course, we got to conclude with this. None of this has been financial advice, nothing like financial advice whatsoever. Of course, all crypto is risky. Bitcoin, Ether, alt layer ones, DeFi, it's all risky. You could definitely lose what you put in, but we are headed west. This is the frontier. It's not for everyone, but we're glad you're with us on the Bankless journey. Thanks a lot.

• 1:26:44David Hoffman?

  Hey, we hope you enjoyed the video. If you did, head over to Bankless HQ right now to develop your crypto investing skills and learn how to free yourself from banks and gain your financial independence. We recommend joining our daily newsletter, podcast, and community as a Bankless premium subscriber to get the most out of your Bankless experience. You'll get access to our market analysis, our alpha leaks, and exclusive content, and even the Bankless token for airdrops, raffles, and unlocks. If you're interested in crypto, the Bankless community is where you want to be. Click the link in the description to become a Bankless premium subscriber today. Also, don't forget to subscribe to the channel for in-depth interviews with industry leaders, Ask Me Anythings, and weekly rollups where

• 1:27:27David Hoffman?

  we summarize the week in crypto and other fantastic content. Thanks, everyone, for watching and being on the journey as we build out the Bankless nation.