45 - Taking Ethereum Public | Ether Capital's CEO Brian Mosoff & CFO Stefan Coolican

🚀 SUBSCRIBE TO NEWSLETTER: http://bankless.substack.com/ ✊ STARTING GUIDE BANKLESS: https://bit.ly/37Q17uI ❤️ JOIN PRIVATE DISCORD: https://bit.ly/2UVI10O 🎙️ SUBSCRIBE TO PODCAST: http://podcast.banklesshq.com/ 👕 BUY BANKLESS TEE: https://merch.banklesshq.com/ ----- GO BANKLESS WITH THESE SPONSOR TOOLS: ⭐️LEDGER - BEST HARDWARE WALLET TO SECURE YOUR CRYPTO https://bankless.cc/ledger 🚀 ARGENT - INVEST IN DEFI FROM ONE PLACE (download it now!) https://bankless.cc/argent 💳 MONOLITH - GET THE HOLY GRAIL OF BANKLESS VISA CARDS https://bankless.cc/monolith 🤖YEARN - YIELD-SEEKING MONEY ROBOT THAT FARMS DEFI FOR YOU http://bankless.cc/yearn ------ 45 - Taking Ethereum Public | Ether Capital's CEO Brian Mosoff & CFO Stefan Coolican Ether Capital is a publically traded company out of Canada, and Ether Capital's job is to get ETH on the balance sheet. The company is centered around ETH the asset and Ethereum the ecosystem, and offers a bridge for investors to be able to access exposure to the Ethereum ecosystem via public markets. We dive into the background and context of the company, as well as how the company structure gives them a competitive advantage. Ether Capital is the first public company to stake ETH, and has big plans for the world of ETH staking. These guys are on the frontlines of getting investor awareness about the opportunity that ETH and Ethereum offers, and has been sharpening their ability to explain why the opportunity is so compelling. Resources: Ether Capital Newsletter and Ether Capital Podcast - https://www.ethcap.co/blog-media Their podcast is great 101-202 level content! Perfect to share with your financially minded, crypto-novice friends! Ether--the birth of the digital bond, written by Stefan https://bankless.substack.com/p/ether-the-birth-of-the-digital-bond Ether Capital Staking on ETH 2 https://www.ethcap.co/pr20201201 Ether Capitals presentation on ETH https://ethcap-co.s3.amazonaws.com/Docs/2020.11.30+-+ETHC+Presentation.pdf ------ Don't stop at the video! Subscribe to the Bankless newsletter program http://bankless.substack.com/ Visit the official Bankless website for resources http://banklesshq.com/ Follow Bankless on Twitter https://twitter.com/BanklessHQ Follow Ryan on Twitter https://twitter.com/ryansadams Follow David on Twitter https://twitter.com/TrustlessState ----- 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 we may add links in this channel to products we use. We may receive commission if you make a purchase through one of these links. We'll always disclose when this is the case

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

• 0:13Ryan 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, and how to front run the opportunity. This is Brian Sean Adams. I'm here with David Hoffman, and we're here to help you become more bankless. David, it's been a long time since we had a really bullish episode on Ethereum. We just had that today. Can you talk about it?

• 0:37David Hoffman?

  Yeah, the first of many bullish content specifically about Ethereum is coming to the Bankless Podcast, starting with this episode with Ether Capital, a publicly traded company based out of Canada that has already done some of the things that we are seeing a micro strategy do today, but did them back in 2018. The whole intent of Ether Capital is to put Ether on the balance sheet and watch that Ether grow. So they are inherently bullish Ether. They understand Ethereum, and they are pitching Ether and Ethereum to investors. And so they are on the front lines, doing the dirty work, getting people's minds wrapped around Ether and Ethereum and what that means for the future of money and finance.

• 1:21David Hoffman?

  They understand it all, and it was a fantastic time getting both Brian and Stefan onto the podcast to talk all about our favorite asset on top of our favorite ecosystem.

• 1:31Ryan Sean Adams?

  Do you know what I love about these guys, David, is they are not just Johnny come latelys. They're not tourists in this space. They just endured a two and a half year long bear market with Ether on their balance sheet, and they didn't sell it. They didn't sell any. They have a long-term, long-time horizon thesis about Ethereum, about Ether, about the economy that is growing on top of Ethereum, and they've stuck to their thesis all along, including they are now staking Ether, the first publicly traded company to actually stake their Ether and run a value

• 2:10Ryan Sean Adams?

  That's how committed to the original thesis they are. I love talking to investors who are long-term oriented in this space because there's too many people that just chase the hot new thing and jump on it and don't have conviction about what they're doing in this space.

• 2:30David Hoffman?

  The relationship that Ether Capital has to Ethereum is really interesting to me because companies inherently are self-interested, right? Each organization that you see on like a public stock market or any private company is inherently self-interested in its own growth and flourishing. But Ether Capital is an entity that is focused on, you know, putting Ether on their own balance sheets and then also actively participating in the Ethereum economy, which makes Ether Capital inextricably, oh boy, inextricably related, inextricably connected to Ethereum and the health of the Ethereum economy. So like Ether Capital as an entity is increasing the security of Ethereum by taking their ETH. They're increasing the monetization of Ether, the asset,

• 3:13David Hoffman?

  by holding it on their balance sheets. So what's good for Ethereum is good for Ether Capital, and what's good for Ether Capital is good for Ethereum. And so it's very interesting to see a publicly traded company operating as a steward of the protocol, a steward of Ethereum.

• 3:29Ryan Sean Adams?

  They're also providing a narrative bridge to traditional investors. They're talking about Ether on three value points, which, which sounds a lot like the, the triple point asset that we talk about on Bankless so often, but specifically talking to investors about Ether as a store of value, a digital bond, and also as a commodity for block space. Fascinating that they are bringing that dead simple message to the massive pool of investors. And they've been doing that all the way back in 2018 up until now.

• 4:05David Hoffman?

  So let it be known that like it is possible to be right really early, even in an environment where people tell you that you were wrong. Like the Ether Capital boys have been beating the same drum for years and years and years now, and now it's finally coming into fruition. Some more topics that we talked about on the podcast are how they get yield on their Ether. Obviously, an answer to that is staking, but we ask about getting yield in DeFi. We also talked about how Ether Capital evaluates making investments, especially in a world where you denominate in Ether, not in US dollar. And they also talk about the complexities of being a publicly traded company and having to work with code and having to deal with things that are simply undeveloped in this

• 4:49David Hoffman?

  ecosystem that they are on the frontier of. So really wide-ranging conversation. It's all about Ether and Ethereum, so we know you guys are going to love it. So we're going to, without further ado, get right into the episode. But before we do that, we're going to take a moment to talk about some of these fantastic sponsors that make this show possible. When you own crypto, what really matters is the security and ownership over your assets. Being a part of the bankless nation means having complete sovereignty over your crypto. The easiest way to do that is with a Ledger hardware wallet. A hardware wallet is a little device that manages your private keys for you, so you don't have to worry about proper private key management. Your Ledger hardware wallet keeps your private keys private, but still lets you have easy access to your crypto.

• 5:33David Hoffman?

  The combination of my Ledger hardware wallet and Metamask lets me store my crypto assets in the most safe way possible, but still lets me easily access Uniswap or all the other DeFi apps that I use on a daily basis. If you already have a Ledger wallet, you can use the Ledger Live app to participate in some of the money verbs that we discuss in the Bankless program. The Ledger Live app is your headquarters for managing your personal crypto finance. It's a great tool to manage the assets you hold on your Ledger, as well as receive a portfolio summary of all the assets that you have stored. Using the Ledger Live app, you can buy Bitcoin, Ether, and stable coins and have it sent directly to your Ledger hardware wallet, skipping over the trusted exchanges and getting your assets into your control.

• 6:18David Hoffman?

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• 6:42Ryan Sean Adams?

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• 7:26Ryan Sean Adams?

  transfer limits on a daily basis. There's no seed phrases to lose. It's always backed up through social recovery. You can even use Argent as a multi-sig for large transfers. Lastly, they just launched a DEX router. That means if you're trading in Argent, you get access to the best rates across the top 10 exchanges in one tap. You can go to argent.link/bankless to download the Argent wallet on iOS and Android and get started. That's argent.link/bankless. All right, guys, let's get to this incredible interview with the gentleman from Ether Capital, Brian and Stefan.

• 8:05Ryan Sean Adams?

  Bankless Nation, I am super excited to bring on two guests from Ether Capital. We'll tell you about Ether Capital in just a minute. We've got Brian Masov, who is the CEO of Ether Capital, and Stefan Kulikin, who's the CFO of Ether Capital. What is Ether Capital? They are a publicly traded company based in Canada, super bullish ETH. In fact, they've got 90% ETH on the balance sheet. That's 32,000 ETH on the balance sheet as we are recording this. Gentlemen, it's fantastic to have you in front of the Bankless Nation. How are you doing?

• 8:39Speaker 02

  Thanks for having us here. We're doing great.

• 8:40Speaker 03

  Yeah, we're excited to be here.

• 8:42Ryan Sean Adams?

  I'm going to start off with this question. Are you the MicroStrategy of Ethereum, guys?

• 8:47Speaker 02

  I don't think so. I think we're focused solely on Ethereum and being an ecosystem investor. Stefan, do you want to add anything to that?

• 8:56Speaker 03

  We are an Ethereum ecosystem investor that gives public market investors access to the ecosystem. We don't have an operating business as it currently stands, but we are sort of an access point. And to the extent that MicroStrategy is an access point for investors in the public markets that are looking for Bitcoin exposure, I think that you could certainly make the comparison there. But we're focused on the Ethereum ecosystem and we're excited about it. And we think we have a lot to offer. And so that's basically it.

• 9:35Ryan Sean Adams?

  That is awesome. Just curious on that MicroStrategy point because it's making news as we're recording this. MicroStrategy, of course, is a US publicly traded company. They've been historically a business analytics shop with some software tools. And recently, they've just started using their balance sheet to buy up a whole bunch of Bitcoin. As we're recording this, they're talking about buying up, I don't know, David, is it like 400 million more?

• 10:00Speaker 02

  I thought I saw that they upped that.

• 10:01David Hoffman?

  They are issuing 400 million in debt, but it was oversubscribed, so it turned into 550 million of convertible notes.

• 10:08Ryan Sean Adams?

  Yeah, so just a quick take on that, guys. You guys are in the publicly traded company kind of game. Is this sort of odd from your perspective that they're doing this in this way? It's like a business analytics shop becoming a Bitcoin holding company?

• 10:26Speaker 02

  I can't comment specifically on MicroStrategy's history and what their vision of the future is. But I think what we can all agree on is that the public markets are looking for access points into the space and figure out how can they get access to these assets in a way that's familiar to them.

• 10:47Speaker 02

  Depending on where you are in the world and how long you've been in the space, there have been a host of crypto native exchanges that have been hacked. And I say crypto native because I mean access points that are not wrapping these assets into a traditional security where people can buy through their brokerage account and say, abstract away the custody, abstract away who the people are, we don't, we don't care and we can trust that the assets are going to be secure. And so people are looking for ways in the public markets to have exposure to Bitcoin first. We hope that they will also seek out Ether. I think that the narrative is a little bit more complex around why people want to own Ethereum different than Bitcoin.

• 11:28Speaker 02

  But what the micro strategy news is proving is that people want exposure, whether it's direct or it's through a company putting it on their balance sheet. There is certainly appetite out there now more than ever before. And that's what's really exciting to us.

• 11:45David Hoffman?

  One thing that really excites me about Ether Capital is the intent behind the entity. And that's something that always perplexes me about micro strategy is like, it's got its core business model. It's its core way of making revenue. And that's entirely irrelevant to putting as much Bitcoin as possible on the balance sheet and like being a Bitcoin ETF, a backdoor ETF, as I've heard it described. But I want to, I want to talk about Ether Capital. So like, when you buy a share of Ether Capital, like what are you getting? Like what is Ether Capital and what does it track? Is Ether Capital meant to track Ether, the asset? Is it meant to track Ethereum, the economy?

• 12:26David Hoffman?

  Like what, what is unique about Ether Capital and its relationship with its balance sheet and, and asset price? And also the Ethereum economy? Like what are you getting when you buy into Ether Capital?

• 12:38Speaker 02

  I'll go first and then let Stefan chime in. I think what's really unique about Ether Capital and our structure specifically is that we're not set up as a fund and we don't intend to be a fund. I think that those are important products to come out to the market like the grayscale trusts, whether it's the Ether or the Bitcoin trust. But what we see is that people should have exposure to not just the assets, but other things that you can do with the assets like staking, like generating yield through DeFi lending protocols. And when you're boxed into these fund structures, you don't have the flexibility as if you were set up as a corporation. And so Ether Capital was put together a few years ago. It basically in kind of mid 2018 is really when it started trading.

• 13:21Speaker 02

  But the idea was never just to passively hold ETH. We think that that's great and important, but what else is there out there? What about the makers of the world that we think are extremely valuable? What about companies like Wire that are really valuable to us, providing really important services? People should have more exposure in their portfolios to things beyond just passively holding the token. And because of our structure, we're able to offer that to investors and to give the public markets an access point to, again, wrap these kind of weird assets to them into a traditional security and say you can have a piece of your portfolio exposed to crypto that's beyond just Bitcoin.

• 14:01Speaker 03

  Yeah, and I'll just kind of highlight or add on to that. I think with MicroStrategy, you see crypto as an asset class as being a little bit of a square peg in a round hole as it relates to the public markets. So if you think about Bitcoin sort of from 2013 to today, it's kind of become a more accepted commodity, more of an accepted asset. But there's really no way for public market investors in the US and in Canada to get access to that Bitcoin in a public structure.

• 14:41Speaker 03

  And certainly in the US, that's a result of not having, let's say, an ETF or an exchange traded. Fund, you know, there's been a history around around the S E C on on people applying and and and getting rejected. Actually, in Canada, that's that's sort of changed because there is a what's called a closed end Bitcoin fund that's now listed in Canada. But, you know, one of the the sort of knock on effects of not having Bitcoin exposure in the public markets is that you have entities like MicroStrategy kind of pop up and they say something like, well, we have a thesis around

• 15:24Speaker 03

  the the U the U S dollar and, you know, all of this inflation or not inflation, this money printing that may give rise to inflation in the future, and we want to hedge that risk on our on our balance sheet. So we're going to invest in Bitcoin and, you know, we want to increase our exposure to that. And as a result, Microstrat- MicroStrategy takes on this this status as a sort of a quasi ETF or sort of Bitcoin exposure in the context of of the public markets. And so it'll be very interesting to see how that sort of unfolds and develops in in the U S as it relates to Bitcoin,

• 16:04Speaker 03

  you know, ETF or public market exposure. Obviously, there's there's the Grayscale Fund as well, which is which is passive exposure, but it's not traded on on a major exchange and they've obviously done very, very well and and Grayscale's an unbelievable kind of entity and and good for the space. I think that where Ether Capital differs is, you know, we never we never thought of this as passive exposure to Ether. We were trying to create an ecosystem investor. So getting public market investors exposure to what's going on in the ecosystem. And in 2018, that meant putting Ether on your balance sheet because we have a thesis around

• 16:48Speaker 03

  Ethereum being this kind of next generation of the Internet and owning Ether is like owning a piece of of this Internet. And and so that was kind of an early thesis of ours, which developed into an investment into Wire in 2018 and an investment into Maker in 2019 and has kind of become Ether as kind of a yield generating instrument through staking and through DeFi is really exciting. So I think it's kind of like two, two ways of getting to kind of the same, the same sort of destination, which is exposure to the underlying crypto asset in a public market context.

• 17:30Ryan Sean Adams?

  This is so interesting. So like, would you guys say you're almost like a public version of a crypto hedge fund that's a bit more Ethereum focused? Is that a good characterization?

• 17:40Speaker 03

  I would call us a public market ecosystem fund. And sorry, not it. Sorry. Let me start that again. I would say we're closer to a public market ecosystem investor and less of a hedge fund because we basically, we bought our Ether in 2018 and we hold it to this day. We're not making active trades, like we're not, you know, Yolo yield farming as a public company as much as, as much as we would, we would kind of like to. But that's really not, not the strategy. It's, it's kind of access and, and exposure to the ecosystem. So in lieu of, of a hedge fund, I would call us more of a venture fund where we can, we

• 18:23Speaker 03

  can make portfolio investments along with our, with our Ether into things that have the potential to outperform Ether and, and things that are really important to the Ethereum community. So things like Maker, obviously Maker is, is the backbone and the cornerstone of, of DeFi, right? And, and it's just, it's an incredibly unbelievable project that really for me was, was the reason that I'm in the space full time and why, you know, I joined Ether Capital. I ended up going down the Bitcoin rabbit hole when I was an investment banker in, in 2015 and I'd spent 10 years in, in traditional finance and I, Bitcoin was, was kind of

• 19:05Speaker 03

  Incredible innovation and I almost immediately understood this concept of digital gold. And then when Ethereum came around and Brian and I had been talking about Ethereum, he kind of pulled me down the rabbit hole. It made sense and then something like Maker was the thing that really crystallized, you know, why this platform is so incredibly innovative and the interesting things that you can do.

• 19:30Ryan Sean Adams?

  It's funny you say that because Maker for me was one of the first magic moments I ever had with DeFi. First time in that very clunky interface, you'll recall it, of course, from, you know, 2017, where you go and you create this thing called a CDP. And I just remember doing that and there was no one in the middle, there was no bank. And comparing that to taking out, say, a mortgage where you have like floors of people and entire banking infrastructures and this whole process happened in a matter of seconds for like cents. That to me was was a very magic moment. But I guess maybe to sort of summarize the way you guys are articulating Ether Capital,

• 20:13Ryan Sean Adams?

  it sounds like that the problem you're solving is that investors don't have a way to gain access to crypto in public markets while they're locked inside of their brokerage accounts, let's say. So this provides that. And, you know, I guess there are a few different ways that investors can do that, whether they're in the US or Canada today. One is, of course, now like these, like they could buy a micro strategy, gain some exposure, maybe to Bitcoin. The other is, you know, trust, like Grayscale. We had Michael Sonnenstein from Grayscale talking about ETH and Bitcoin. And the third, which hasn't really come out yet, is some sort of an ETF.

• 20:55Ryan Sean Adams?

  I just want to ask you guys a question about the third path here, the ETF path. Are you surprised that the US doesn't have a crypto ETF of any kind, whether it's Bitcoin or Ether today? Like, does that lead to a lot of inefficiency? Why is that not happening? It sounds like it's happening maybe in Canada. Why is it not happening in the US?

• 21:17Speaker 02

  So we don't have an Ethereum ETF, a true ETF yet in Canada. I hope that we'll see one soon. And I think that the US will have one soon as well. But I think if you rewind three or four years ago, when ETFs were starting to be proposed or submitted to the regulators for review, problems in the space had not yet really matured like custody and insurance. And before the regulators are going to approve a product like that, they want to know that it can get to scale with appropriate controls in place where nothing will blow up on their watch. And I think that they're fair and right to have those concerns. I think we're at a place now in 2020 where we are seeing real, robust forms of custody emerge.

• 22:00Speaker 02

  We are seeing types of insurance be possible in this space, where it's getting more appropriate for a true ETF to be approved by a regulator. Whether that happens in the US or Canada first, I don't know. But I think that it's a question of just if is it going to happen in the next few months or in the next year? I don't know, but I think it's coming and it's really exciting. And I think now is the time where, looking back, it's more appropriate than ever before.

• 22:27Ryan Sean Adams?

  Stefan, you mentioned, I think, is it the equivalent of a grayscale in Canada that was set up that that's gotten 300 million or so in Bitcoin? Can you talk maybe about that? I'm not really familiar with it. And I understand there's a company called Three IQ, maybe it's the same one, that is actually doing the same thing. Okay, it is the same one. That's actually doing the same thing for ETH. So they're raising right now and they're creating sort of a trust-type structure, maybe for ETH. What is that? Help us understand that.

• 23:00Speaker 03

  So you can think about it in in three sort of buckets. You can think about an ETF, which we've spoken about, where there is access to the underlying commodity, whether it's Bitcoin or Ether, and the liquidity is done on on a, you know, an hourly basis. So you're effectively, you're making an order to the to the ETF, and there are market makers on the exchange that are, you know, buying from and selling to that ETF structure. And we don't have those in in either Canada or the US yet. So the other way to get sort of passive exposure to one commodity, whether it's Bitcoin or Ether, is to create what's known in Canada as a closed-end fund.

• 23:44Speaker 03

  And that's what Three IQ has has put together on the Bitcoin side, and that has attracted, I think, around 300 million of of capital, and what the Three IQ is currently putting together on on their Ether fund. Now, the way closed-end funds are structured, I believe it's very similar in the US around the the grayscale products like GBTC and ETH-E, although I'm not an expert in in sort of the regulatory environment and and sort of structures in in the US. But think about a closed-end fund as, you know, issuing shares or units that reflect a proportionate ownership in the underlying crypto assets. So they, you know, they go out and they'll buy $50 million worth of Bitcoin.

• 24:28Speaker 03

  And then you own that share of the Bitcoin. You can potentially redeem that, but on fixed periods, so either quarterly or annually. But generally, if you want to sell your position, and you don't want to wait until the the redemption periods, you can sell those shares on an exchange to another counterparty. And what that introduces is this concept of a discount or a premium to net asset value. And so that's what we've seen, for example, in the grayscale products, they trade at at a premium to their net asset value. We've seen that in Canada with with the closed-end funds. So, you know, that's a sort of a passive bucket. And then we have the active operating business. Business, which is what we are as Ether Capital.

• 25:13Speaker 03

  And what that allows us to do is, you know, hold a commodity like Ether as a big part of our portfolio, but make other venture type investments. But we're also able to do things like staking, where that's an active, that's an activity that you do. Running a validator node is something that a passive vehicle is not able to do. And it really differentiates us. You know, think about putting funds into DeFi, putting Ether into DeFi, or doing all sorts of kind of ecosystem type investments. That is what structurally we're able to do because of our corporate structure.

• 25:53Ryan Sean Adams?

  It's funny too, because I see this three IQ is raising up to 107 million US dollars. And this could all go into ETH. And the interesting thing is, from what you're saying, right? This is a different structure. You guys are differentiated, you're more active. This is a passive mechanism. But if they raise that amount, you win too. Because it increases the size of the Ethereum ecosystem, the Ethereum economy. Ether becomes sort of this asset that's just gobbling up capital. We've called it on Bankless before, this like gravity well that just sucks in all of this capital. And because Ether Capital has Ether on its balance sheet, you know, and ETH price go up, that's good for Ether Capital too.

• 26:36Ryan Sean Adams?

  So it seems like we're all kind of succeeding as an ecosystem, as some of these assets start to attract institutional money. Is that the case?

• 26:46Speaker 02

  I think so, and it definitely is good for everyone in the ecosystem as a whole. But when Stefan and I, and I think most people who are in the Ethereum and crypto ecosystem, as you know, everyone, they think about, this isn't just about buying exposure to these assets and then wait for the number to go up. The question is, how can you use these things in really interesting ways? And so sometimes I get frustrated by the idea of these, you know, Bitcoin closed funds or Bitcoin ETF. The idea isn't just to say, go and get exposure to the price. I mean, that's good and important, but You want people to say, wait a minute, this is a bearer asset. It has the potential to be custodied on your own, different than almost any other asset that's come before. And that's really exciting.

• 27:29Speaker 02

  And then in terms of Ether, being able to interact with various applications, whether it's in DeFi or gaming or NFTs in art, that's the point of having Ether. So we think that we serve an important function, but we also really want to see people go out and find ways to get exposure to the asset, where they take control of it, where they play with it, where they test things. They get a MetaMask wallet and they go and interact with various applications that run on this network. That's the point why we're all here, right?

• 27:55Ryan Sean Adams?

  Well said, sir. That sounds very bankless of you.

• 27:59Speaker 03

  And, and

• 28:00Speaker 02

  And listen, wait, wait, listen, we benefit if people are boxed into having to just get their exposure through these wrapped up traditional equities. But that's not the ethos of the space. That's not why we're all here. That's right now why we're here and it does serve a specific purpose. But we do want to see other people long-term going out and finding ways to touch the assets themselves. That's really important to the narrative. Otherwise, I'm not sure how successful these networks are going to be if no one actually holds in custody them on their own.

• 28:32Speaker 03

  And one thing I'd add is it's, it's a totally a net positive that you have a public market investor money or just investor money in general, trying to get exposure to, to these assets. But as, as Brian noted, the interesting part is, is using them. And when you think about something like Bitcoin or even Ether as almost a gateway drug, to the extent that once people understand sort of the decentralized network thesis with say Bitcoin, and then they start to understand Ethereum as an operating system versus Bitcoin as a calculator, which is, which is Brian's phrase that we use with, with investors. You know, you start to get, go down the rabbit hole and then, oh, interesting.

• 29:16Speaker 03

  So what's next? Okay. Well, there's stable coins. There's, there's Bitcoin on Ethereum. There's, there's decentralized finance. And what we've started to do is, you know, we've, we've sat down with some investors and, you know, Start from the beginning around getting ether into a wallet and then trading some of the ether for dye on Uniswap. And then using that dye and putting it into compound and earning a yield. And so these are sorts of things where you you actually have to use the the protocol or the platform to really understand what it's all about. And we we often struggle with traditional traditional finance investors because they say, what can you use Ethereum for?

• 29:58Speaker 03

  And you you really kind of, you want to show them, you know, what what these things can be used for and how they are, you know, very game changing in in the way that they're built.

• 30:08Speaker 02

  Stefan and I always like to draw a parallel to an early clip of David Letterman and Bill Gates sitting and talking about what is, what is the internet all about? And it's the mid 90s and David Letterman says, so what can you do with this thing? And Bill Gates says, well, you know, you could listen to a baseball game. And Letterman says, ever heard of the radio? Yeah, that's, you know, like, that's, that's true, but you know, maybe you could listen to it at a later point in time. And Letterman says, ever heard of a tape recorder? And so I think it's hard in the early days to imagine just how powerful these open networks can actually be. And you saw this with the internet and we're not even talking 30 years ago.

• 30:52Speaker 02

  And now it's so obvious how the internet has changed everyone's lives, the way we interact, the way we do business, the way we set up companies. And people still have a hard time imagining, okay, great. So you have this global financial system that everyone can plug into and and a standard protocol that anyone can use and interact with and have something secured. But so what? And I think we're still in that infrastructure wireframe phase where the developers are tinkering and getting really excited. But what we need is over the next five or 10 years to abstract away all the technical complexity. And we will get there. And that's when this is going to be such an, oh, of course, it was so obvious that you would have all these transactions and lending happening through this platform.

• 31:36Speaker 02

  And that traditional banks that currently really don't pay out any Any kind of interest to people will use some type of crypto network to generate yield and abstract away the complexity and let everyone participate. It's hard to imagine now how it's going to change the world unless I think you're deep in the space and you can see there's something really special happening here. And that's why so many people are getting really excited.

• 32:00Speaker 03

  And there's sort of a light bulb moment with, I mean, all of us, I think. For me, it was probably where I bought a treasure and I got some Bitcoin on it and I sent some to my brother. And it's like, oh, my gosh, this thing works and there's, there's no centralized counterparty. It's a distributed network. Oh, my God, this is, this is game changing. And, you know, we're, we're trying to find that point with traditional investors. And it can vary between, between who it is and sort of if they have an understanding of gold, if they're, if they're resource investors or if they're fintech or, or internet type investors. But it's, it's just that sort of tipping point.

• 32:41Speaker 03

  And, and typically the narrative that we use that, that can resonate is tokens, right? The thing that makes these networks interesting are, is the tokenization. And, you know, we, we talk about investors, investors want to invest in, in businesses. And that's, you can't blame them. That's kind of the, the goal of capitalism. That's what happens in the public markets. But when we talk about tokens being this kind of step function, change around economic incentives, we really need it and we try and drive it home. And, and that's sometimes when people say, okay, I get how the token works. I know why it's important is where people, is the light bulb moment for traditional finance.

• 33:27Speaker 03

  And we're still working on it. We still have a ways to go, but, you know, that's one of the strategies that we use.

• 33:33Speaker 02

  You're also trying to help them understand though, just to add on, on to what Stefan was saying, that they want to invest in the intermediaries. And the whole purpose of these networks was to remove the intermediaries and to facilitate all of the transactions or a host of activities. Without having to rely on any centralized third party to do it on your behalf. And so that's where you have this bit of a roadblock where you're trying to help them understand that the token removes the agency. That's the idea here and you're better off just to invest in the token most of the time than the businesses. So the specific application that's built on top of a blockchain or the exchange could fail, but Bitcoin and Ethereum probably aren't going to.

• 34:15Speaker 02

  And I like to think about in my early days in the space, the biggest, the biggest exchange was Mt. Gox and Mt. Gox was set up in Japan and then I think about $400 million was hacked. And so Mt. Gox blew up and so that didn't make sense to invest in there. And so then along came Polonix. And of course, there were other smaller exchanges along the way. I'm just highlighting the big ones, but Polonix was the first big altcoin casino, if you want to call it that. And Polonix did very well. I participated, I was on it all the time. And then Polonix got disrupted for a number of reasons, but along came Binance around 2017 and Binance exploded onto the scene. And now where we're at today is seeing that, well Coinbase and Binance even were disrupted

• 35:00Speaker 02

  this summer when the explosion of DeFi yield farming came about and you had on one day of, you know, Uniswap trading, the 24 hour trade volume exceed that of Coinbase's 24 hour trade volume. So the, the thing that I'm trying to point to here is that you could have invested in any of those exchanges, those corporations, those traditional looking businesses along the way, and you would have probably gotten disrupted. But what you could have done instead was said, I'm just going to go out and buy Bitcoin at 50 bucks in 2013, had liquidity and know that Bitcoin itself is probably not going to go away. And that's, that's the part that you're trying to help people connect the dots on, that the tokens themselves are probably here to stay and going to succeed.

• 35:45Speaker 02

  Picking the businesses is going to be much, much, much harder and they will get disrupted by other things that are more efficient. And maybe there's ways to build those businesses on chain, like Uniswap is a more efficient way of trading with less risk than a centralized exchange.

• 36:01David Hoffman?

  Hey guys, there is so much left in this conversation with the boys from Ether Capital. We talk about their investment and thesis into MakerDAO and why DAI is so awesome. We also talk about how they pitch Ether as an investment to investors. What explanations do investors resonate with? And then we talk a ton about e-staking. Ether Capital is a public company that is staking ETH, their long-term plans for Ether staking. And finally, we touch on the nature of exponential growth and how many people aren't well-prepared to think in exponential terms. So we're going to get to all of those subjects. But first, we're going to take a moment to talk about some of these fantastic sponsors that make this show possible.

• 36:43Ryan Sean Adams?

  Bankless Nation, do you want to go fully bankless, but in the real world? Monolith is the DeFi account that you need. It wraps your ETH address in a bankless Visa card, and it does so much more. It closes the loop from fiat to DeFi. So you can onboard fiat to DAI on Monolith with zero fees. Then you can convert that DAI to a DAI, which is an interest-bearing savings account. Again, zero fees. And then you can spend that interest in the real world on a Visa card. So you can finally buy your cup of coffee with interest earned in DeFi. Guys, this is magic. This is the closest thing to the Holy Grail crypto card, and Monolith gives you all of it. You need to download the app at monolith.xyz to get your bankless Visa card.

• 37:28Ryan Sean Adams?

  It's optimized for European listeners, they'll be coming to the US soon. And when you get that Visa card, the Monolith card, tweet about it when you do. I love seeing people unpackaging their beautiful bankless Visa cards. It makes me realize that the revolution is here. Search "Monolith" in the App Store.

• 37:46David Hoffman?

  Wiren is DeFi's first self-building project on Ethereum, focused on producing products for those who are interested in earning yield in DeFi. Wiren's various products are all built to suit each individual investor's preferred level of risk, from various vault strategies that leverage DeFi tokens to the safer Earn system, which relies on stable coins. Vaults are aggressive yield-farming robots. Each with a unique strategy that is designed to maximize the yield of the deposited asset. Yearn employs some of the most informed developers in DeFi to keep the vault strategies updated with the various yield farming opportunities on Ethereum. For customers who are more risk adverse, the Yearn's Earn product may be for you.

• 38:28David Hoffman?

  Earn is a yield-aware, dynamic money market that automatically seeks the best interest rates across the various DeFi protocols and regularly migrates your deposited stablecoins between the DeFi protocols that are returning the best yield at the present moment. Yearn is a system that is just a little over four months old, so things are still very much an experiment. However, this hasn't stopped people from depositing over $700 million worth of assets into the Yearn system in order to find yield on Ethereum. Perhaps the people that deposited all this money were tired of constantly making daily transactions to follow the best DeFi interest rates. And maybe the gas fees that they were paying ended up eating too much into their profits. With Yearn, it doesn't remove the risk of these various protocols that it leverages,

• 39:12David Hoffman?

  but it does remove the overhead of constantly trying to make sure you're finding the best yield and also so that you don't have to pay for gas to switch up your assets. Check out the products that Yearn has to offer at yearn.finance. That's Y-E-A-R-N dot finance, which they also have a nice statistics page to see what other people are doing.

• 39:33David Hoffman?

  We started this conversation out asking you guys about like, what does Ether Capital track? Does it track Ether the asset or Ethereum the economy? And it seems you guys' answers is surrounding Ethereum as an ecosystem and Ether Capital as an investment into the ecosystem. And so it sounds like Ether Capital is meant to track Ethereum the economy. And that makes sense as to why you guys are focused on tokens as a mechanism that disintermediates people, yet it is the investable asset itself. If people, traditional investors, are looking for intermediaries to invest in, look no further than a token on Ethereum, which is the expression of Ethereum's best, best features,

• 40:18David Hoffman?

  which is being able to cut out middlemen. Yet that that intermediary force still exists in the token itself. The token is now the intermediary. Except the surface area of the intermediary has been just reduced and reduced and reduced down to the point of a token that governs a protocol like Compound or Uniswap or Aave. And that seems to be a way of accessing that ecosystem growth from Ether Capital. Accessing the growth of Ethereum is not just Ether, the asset, and Ether staking for Ethereum 2.0, but also the tokens that exist inside the ecosystem as well. Because if Ethereum doesn't disintermediate people, then it probably won't have any tokens, and it also won't be all that interesting.

• 41:04David Hoffman?

  Does this all resonate with you guys and what you guys are trying to get done at Ether Capital?

• 41:07Speaker 02

  Absolutely, and I would say that the way we look at most things, whether they're tokens or traditional businesses, is do they perform some basic form of infrastructure that is going to play out for supporting this entire space? And Maker is exactly that. Maker is infrastructure. The Maker token, we believe, is very important because we think that a decentralized stablecoin is going to be paramount in this space, and no one has done it better yet than Maker. And I don't know that anyone will be able to do it better. I think that their timing was incredible. And we think that there's a lot of advantages certainly over getting to scale with a centralized

• 41:46Speaker 02

  stablecoin, fiat-backed deposits represented by a token like USDC or Tether. But we do think that a decentralized stablecoin is very, very, very important. And so we look at Maker and DAI as key pieces of infrastructure for this ecosystem to flourish. And that's where we want to invest, is at that protocol layer. And whether that protocol layer is the base layer of Ether itself or the next level up where you have an application like Maker that gives rise to a whole other set of applications, that's what we want to put into our portfolio. That's what we want to help people get exposure to.

• 42:22Speaker 03

  Yeah, and also I would add our investment in Wire is an example of trying to facilitate on-ramps into the ecosystem. System and notwithstanding that wire is a traditional business and not a token. They have a developer solution around onboarding and that's really important in in in this in this type of of environment. And so it's it's, you know, we have kind of a three pronged thesis around. You know what type of infrastructure investments we were aiming to make. So, you know, I think the first one is around scalability. And that's where ETH two comes in. That's where staking comes in, you know, stable coins is another one.

• 43:05Speaker 03

  And that's where Maker and and die come in and on ramps, which is where wire comes in. And this is the sort of thing that will evolve. It will it will change. You know, you could envision a a world in, you know, five or 10 years where, you know, ether is just in the background. You know, it's it's staked. There's many ways to get access to it. And, you know, at that point, there will be, you know, new, interesting crypto economic platforms at at the application layer. Much like sort of DeFi is today, or say NFTs. But, you know, th- these these things change so quickly. I mean, at the beginning of the year. To predict that DeFi would have the year that it has to, you know, to think about ETH two shipping on time.

• 43:48Speaker 03

  You know, at before the end of 2020, there were a lot of prediction markets where people said it's never it's never going to ship ship. And, you know, people on Twitter mentions are always just, you know, trolling about that sort of thing. But it it's constantly changing and we're trying to stay at the front of that. And that's really the goal of Ether Capital as a company is to try and, you know, provide, you know, this kind of, you know, forward thinking. Sort of investment thesis around the ecosystem.

• 44:17Ryan Sean Adams?

  It it's it's super interesting because the portfolio in terms of how you think about it. Is very similar to what we talk about so often on Bankless. Of course, guys, none of this is financial advice. But when when when people ask the question of like, I'm new to crypto, where should I start? What we always talk about is, well, the best thing you You can do is is buy some ether, buy some bitcoin, right? Those are the reserve assets of this space. If you're particularly bullish on the Ethereum economy, then you weight that much more heavily towards ETH, which is the reserve asset of the space. And then what you want to do is look for some of these disruptive,

• 45:00Ryan Sean Adams?

  you know, protocols that are built on Ethereum that essentially give you exposure to the the DeFi ecosystem. But what you probably don't want to do is sit out too long from the reserve asset of the Ethereum economy, which is ETH, right? You want to be almost denominated in ETH and then sort of measure your investments in ETH appreciation, because that, at the end of the day, is the value accrual mechanism for like Ether, the the economy. And it seems like the way you've constructed Ether Capital's portfolio, you've sort of done it in the same way, right? So you are heavily weighted ETH as the reserve currency

• 45:43Ryan Sean Adams?

  for Ethereum, the reserve asset. And then you go into these different opportunities, whether whether it's something like Wire, that is a bit outside of tokens, but still provides a fiat on-ramp into the Ethereum economy. Or you're doing something like Maker, which is, of course, a like a bankless bank, as we would call it, and essentially investing that way. But I want to ask the question about Ether, the asset, because there there are some people out there, believe it or not, guys, that don't think Ether, the asset, is very important. They don't think that Ether, the asset, is anything like Bitcoin. They don't think it is a value accrual mechanism

• 46:28Ryan Sean Adams?

  for this Ethereum economy that we've been talking about. What is your take on Ether as an asset? And how do you articulate its value proposition?

• 46:39Speaker 02

  I don't think it's any different than Bitcoin in that you need a native token of these networks as part of security to the protocol. When you have mining and people who are securing transactions, including them in blocks, they have to be rewarded with something that's native to the network. So they're giving up a commodity external to the network. In the case of proof of work, it's electricity and hardware, and they're being rewarded in the native token. What's really exciting about proof of stake is that you can align the incentives of the validators and the token holders, and that happens through the native token on that network. So a problem that you have in proof of work is that the miners may be

• 47:22Speaker 02

  just people who want to arb the cost of electricity. They don't care about Bitcoin at all, or they don't care about Ethereum. They're going to immediately dump that token and just capture that value, you know, the difference between whatever they paid, you know, two and a half cents a kilowatt hour and whatever they mined and off they go. And what's really exciting about proof of stake is it says this native token to this network is the thing that you can put up as the bond. It's part of the security. It aligns the token holders, the users of the network with the people who are doing the validation. You can't remove that token from this process. It's not possible. That to me is what people are missing. And Stefan, do you want to add anything into that?

• 47:59Speaker 03

  Yeah. So I mean, when, when we talk about Ether and, and why you need to own it, I mean, for us, it's kind of a, it's a three-pronged thesis. The first is that it's a store of value, just like Bitcoin is. And we, we refer to it as a store of value plus, which is effectively, it has the same scarcity properties that Bitcoin has, but it also provides this venture-type upside to the usage of the network. And so that's, that's really compelling, and particularly in the environment that we're in, where there's money printing everywhere, to be able to, you know, go towards a store of value asset that, that not only has that

• 48:42Speaker 03

  property, but provides some, you know, additional upside. And it's interesting, because when we're, when we're interfacing with traditional investors, we kind of leave it there. But, you know, one of the things that I think your listeners and people in crypto understand, which is important, is that, you know, you have Bitcoin's inflation schedule. You know, we have a halving every, every four years. And that's, that's very compelling, and it sort of makes the case for digital gold. But when you have, you know, staking and you have, for example, EIP 1559, which where the the network gets a lot of usage,

• 49:24Speaker 03

  you could potentially see a disinflationary environment for Ethereum, which is, which is like, if you want to store a value thesis, like, that is the one. So, you know, I think that's the first prong is the store of value plus. The second one is the usage of the network, where we've seen usage at at all time highs.

• 49:46Speaker 03

  Just compared to any other blockchain, we put out in our newsletter last week, comparing sort of fees generated by by different protocols. You know, Ethereum is right out there at the top. And then you have Bitcoin. And then you have all of the applications on Ethereum that, you know, if you add them together, they would take out Bitcoin. And so, like, it's just undeniable that Ethereum is being used and and that it's sort of garnered this this network effect. And then the third thing I'd say is this is an asset that is becoming, or it is already, it's a yield generating instrument. So instead of sort of taking your Bitcoin, just like gold,

• 50:27Speaker 03

  putting it in in, you know, in storage and waiting for the price to go up, you can actually contribute to the security of the network and get paid to do so by by a yield. So, you know, I think those are the three things that we that we speak to that hopefully makes the case for Ether as an asset. We have our our co-CIO at Ether Capital, Ben Roberts. You know, he refers to Ethereum as as a toll road and as this kind of base infrastructure for the world. So imagine owning sort of a share in a toll road that goes that spans the entire globe. You know, that's that's another kind of analogy or thesis that we use.

• 51:11Speaker 03

  But, you know, at the end of the day, it it's sort of, it doesn't really matter, you know, how you pitch it. It's what happens, you know, practically speaking. And I think that the last year has shown us how important Ether the asset is to, you know, the Ethereum network, to just, you know, the the the general

• 51:33Speaker 03

  investment philosophy around crypto and around these decentralized networks.

• 51:38Ryan Sean Adams?

  So here's the take-

• 51:38David Hoffman?

  As you're explaining Ether to the interested parties, right, your investors, in this three-pronged thesis, do you find that one prong particularly resonates better with certain subsets of the audience? Or one does better in certain contexts versus another? How has these different ideas or theses around Ether landed, depending on who you're talking to?

• 52:01Speaker 02

  I think we're at a time now where people are certainly warming up to the idea of a monetary policy that's not controlled by a corporation or any one government's interest. And so Bitcoin is certainly the first way that they come down that rabbit hole. So I think Ethereum is hard to pitch in that sense because they just say, well, why don't I just go own Bitcoin? The thing that currently is waking up a lot of people is staking. And the idea of generating cash flow, a yield, off holding what was otherwise a passive commodity that was fairly unproductive. We're constantly trying to get people to understand that the network usage is really exciting.

• 52:43Speaker 02

  And we will pull up a chart that shows the history of Ethereum and the number of daily transactions. And you can see in 2018, when the price of Ether is over $1,000, that when the bear market hit, the network activity didn't stop. The developers didn't stop bidding. And that's something that traditional finance doesn't see. We might see it because we're part of the community, that the developers never left the table. But mainstream people just see the price. And so it's really hard to get people to understand that outside of the price, the demand to use this network and the use cases that are emerging are growing faster than ever. And that that's something worth paying attention to.

• 53:27Speaker 02

  They don't seem to lock on to that. They do seem to lock on to proof of stake and the opportunity around saying, you can generate this yield by just holding this asset and generating some type of cash flow.

• 53:40Ryan Sean Adams?

  Let's talk about that a little bit more, because I think it's super interesting. You're right, of the kind of the three-pronged thesis, the triple-point thesis. ETH as a store of value, I think, once people understand the Bitcoin story, they start to understand ETH as a possible contender for store value. So like Bitcoin is almost-

• 53:59Speaker 02

  I don't think so, but but they don't because they just see, why don't you just buy Bitcoin then?

• 54:04Ryan Sean Adams?

  Well, well, they they partially do. I think it opens their mind to the idea that, let's say, a digital currency that is non-sovereign could be a store of value. Now, most, many are right now persuaded in the argument that like, and there shall only be Bitcoin because Bitcoin is Austrian and 21 million. And they seem to have this very shaky idea that Ethereum has no monetary policy or a monetary policy that is constantly inflating or something to that effect. But I would still say, I feel like Bitcoin has helped open the door to something like Ether being a store of value.

• 54:46Ryan Sean Adams?

  And once those arguments land, then I think it's going to be inevitable. Once like inflation cuts below 1% and then maybe goes, as Stefan was saying, to the negative territory, that will become obvious over time. So you've got that path. And then you've got the path that has been popular in Ethereum is kind of undeniable, that Ether is definitely being used as as gas, as a commodity, right? And so Ethereum as an instrument for that is is obviously showing promise. But it's this third thing that I want to talk about because it feels like Ethereum is really opening the door for the ability of investors to think about Ether

• 55:27Ryan Sean Adams?

  or digital currencies in this way as almost like non-sovereign bonds. And Stefan, you wrote this post for Bankless not too long ago about the idea of Ether as a digital bond. We've talked about this, you know, a few times on on Bankless. Can you articulate that thesis and maybe give the pitch for how you explain Ether as a digital bond to investors?

• 55:53Speaker 03

  Let me take a step back and I'll give you a sense of how this kind of idea came into my mind, which was at the beginning of this year, staking was on the horizon. And as you started to dig into the numbers, you saw that there was a potentially significant double-digit yield that was going to accrue to Ether holders who were staking sort of early in the network. And to me, I felt that this was something that traditional finance, like our investor base and just people outside of the Ethereum community, were completely missing.

• 56:34Speaker 03

  And so I went on Twitter and I did a tweet storm around this, just saying like, "This is a big deal. This is what people are missing. Ethereum is a very consequential asset in the crypto ecosystem and people just are not paying attention." And it ended up getting some traction. And when I wrote the piece for Bankless, I started to think about what does Ether as a digital bond mean? So how can you put into context what is happening with staking? And so one of the concepts was Ether is becoming a productive asset.

• 57:16Speaker 03

  So you're generating an Ether-denominated return by providing a service to the network. And one of the interesting things about that is it's similar to, think about it like a T-bill or think about a government bond, a treasury, where you invest money with the government and they pay you a yield that they effectively print. So they effectively control it. And that's unlike a scenario where you're investing money into bonds for a corporate entity, because the corporate entity actually has to generate the cash flow to pay you back.

• 57:59Speaker 03

  In the case of a treasury, there's really, there's no constraint. They just kind of, you know, print the money. And for me, that was kind of the analogy that made the most sense to me. Around Ether as this kind of digital treasury bond. Because ultimately, the protocol itself is issuing the Ether. And there's no constraint to it because it's coming from the protocol itself. Unlike, let's say you lend money into a compound lending pool. Where, you know, that money is coming from somebody else on the other side. You know, notwithstanding that it's collateralized. You know, that introduces separate risk.

• 58:43Speaker 03

  So how I tried to explain that was this is an intrinsic yield instrument. Which sort of is what makes it kind of special. But I didn't want to say it was a digital T-bill. Because who knows what a T-bill is? I mean, people in traditional finance do. Yeah. You know, so I kind of settled on it's a digital bond. And so I thought that it was a way to illustrate what is going on. Because everybody understands what a bond is. And people talk about Bitcoin as digital gold and Ether is digital oil. And, you know, this is a digital bond. It's kind of, you know, I feel like it flows.

• 59:26Speaker 03

  So, you know, that was kind of the thinking behind it. As an intrinsic yield instrument. And, you know, part of the thinking there too. Is that unlike Bitcoin, which is an unproductive asset. You know, you can't get intrinsic yield from Bitcoin. You can get a yield by either lending it to a counterparty. Or you can, you know, you could potentially mine it. But it involves, you know, another sort of risk. So, you know, one of the other things that I talked about is there's protocol risk, but not counterparty risk. And so, you know, one way of thinking about it is there is counterparty risk and that's protocol risk.

• 1:00:09Speaker 03

  But I think that ultimately, it's a very unique instrument. And something that That people weren't paying enough attention to. So hopefully that provides some color.

• 1:00:19Ryan Sean Adams?

  It does. Oh, so here's the thing is they're still not providing enough attention to it. This is still like a narrative that, you know, some of the insiders in Ethereum kind of know, but has not gone mainstream. It almost feels like the Bitcoin is digital gold narrative in 2015. And of course, we talked to lots of folks that are on the Bankless program. They've heard us articulate this digital bond narrative, but we don't talk to as many institutions. How is that digital bond narrative landing? Is it a helpful analogy and framework for helping people understand the value of Ether as an asset?

• 1:00:59Ryan Sean Adams?

  What are these institutions? How do they react, these investors, when you talk to them about it in this way?

• 1:01:06Speaker 03

  Yeah, so I think there's a lot of resonance and it's a very short and quick pitch, right? You're effectively saying Bitcoin is an unproductive commodity. And with Ether, you're able to generate a staking yield. And, you know, we talk about mining in the context of Bitcoin mining, proof of work mining versus staking. And ultimately, it's a digital bond that pays an Ether-denominated yield. And really, that's kind of it. Like, we don't want to muddy the waters here. I think it's a very important point to get people to pay attention. But, you know, the more you go down the rabbit hole, the more, you know, questions people have.

• 1:01:47Speaker 03

  And we're happy to answer them, but we don't want people to lose the fundamental message here, which is that this is a yield-producing instrument. Now, one of the things I should say is it's not, this isn't passive yield. So you're still operating, you know, a validator node. And that entails, you know, risks of slashing and offline penalties and that sort of thing. So this isn't a passive yield, but it is a yield nonetheless. And so, you know, these are nuances that are important to people, you know, like me. Ultimately, we just want to try and differentiate it from something like Bitcoin.

• 1:02:28Speaker 03

  And when we make the case around the digital bond, sort of articulating that Ether is this the most used platform. Sort of when you put those two together, people say, wow, this is a very, a very sort of compelling pitch around not only usage, but my ability to generate cash flow.

• 1:02:46David Hoffman?

  Do you guys find that it's helpful to bring in Ether as a non-sovereign yield? Important in these conversations when you guys are explaining things to investors. Because you know Bitcoin is digital gold or Bitcoin as like a non-sovereign money is really compelling to a lot of people. And especially during the days of money printer go brr, people can really empathize and resonate with that, that narrative, where this is a, an asset with a monetary policy outside of the purview of any state. And Ether and the bond and the yield coming into Ether is also similarly non-sovereign, right? And Ether in my mind is one of the world's first sound money, hard money bonds. Does adding that non-sovereign emphasis into your pitch to investors, does that resonate with people?

• 1:03:31David Hoffman?

  Or do they kind of just see Ether as like, you know, you take, you take Bitcoin, you add yield and that's what's attractive to it? Never mind why that yield is, is unique or important.

• 1:03:41Speaker 02

  I don't think so. We haven't articulated it in that much of a succinct way where it is framed within two sentences, connecting all those dots. I think in general, what people are latching on to is that they want crypto exposure. And that's relatively recent, right? I mean, there was some interest in the second half of 2017, when the price of Bitcoin, you just couldn't ignore. When it's moving from 4,000, crossing 10,000 up to 20,000. Institutions were waking up and saying, what am I missing here? I need to be a part of it. The, the space wasn't as mature then as it is today. And now what we have is a mature space plus the backdrop of all the, as you say, money printer go brr.

• 1:04:24Speaker 02

  That's waking people up. So they are warm to these assets. They are curious and want exposure. And the question is, how do they participate? I do think that there is some. Resistance around the monetary policy of Ether versus Bitcoin, where they just latch on to Bitcoin. It has the biggest brand. It has the biggest market cap. It's a very clean and easy to understand thesis. The thing to really get people to be gravitated to with Ethereum is a chart effectively that shows here's how much ETH has moved over from ETH1 on to ETH2. Here's how much is sitting in that contract today. Here's what the yield is currently. That they understand, that they they connect the dots on why that's valuable and important and really compelling.

• 1:05:08Speaker 02

  For us specifically as Ether Capital, we are the only public company that I think has the flexibility to participate in phase zero. Because there, as you know, there's no liquidity or transfers or anything that you can do with that asset for the time being, whether it's 10 months or 12 months or longer. That puts us in a really unique position to take advantage of our unique structure. You know, we're not, again, we're not a fund. We're a corporation. Participate in staking and say, if you want public market access to staking your Ether, then this is the best way to do it. And that's a, that's a really interesting moat for us. And it's really exciting and we want to be at the forefront of these things. We want to be the leaders in the public markets

• 1:05:51Speaker 02

  for the ones who understand these assets. We understand what's happening in the ecosystem, the excitement, the developments, what's, what's coming up next. And if we just take a step back to when Ether Capital was formed, because I think it's a little bit helpful here.

• 1:06:07Speaker 02

  The 2017 bull run had, you know, this is all the ICO boom going on in the backdrop. There's a token coming out every week, a new website, and no one knows where do they invest? I'm sure if you guys were around, you remember the complete ICO mania. And when Ether Capital was put together, the idea was to have a very clean thesis on what was going to happen in the digital asset space and pick one of those assets, which we thought was really going to have meat to it and longevity. And that was Ethereum. And sure, there's hype around a whole host of ICOs at the time, but we thought that Ethereum was the one. It was the thing that was an order of magnitude of improvement over Bitcoin

• 1:06:51Speaker 02

  that offered a new set of properties that was going to excite and maintain a set of developer interest. And if you go back to 2013 and you see, or maybe it was 2012 when Litecoin came out, I don't remember. But all of the Litecoin, Peercoin, Feathercoin, Dogecoin, none of those were orders of magnitude of improvement over Bitcoin. And so when Ethereum comes along in 2014 and you have this completely new way of building a blockchain. Well, that was really exciting. And when 2017 comes about, the question was, how do you isolate the signal through all that noise? And how can you create a access point for the public markets to say,

• 1:07:32Speaker 02

  here's a group of people who are in the community, who are very high caliber, who have a very specific thesis. And I'm going to follow them on their journey through navigating this insane world with terms that they've never heard of, with assets that are hard to secure. And that's what Ether Capital was about then, and it still is today. It's we remain dedicated to this thesis, this thesis around why is Ethereum so valuable? And how do you play it? And how do you say you can have that access in your portfolio through us? And we are going to know about staking. We're going to know when it's appropriate to move a large amount of our assets into that new network. And what the appropriate controls are around doing it.

• 1:08:15Speaker 02

  That to us is what this is all about is, is finding that signal through the noise and saying, you're going to play it alongside us and follow us on that journey.

• 1:08:24Speaker 03

  And David, I would just say on your, your sort of non-sovereign bond, I mean, it's, you're bang on. The challenge that we have in some sense is communicating that. I mean, you're deep in the space, you've done a lot of thinking about this and non-sovereign bond makes a ton of sense. But if you go into a generalist investor who maybe understands a little bit about the gold thesis, and you say, this is a non-sovereign bond, they may say something like, what the heck does that mean? Yes. And so we We really, we really have to, and, and it's again, it, it, it's bang on, but you have to approach it a little bit from first principles. And so, you know, that's what Brian and I have spent, you know, two and a half years trying to do is just distill

• 1:09:06Speaker 03

  into why, why this matters. So, you know, staking matters because you can earn a yield. And that's really all, all you can say about it. You can, we even talk about scalability as, as an important sort of goal. But if you say sharding, like you're, you're in the penalty box because it, it's, it's not something that, that any sort of traditional fund manager, investor would have any clue about. Now, would they obviously want, you know, a thousand transactions per second and to be able to have a decentralized network sort of, you know, execute that, of course they would. But you, you really have to be careful in your language, even, even something like Ethereum as a smart contract platform. Or, you know, Ethereum is a general purpose blockchain.

• 1:09:51Speaker 03

  These are things that resonate, you know, with, with Brian and I and the rest of, you know, the team at ETHCAP. But it's, it's, you know, you, you risk sort of alienating certain public market investors when, when you get that, that deep into the granularity. So it's kind of a push and pull that we've, we've, we've had to achieve over the past couple of years.

• 1:10:12Ryan Sean Adams?

  I'm going to quote my co-host here, uh, who said, the most bullish thing for Ethereum is to be understood. And I think that is so true. Like part of the challenge of the Ethereum community is that, that we speak in these technical terms, right? So you mentioned sharding, like that doesn't mean anything to an investor, right? Like, like.

• 1:10:35Speaker 02

  Leads to a lot of jokes, though.

• 1:10:37Ryan Sean Adams?

  It leads to a lot, right? So, or, or like take EIP 1559. What's an EIP? Why the numbers? What does 1559 mean? And how is this related to Ether as a, a, a, a better store of value? And like, we see it and we're like, okay, well, that's Ethereum scarcity engine, basically. And that just links usage of the Ethereum blockchain to the store of value-ness of the etherresin acid. Asset, right? But like when we use these terms, investors can't understand this sort of thing. So you guys are doing God's work and educating investors about these things and translating the Ethereum community speak into what this actually means for Ether as an asset.

• 1:11:21Ryan Sean Adams?

  And I was connecting some dots too on something that you were just saying, Brian, which is super interesting. I want to make sure the listeners understand this too. It can be enough if you have an asset like Bitcoin to just, you know, buy and hold essentially, right? Like you don't have to do much more with Bitcoin, but that's not enough with Ether as an asset. And I think this is a link to why you set up Ether Capital as being not a passive instrument, but being an actively managed asset and instrument is because if you have Ether and all you're doing is holding it, you are missing out on a whole bunch of yield, guys.

• 1:12:00David Hoffman?

  Like you are falling behind.

• 1:12:02Ryan Sean Adams?

  You are falling behind. You are actually like, if you're not staking your Ether and taking basically the same protocol risk as holding your Ether, you're losing what? Like in the future, maybe that's 5% per year? So if you have Ether on your balance statement, you almost have the fiduciary responsibility to go like, do something with it. And I think that's why Ether Capital sounds to me structured as more of an actively managed type of thing, because you guys are doing this sort of thing. In fact, press release, I believe it was last week or the week before, Ether Capital is the first public company that I know of, and maybe you know of some others, but the first public company to actually start staking Ether, the asset.

• 1:12:48Ryan Sean Adams?

  So you guys are actually taking a portion of your Ether, this is a small portion today, but you are doing that in a public entity and running a validator and staking it. Can you tell us about that story? Like, how are you actually doing this?

• 1:13:02Speaker 02

  So staking has been something on our roadmap since 2018 when the company was put together. We were very excited about staking. Unfortunately, it took a long time for staking to finally come to fruition in the launch of ETH2. But these are very hard problems to solve and we respect that the developer community and the research community was going to go slow and only do it when the time is right. Now, along the way, Stefan and I are out beating the drum, saying, "You should invest in ETH now because there's going to be this potential price explosion when ETH2 actually launches." And the question was, "Well, when would that be?" We would say, "Well, we don't know, but it's soon." Four more months, you know, it's four more months for two years.

• 1:13:44Ryan Sean Adams?

  Yes.

• 1:13:45Speaker 02

  But the point is, we knew it would happen eventually and we knew that it would be successful. And it was important to us as a company and as a leader, I think, in the Ethereum ecosystem or in the public markets, to bridge that gap and say, "This is a historical moment for crypto assets in general, but specifically the Ethereum community." And to show that we were at the forefront by putting our money where our mouth is, or in this case, putting our ETH where our mouth is and say, "We are going to stake. We want to be part of the Genesis block." Now, after we all got excited and said, "Yeah, we should do it, let's do it, let's do it." It raises a whole host of complexity around, "How are you going to do it?" Without going too deep in the weeds, we use the Gnosis MultiSig. We don't use a third-party custodian.

• 1:14:30Speaker 02

  It's something we pride ourselves on, that we have 10 directors. Everyone has a hardware wallet and we all sign off on transactions. And the MultiSig doesn't support the curve used in ETH2. And so we had to go on this long, winding road to figure out, "How will we actually run a validator here when the MultiSig doesn't support ETH2?" And so, we spent a lot of time researching the best ways to do it. And we came to a bunch of conclusions and figured out how we would. And we're currently running one validator. So it's not significant in terms of our total balance sheet, but it was important to us to be part of that genesis block and to say, we did it. We figured it out and we think that this is an important milestone for Ethereum.

• 1:15:13Speaker 02

  And we are going to signal to the market that long term, it's likely that we will stake more of our assets and participate in a more meaningful way as the network continues to be live and without issue. And we resolve things on our end and work with auditors on how they're going to look at ETH2. It's a whole different beast to be in the public markets. And Stefan takes the brunt of that complexity and figures out how to interface with them. So maybe he wants to jump in a little bit here and give some color on what it's like to operate a crypto company in the public markets. But we did it. We're very proud of it and we're really excited about exploring how we would further delve into more exposure into ETH2.

• 1:15:56Ryan Sean Adams?

  So you may be the first company to launch an ETH validator and start staking ETH. You will not be the last. If we are all right about this ETH economy thesis, then I think there's a day where we see most large, at least financial companies in the world, maybe tech companies too, running validators themselves and staking ETH on their own balance sheet. But as I guess the people who are first in the journey, there's probably a lot from a regulatory perspective to get through as a public company. So Stefan, what's it like to try to stake as a publicly traded entity? What hurdles do you have to jump over?

• 1:16:36Speaker 03

  It's part of the, it's a benefit and a burden to, to bring this kind of access and exposure to our investor base, which is traditional public market investors who would otherwise not have an ability to get meaningful exposure to, let's say, staking. But you know, listen, it's, it's an every, it's an everyday thing where you take for granted how, let's say, integrated custody is in the traditional finance system, like, you know, share certificates and custody.

• 1:17:12Speaker 03

  Of those when when you come down to the multi the Gnosis multi sig, which is, you know, heavily used and we kind of, you know, Brian and I, we talk about it as being, oh, it's just the multi sig. But, you know, imagine our auditor, KPMG, and I believe we're the only publicly traded company, I'm not 100% sure, that has a big four auditor. So, you know, KPMG has been great. But listen, we we get quarterly reviews on our financial statements because we issue our financials on a quarterly as well as annual basis. And, you know, there's a lot of operating controls around our multi sig. And so, you know, those are, those are things that are are maturing. They're not quite seamless yet.

• 1:17:58Speaker 03

  But that's sort of the part about being a pioneer in this space and sort of being on on the frontier. I mean, it was the same thing operating an email server, you know, 10, 15 years ago versus versus today. You know, there are these same types of of of issues, you know, whether it's around accounting, operating controls and that sort of thing. So, so it's interesting. It it keeps things, it keeps things, keeps us on our toes. And and so, but we're happy to do it because that's that's our job and and we take our our our mission seriously.

• 1:18:33David Hoffman?

  Yield on your ether is not only possible via staking, right? And and perhaps staking is most resonant to Ether Capital because of how intrinsic it is to the actual protocol of Ethereum. However, when there is yield to be gained from staking ether, that means borrowing and lending rates in DeFi also offer yield on your ether. And right now you can get yield on and compound and Ave and all these other DeFi protocols, albeit it's extremely low because generally there's no place of sourcing yield on your ether up until now. But there are things like the Y ETH volts from wire and there are other places, there are other mechanisms to get yield in in DeFi as well. How does, how do you guys think at Ether Capital about DeFi as an opportunity to, you know,

• 1:19:17David Hoffman?

  increase the value of Ether Capital? Are you guys tinkering inside of DeFi? Well, do you guys have like a DeFi strategy? How do you guys think about DeFi in relationship to Ether Capital?

• 1:19:28Speaker 02

  We think it's really exciting and going to be an important part of our narrative. I don't think it's something that we'll dip our toes to in the near term. We definitely have to be mindful of our structure and respectful of the risks. You know, we're playing in the, in the public markets. This isn't a private fund. And so the Yeth Vault is something that we talk about constantly. It's something that we would test personally with Ether that we hold. But to do it inside of a public structure has to be, once the code has been battle tested enough that it's appropriate to move, we're not just talking about a few hundred dollars or a few thousand dollars, but a meaningful amount of money in, in the form of millions of dollars of our ETH. And you constantly see various bugs in the code, or something gets hacked, or drained, or exploited.

• 1:20:13Speaker 02

  And that's an important part of these networks or these DeFi applications developing, right? There's some bug, people go back to the drawing board and say, let's close the loop on that and relaunch. Like, you know, what happened with YAMs in the summer? So it's something that we're going to monitor. It's something that we watch in awe and excitement of. I think it's the coolest thing. There's a lot of late night texting that goes on between Stefan and I. Did you see this bug? Did you test this thing out? And when the time comes where we can participate, we will. And we'll have to benchmark that against something like staking. I imagine that most people in the community will be doing the same thing. They will be looking at what is the yield on stake ETH versus something happening in DeFi?

• 1:20:57Speaker 02

  They'll set some dials around risks and then say, maybe I don't want to stake for the next month because there's this opportunity with a Yeth Vault or something else and take advantage of that. Either way, it's, it's definitely exciting. I also think it just shows we're personally committed to this. Outside of our professional capacities at Ether Capital, there is no off switch for us. There are no vacations where we just turn our brains off from looking at DeFi. This, this is the coolest thing. You're, you're never going to leave this space. There's so much innovation happening here. You can't walk away and say, all right, I've learned enough. I don't care anymore. No, the, the pace of innovation is astounding and exciting. And you're watching the birth of an entirely new asset class and you want to participate.

• 1:21:40Speaker 02

  And so we look at it personally first and then we'll figure out long-term when we can do it inside of a public structure. Stefan, you want to add anything to that?

• 1:21:49Speaker 03

  Yeah, so I mean, having spent 10 years as an investment banker in traditional finance and sort of going down the rabbit hole on Bitcoin and then sort of seeing Maker as this decentralized central bank, and you know, I became very, very excited and passionate about it. And I think DeFi is just sort of an extension of that sort of excitement. And when I speak to my former colleagues who are still in traditional finance, you know, imagine saying, oh, my gosh, you should check out the Yith Vault. And they look at me like, like, what are you speaking about? And it's, and so you could say something like, okay, cool. So what you do is you put Ether into this vault and, you know, it opens up a CDP. You take the die and you put it in Curve and you yield farm on Curve.

• 1:22:34Speaker 03

  And then they're like, okay, we need to get this guy to like a mental hospital, like stat. But, you know, ultimately, these kinds of things are financial innovation. And, you know, Joey Krug, who's on the board of Ether Capital, who's, you know, an insanely smart guy and a great, you know, resource for us, you know, he talks about, you know, anyone in the world being able to create a financial instrument via Ethereum and via, you know, the, all these Web3 technologies. And so to me, like, when Brian and I are sitting and we're chatting about, you know, the future, like, imagine a public company being able to deploy Ether into something like the Yith Vault.

• 1:23:16Speaker 03

  And it's not necessarily, you know, Yith, but some sort of robo-advisor, a smart contract, where there's an automated yield strategy, it's been battle-tested. And like, imagine being able to generate that sort of yield and being sort of, where, what separates, you know, a, someone that knows what they're doing versus someone that just, you know, for example, just wants to hold Ether in state, is that you have this ability to understand the risks in the smart contract and understand, you know, the code. And when I was, when I was starting investment banking, you know, the mining space, the physical mining world was, you know, really, really hot.

• 1:23:58Speaker 03

  And one of the great skill sets was having a traditional finance education and also having sort of real world mining experience, whether it was, you know, professional engineer or some sort of thing where you could look at, you know, a mining, a resource report and be able to say, okay, like, not only is this, is this a really interesting resource that I think could can, you know, make a lot of money, but I'm looking at the capital structure of the company and I'm able to make an assessment. You know, I view the next five years is imagine somebody from traditional finance can come in and read a smart contract. And, you know, we're already seeing that in terms of, you know, obviously some of the exploits in DeFi. But imagine that, you

• 1:24:43Speaker 03

  know, even, even a few years ago, it's, it's, it's just very exciting. And it's what I try and articulate daily to our investor base and, and, you know, my former colleagues and friends that this is here to stay and just the level of innovation, it's, it's tough to describe without sort of getting

• 1:25:01Speaker 02

  Well, think about flash loans. Flash loans are such an incredible example of something you can do natively in this space that traditional finance, just their heads will spin if you try and explain how it works and why you would do it.

• 1:25:14Ryan Sean Adams?

  Guys, I want to underline, this is for listeners, I want to underline the, the point that Brian and Stefan are making here because we, we talk about this so often, but what they're saying is like, get your DeFi education started now. We are not just investing in assets here and the Ethereum economy. We're also investing in ourselves, our own skill set. This, if this is the, the future of financial ecosystem, open finance, if, if, if this is the future for the world, and you are starting now, and you're starting to acquire the, the skills, either like how to communicate them, or you're starting to use these protocols, you understand what they

• 1:25:56Ryan Sean Adams?

  mean, you can be a bridge to the old world. And that career skill set is incredibly valuable, maybe more valuable than some of the assets that you're acquiring now. So start investing, continue investing. Obviously, tuning into bankless is, is one way, but make sure you're actually using these protocols and products too, because that's how you continue your investment. I think it's such an important point you guys are making right now.

• 1:26:26Speaker 02

  Don't forget, Ryan, that that's not investment advice.

• 1:26:30Speaker 02

  So you're totally right, though, that the best way to learn and understand is by touching the assets yourself. And that goes back to my point that I was making earlier about, I fantasize that people don't just want exposure to number go up, that they want to understand why these assets are so important to the future of the internet and how they're going to reshape things. Filecoin isn't just another ICO, another token. I mean, it is in some ways. Sure, it's another one, but it brings with it a new set of properties, a new set of possibilities for how the internet is going to be shaped in the next two to 10 to 20 years. And you have the opportunity, this generation can be a part of that. We

• 1:27:14Speaker 02

  weren't around for the birth of the internet, but there's a birth of this whole new thing that's happening here that everyone's getting really excited about. And I remember in an early Toronto Bitcoin meetup group, it was probably under 10 people at some bar in Toronto. And I went, you know, I'm nervous. I don't know what they're going to talk about. I don't know if I'm using an Electrum wallet, and Electrum is the thing that is socially acceptable with these people. And you felt like you were part of something that you saw and understood that the rest of the world thought you were a crackpot and you were crazy to think was valuable. And I had the same feeling when Stefan and I went to an early hackathon in

• 1:27:57Speaker 02

  San Francisco, and they're happening in these warehouses, and people are in ripped jeans and t-shirts, and they may not even be 20 years old. But there's something special happening there. And I would imagine that the early days of the internet in the late 80s, in early 90s, when people are getting together and talking about that they've upgraded their modem from 14.4 to 28.8, and that's so cool, and what could you do, you know, if you have an even faster than 28K modem? That's the same thing that's happening now, just with a different asset and a different set of protocol standards. But that excitement, that electric feeling that you're at the forefront of something

• 1:28:35Speaker 02

  It's going to be really big is really cool and anyone can join today and we're still scratching the surface. We haven't even begun to see what happens when you have millions of developers rallying around these protocols, rallying around these assets. It's just beginning and the ETH global events are perfect examples of that. These hackathons that happen in different countries around the world, bring together people who speak different languages, are different age groups, are different ethnicities, and they're all rallying around something really exciting and they want to piggyback off each other's knowledge and education and what they're able to build and say, well, this is the point of my money Legos, that I can take that and maybe build an on-chain insurance product. This is really, really cool.

• 1:29:19Speaker 02

  This isn't just about number go up. That's what that's what's exciting to me is to see that. I'm not a programmer. If I can program, it's terribly, but seeing people get excited in that way is the thing that draws me to this space.

• 1:29:32Ryan Sean Adams?

  Totally agree. Guys, don't stop at number go up. Go use, go build, number go up will take care of itself. You don't have to worry about that part of it if we are correct on this space. All right, let's talk about Ether Capital's plans for the future, guys. So you've just released a 125 million shelf prospectus, which, and correct me if I'm wrong, this allows you potentially to raise an additional 125 million in the next few months. Does this all mean that Ether Capital is going to be buying a bit more ETH?

• 1:30:07Speaker 03

  So it's, so our shelf prospectus is a regulatory document that we filed with the Ontario Securities Commission and it's on a website known as SEDAR, which is effectively the same thing as Edgar in the US. So, you know, I invite, again, this is not a solicitation. This is, this is not investment advice or anything. It's, it's a, it's a public document that we've issued and we are awaiting comments from regulators around the potential finalization of that document.

• 1:30:45Speaker 03

  But assuming that that we're able to do that, then that shelf prospectus would would run for, I believe it's 25 months. And it allows, it would allow us to open up the the investor sort of universe for for Ether Capital and potentially raise money. But again, I do, because it's in the public record, we spent quite a bit of time going through the thesis on Ethereum in that document around Ether Capital as a company, around staking and interesting sort of statistics around around DeFi. And so, you know, it's, it's, it's something

• 1:31:27Speaker 03

  that is, it's, it's important to us and, and, you know, as part of being a public company.

• 1:31:35Ryan Sean Adams?

  What about other plans? What do you guys have in store for the next 20, 24 months or so?

• 1:31:41Speaker 02

  I think what we can talk about right now is what we see in the immediate future for Ether Capital. And that narrative is all around staking and figuring out how we can appropriately move a bigger portion of our balance sheet onto ETH2. It's not 100% that we're going to do it, but it's something we would like to explore and test because we think that the uniqueness of our structure allows us to take advantage of the opportunity of doing that now versus three years from now. And again, being a leader in the public markets and showing how we do that. At the same time, a lot of the DeFi protocols, like you talked about the Yeth Vault, are very interesting to us. That's something that we'll certainly

• 1:32:19Speaker 02

  explore and monitor and test. I think Maker is still a very undiscovered asset. I think a lot of people use DAI and they understand why DAI exists, but they don't understand why the MKR token specifically is valuable, despite there being really great tools like Maker Burn. I think it's MKR burn dot tools or dot com.

• 1:32:42Ryan Sean Adams?

  Maker burn.com.

• 1:32:44Speaker 02

  That shows you what's owed to the MKR token holders. I mean, people don't seem to see or understand the value of that token yet. I would love to get more involved in Maker as they start moving real world collateral into the system. I think that's a very important part of their narrative. That's something I can see Ether Capital participating in in the next 12 months. But it's not the sole focus of what we're up to where we'll be the first. I think there's companies out there right now like Centrifuge who are working on those problems with very closely with maker community and trying to figure out how to do that. It's something we'll monitor. I think we have a very unique platform and structure and access to understanding the

• 1:33:29Speaker 02

  regulatory landscape and how we would be able to participate in some of those activities like moving real world collateral into a system like this and helping issue loans against that collateral in the form of DAI. But that's not on the immediate roadmap. Currently, it's all about yield and that's staking and DeFi.

• 1:33:47Ryan Sean Adams?

  You know, we haven't gotten to this, but I just want to make sure that this detail is clear. So who can buy Ether Capital shares, right? So can Americans buy it? Can retail buy it? And if they wanted to buy shares, of course, none of this is a solicitation. But how practically would a retail investor do that now?

• 1:34:05Speaker 03

  So we're listed on an exchange called the NEO in Canada, in Toronto. And it's quite easy for Canadians to buy it, both retail and institutions. But unfortunately, because we're listed in Canada, it can be a challenge for people outside of the country. And it's just part of, again, the, we talk about Ethereum as being this sort of global borderless system. You know, capital markets are certainly are certainly not there yet. And so we, you know, we market to our, you know, Canadian investor base. And we are publicly traded and to the

• 1:34:46Speaker 03

  extent that, you know, investor access is available, we are listed on the NEO exchange. Again, not a solicitation, but that provides some color, hopefully.

• 1:34:58Ryan Sean Adams?

  There's no way you guys are able to do price predictions, are you? Can we do that?

• 1:35:05Ryan Sean Adams?

  We love to ask our ETH bullseye question.

• 1:35:07Speaker 02

  I don't, I don't think either of us, and in general, even outside of Ether Capital, I've never really made predictions on the price of things. I think the important thing to really pay attention to here is, are these networks being used now more than ever before? Do you expect in the next five years, there to be more people using, transacting, building on these networks? And if the answer is yes, then it's worth exploring. If you think that the answer is no, then maybe you don't want exposure to these assets. I've always looked, as I said earlier, to the developers. Follow the developers. Look at what they're getting excited about. Look at where they're building and invest in and around that. That's what excites me. That's where I look and that's where I'll invest personally and guide Ether Capital to follow.

• 1:35:52Ryan Sean Adams?

  So Brian, we've got about a million DeFi users right now. That number, what do you think that's going to look like in the next five to 10 years?

• 1:36:02Speaker 02

  I think it's orders of magnitude bigger than it is today. And a parallel that I like to draw, or something I think about often, is people underestimate how fast these protocols or applications have the potential to grow. And in maybe early 2019, I joined a regulatory advisory committee to talk about crypto assets. And a large part of their thinking was to figure out how to solve for custody. And out of curiosity, I said, what is, what does everyone here think about decentralized exchanges? And Uniswap was around then. And I think that the daily trade volume was a couple million bucks. It was nothing significant.

• 1:36:45Speaker 02

  And they said, well, we're not paying that close attention because it's only a few million dollars. So it's not really an area of concern yet. And I laid out a few technical points on why that volume might be low currently and how it may scale up in a significant way down the road. And they kind of did a hand wave and said, I don't know.

• 1:37:04Speaker 02

  Here we are. It's one year later. And as I was saying earlier, you had that week in late August, early September, where Uniswap passed Coinbase in daily trade volume. This is not insignificant. This is an order of magnitude, or many orders of magnitude, larger than it was just a year ago. And so as you have more people moving on-chain, onto these assets, onto these protocols, and getting curious and wanting to explore, the growth is going to continue in ways that people... Your brain is not wired to think about how hockey sticks work, right? I don't mean hockey sticks, the physical hockey stick. I'm saying hockey stick graphs. We just don't interact with the world in a way that grows

• 1:37:47Speaker 02

  at an exponential rate. We interact in a world where things are very linear. And so that's the hard part for people to imagine, is that is there a possibility that Uniswap sloshes around a trillion dollars a day of trade volume? Absolutely. That seems crazy to think of today, but it's really not that far off. That is absolutely possible in the next five years, and really exciting to think about. Also, very challenging for regulators to imagine how they would want to try and put in the appropriate protections around people touching those assets.

• 1:38:20Speaker 03

  And I think this highlights the venture-type returns that you can see just in the space. So if you think about Bitcoin as digital gold, and you look at the market cap of above-ground gold as being between $7 and $8 trillion, Bitcoin is 3% of that. And so that's a credible investment thesis. It's much tougher on Ethereum, but you know, one of the mental models that you can say is like owning a piece of the internet. And the internet is worth trillions of dollars. And you know, sometimes we want to put kind of a price-to-earnings or a price-to-sales multiple on certain things. And you know, that's where transaction

• 1:39:04Speaker 03

  fees come in. But the way that you might want to look at it is just this venture-type bet, where you're making an asymmetric bet on the potential growth of this. Of this network in a venture sense. And I think it was might have been Chris Dixon at Andreessen Horowitz, who was saying, you know, in 10 years. So what people are doing in their basements on the weekend will in 10 years be a real job. And so like, I think that thesis has played out around crypto. And so it's exciting to see. And the next five to 10 years, I mean, we're going to be on the ride. And, you know, Ryan, you and Dave are going to be on the ride. And, you know, let's, let's meet up for beers in about 10 years and sort of see where all our predictions.

• 1:39:49Speaker 02

  I think one other thing to point out here that my CIO said to me about a year ago, that frames Ethereum in a really interesting way, which is if you believe that Bitcoin and Ether act as this hedge against inflation, it captures that hedge part of a portfolio. Okay, that's pretty cool. But what does Ethereum do different than Bitcoin? And that is it captures all the building that happens natively on top of it. And so it's wrapping that venture bet, those applications, those new, you know, in quotes, companies that could have wild growth into the same bet. When you buy Ether, you're getting the hedge against inflation and you're getting the venture bet at the same time. Because if

• 1:40:31Speaker 02

  there's five applications, if there are the Googles and the Airbnbs and the Facebooks that exist in this new world, well, sure, maybe you can cherry pick those specific things to invest in direct. But the reality is, they're all going to be paying transaction fees to have their activities secured by this network. And when you own Ether, you're going to capture some of that value at the same time. And so Ether is going to wrap those two things into one bet. And that's why you want to own Ether.

• 1:40:59David Hoffman?

  Going back to the conversation of how humans don't really think in exponential scales, like the people that bought Bitcoin at $1,000 and then proudly sold Bitcoin at $2,000 missed out on Bitcoin, right? Like, if you are in this space and you're thinking in a linear mindset, you're missing out. Like, the entire crypto economic industry is a lesson in exponential growth, in exponential. And that's that's kind of just how nature works. Nature is a is a exponentially growing entity. And Ethereum is, in my mind, is an extension of that, where you do have exponential growth of just the native Ethereum ecosystem. But what's unique about Ethereum is that, like Bitcoin, it can grow exponentially.

• 1:41:43David Hoffman?

  But also it is a platform for things like Uniswap, or things like Wire, or things like Maker, to also grow exponentially on top of Ethereum's own native exponential growth. And so that's what gets me really excited about that future. And, you know, if things do move in a pattern like that, like I am describing, I think the beers that we're going to get are going to come a little bit sooner than 10 years, guys. I think that's going to be a little bit.

• 1:42:07Ryan Sean Adams?

  Can we have Canadian beers, though? They're a little bit stronger, like those.

• 1:42:12Speaker 02

  These are very binary bets. I mean, these networks are either going to work out tremendously, or somehow they're they will retreat. At this point, I'm not sure what would make them retreat, but I still think it's a very binary bet that it's going to pay off in a explosive way.

• 1:42:29Speaker 02

  And Bitcoin was like that for me in the early days, when I first got involved, sub 100 bucks. And this was late 2013, when I meaningfully started trying to invest in it. And there was a C-SPAN hearing at the time where the narrative for people who are outside of the crypto space were wondering, well, is the government just going to come in and find a way to squash this? And there was a hearing on C-SPAN where they had the Department of Homeland Security, you know, just various government regulatory bodies come along and give their opinion on Bitcoin. And everyone was very positive. They said, you shouldn't snuff out a new technology, you shouldn't be scared of it. Instead, you retrain your staff, you hire new people, you put in appropriate measures in place, and you don't stifle the growth and the innovation.

• 1:43:14Speaker 02

  You just monitor it in new and novel ways. And the price of Bitcoin quickly shot up over a thousand bucks. Everyone was so excited because the narrative of the government's not going to squash this thing, well, quickly went away. And Bitcoin went up to maybe as high as $1,200 and I thought I was a genius. And then Bitcoin retreated into this bear market where it touched maybe as low as 250. I don't know the exact price. That's really where I learned to separate my stomach from my head and say, you had a thesis when you got involved. You thought long-term this had the potential to be a very asymmetric bet. Ignore the volatility in the short term and look away. Go about your life and focus on the technology in the building and let's see what happens.

• 1:43:58Speaker 02

  And here we are, years later, there was another bull run and then bear market starting in 2017, down through 2018, 2019 and half of 2020 where, you know, again, some stomach volatility. But if you just zoom out and say, are these things going to continue to grow and be more used and more accepted and built upon by a new set of people? Then I think that this is a really interesting time to participate and consider it as a piece of a diversified portfolio.

• 1:44:29Ryan Sean Adams?

  Gentlemen, this has been such a pleasure to talk to you both from Ether Capital. Uniswap passed Coinbase, ETH2 launched, mainstream didn't even notice, but you guys are noticing and you're serving as a bridge from Ethereum and the Ethereum commodity to traditional investors. We greatly appreciate the work you're doing and thanks for joining us on Bankless.

• 1:44:52Speaker 03

  Thanks for having us.

• 1:44:53Speaker 02

  Thank you for having us.

• 1:44:55Ryan Sean Adams?

  Well, guys, we told you this was going to be an episode that was bullish ETH and I think we delivered. We even got a hockey stick analogy in there for the Canadians that listen to Bankless. This has been a lot of fun. Some action items for you. A few things to check out. The Ether Capital newsletter and Ether Capital podcast are really fantastic. Ether Capital is putting some resources into making really good 101, 202 level content. Good to share with your family. They're financially minded. Maybe they're crypto novices. They don't want to hear terms like sharding and EIP 1559. These podcasts and this newsletter breaks it down. We will include a link in the show notes

• 1:45:37Ryan Sean Adams?

  so you can access them. Also, we'll include a link to Stefan's amazing article Ether, The Birth of the Digital Bond. That was published in Bankless back in the summer. I think we'll also include a link to the Ether Capital Shelf Prospectus. It's, you know, if you've never looked at a publicly traded document, there's a lot of kind of regulatory verbiage in there, but it also makes a really compelling case for Ether as an asset. So that is just of interest, I think, to anyone who is looking in this space. Good, good, definitely some good material in that document.

• 1:46:16David Hoffman?

  And don't forget, you guys, we are trying to get the Bankless gospel in as many ears as possible. And the way that we do that is by climbing up the ranks of iTunes Finance and Investing podcasts. If you want to help grow Bankless, if you want to help grow Ethereum, and if you want to get as many people onboard the Ark as possible, please give us those five-star reviews wherever you listen to podcasts. We appreciate it.

• 1:46:40Ryan Sean Adams?

  As always, risks and disclaimers. ETH is risky. So is crypto. So is DeFi. You could 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.