ARK Analysts call $1M BTC, $180K ETH | Bullish Crypto Price Predictions

In their seminal 'Big Ideas' report for 2022, the ARK team predicts the prices of $1M for Bitcoin and over $180K for Ether. These numbers may seem outrageous in a short time frame, but with a broader perspective about the total addressable market for cryptoassets over the next decade, these ambitious predictions sharpen into something more than exuberance. With paradigm shifts underway, we're bringing on ARK analysts Frank Downing and Yassine Elmandjra to discuss the why, how, and when of these hot price predictions–and why it's more than just the price that matters. How bullish are you? Not bullish enough. ------ 📣 NOTIONAL FINANCE | DeFi's Leading Fixed Rate Yield https://bankless.cc/Notional ------ 🚀 SUBSCRIBE TO NEWSLETTER: https://newsletter.banklesshq.com/ 🎙️ SUBSCRIBE TO PODCAST: http://podcast.banklesshq.com/ ------ BANKLESS SPONSOR TOOLS: 👀 POLYGON | LAYER 2 DEFI https://bankless.cc/Polygon ❎ ACROSS | BRIDGE TO LAYER 2 https://bankless.cc/Across 🦊 METAMASK | THE CRYPTO WALLET https://bankless.cc/metamask 💳 LEDGER | THE CRYPTO LIFE CARD https://bankless.cc/Ledger 🧙‍♂️ ALCHEMIX | SELF REPAYING LOANS https://bankless.cc/Alchemix 🦄 UNISWAP | DECENTRALIZED FUNDING https://bankless.cc/UniGrants ------ Timestamps: 0:00 Intro 6:45 Guest Intros 11:32 Big Ideas 2022 Report 14:00 Public Blockchains Transforming Every Asset Class 20:50 Each Revolution Involves A Different Level of Trust 32:50 Bitcoin Could Exceed $1 Million by 2030 48:05 Crypto-Powered Finance Might Scale More Efficiently Than TradFi 53:38 ETH Market Cap Could Exceed $20T In The Next 10 Years 1:02:09 NFTs Could Shift From Static Collectibles to Dynamic Digital Assets 1:05:35 The Growth of the Metaverse 1:07:45 Final Thoughts 1:12:30 Disclaimers ------ Resources: Frank Downing on Twitter: https://twitter.com/downingark Yassine Elmandjra on Twitter: https://twitter.com/yassineark?lang=en Big Ideas 2022 Report: https://research.ark-invest.com/hubfs/1_Download_Files_ARK-Invest/White_Papers/ARK_BigIdeas2022.pdf Ark Invest https://ark-invest.com/ ----- Not financial or tax advice. This channel is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. This video is not tax advice. Talk to your accountant. Do your own research. Disclosure. From time-to-time I may add links in this newsletter to products I use. I may receive commission if you make a purchase through one of these links. Additionally, the Bankless writers hold crypto assets. See our investment disclosures here: https://newsletter.banklesshq.com/p/bankless-disclosures

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

• 0:06Ryan Sean Adams?

  Hey Bankless Nation, welcome to another State of the Nation edition. David, this is going to be a bullish episode. Are you ready to be bullish, man?

• 0:13David Hoffman?

  Always, Ryan. It's my natural state. And we're going to get some extra help to do that today, too.

• 0:19Ryan Sean Adams?

  Yeah, so we have two of the analysts behind a report just put out by ARK Invest. And so if you remember the Arc folks, we had Kathy Wood on the podcast a few months ago. And with her, an analyst, Yaseen, who covers this space. We have two of the analysts who just published a 2022 update on prices. And we got to say, it's maybe the most bullish price report that we've seen. Like, I'm almost worried, David, that these prices that we're about to say are more bullish than anything we've ever talked about on Bankless.

• 0:54David Hoffman?

  Yeah.

• 0:55Ryan Sean Adams?

  What are these price targets for Bitcoin and ETH?

• 0:57David Hoffman?

  Yeah, we are coming in with a hot prediction of a million dollar per Bitcoin and $180,000 per ETH, which is really bullish. Now, granted, we have between eight and 10 years to get those prices.

• 1:10Ryan Sean Adams?

  It's not coming next month.

• 1:11David Hoffman?

  It's not next month. It's not next year. But still, at the end of the day, when people like Arc, who are famous for actually being able to look into the future, rather than look towards the path to guide the future, come in with a hot prediction like that, I want to understand the math and the analysis and the reasoning behind these numbers. Because these aren't just some random crypto YouTubers pulling some numbers out of their whatevers. Like, these are your ARK analysts who say that these are ridiculous numbers. And so we want to see, why are they actually not ridiculous? Because there's a whole report, which is also linked in the show notes as well. If you guys want to follow along, there's a whole report to guide some of these models and predictions.

• 1:50Ryan Sean Adams?

  So we got the receipts here. We're going to go through the slides, go through the rationale of why 180k ETH and why $1 million per Bitcoin in just a minute. David, before we get in, got to talk about our friends at Notional Finance. So I'm about to sound like Grandpa DeFi here.

• 2:10David Hoffman?

  Once again.

• 2:11Ryan Sean Adams?

  Back in my day, don't say that. Back in my day, okay, there was no such thing in DeFi as a fixed rate loan. Okay, we had volatile, like every block adjustment variable rate loans for just about everything. And so if you took out a loan at like, you know, 3% one day, it could crank up to like 10% the next. And the same was true.

• 2:33David Hoffman?

  In DeFi summary, it got to 60.

• 2:35Ryan Sean Adams?

  Yeah, I know. And the same is true with interest, right? You could be making like nice, you know, 5% gains one day and suddenly you're down to 1%. You're like, what happened? Well, now the kids these days have the benefit of fixed APY loans. Okay, and Notional is putting one out there in DeFi. Look at this, $432 million locked in this protocol, 279 million loan value, 8.57% fixed APY loan on up to a year for USDC. That's what you can get at Notional right now. Pretty awesome to see.

• 3:10David Hoffman?

  Yeah, the last time I saw a fixed rate loan platform, it was down at like 3.5%. This is the highest fixed rate APY platform that I've ever seen. There is a link in the show notes to go check it out if you are interested in getting a fixed rate loan on your crypto assets.

• 3:29Ryan Sean Adams?

  There you go. That's it, guys. So head over to Notional and make that happen. Get some of those fixed rate loans and lend some of your assets as well. David, got to ask you the question we start every episode with, every State of the Nation that is, which is, what is the state of the nation today?

• 3:48David Hoffman?

  It's bullish, Ryan. State of the Nation is very bullish. I mean, Bankless listeners will know that Ryan and I are bullish, but like we're always bullish. So sometimes like we start making.

• 3:57Ryan Sean Adams?

  People get sick of hearing it.

• 3:58David Hoffman?

  Yeah, so we start making content, we start. Like interviewing people in like Washington DC or we start, you know, asking Vitalik about the future of the Ethereum roadmap. And then sometimes we forgot to forget to talk about like how incredibly bullish we are. And it's also nice to bring in the ARC analysts because they come in it from a different perspective. And, and so we, we like people who are bullish and want to talk about bullish things. So Ryan, the state of the nation today is bullish.

• 4:22Ryan Sean Adams?

  All right. Well, I'm ready to get more bullish and our guests are as well. So guys, we will be back with the ARC analysts, ARC analysts talking about 1 million Bitcoin price target, 180k ETH price target in just a minute. Before we do, we want to thank the sponsors that made this episode possible.

• 4:42David Hoffman?

  So you've got some money and you want to spend.

• 4:45Speaker 02

  You, me, shopping, now, bro.

• 4:48David Hoffman?

  When you should be saving.

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• 5:29David Hoffman?

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• 5:33Speaker 03

  Are you winning some?

• 5:41David Hoffman?

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• 6:23David Hoffman?

  making the Ledger Live app your one-stop shop for all of your financial needs. Go to ledger.com, grab a Ledger and download Ledger Live to get all of your DeFi applications all in one place. The Layer 2 era is upon us. Ethereum's Layer 2 ecosystem is growing every day and we need L2 bridges to be fast and efficient in order to live a Layer 2 life. A cross is the fastest and cheapest and most secure cross-chain bridge. With a cross, you don't have to worry about the long wait times or high fees to get your assets back to the Layer 1. Assets are bridged and available for use almost instantaneously. Across's bridges are powered by UMA's Optimistic Oracle to securely transfer tokens from Layer 2 back to Ethereum. Across is critical ecosystem infrastructure and ownership is being handed over to the community.

• 7:06David Hoffman?

  You can be a part of this story of a cross by joining the Discord and becoming a co-founder and helping to design the fair, fair launch of a cross. If you want to bridge your assets quickly and securely, go to across.to to bridge your assets between ETH, Optimism, Arbitrum or Bova Networks.

• 7:25Ryan Sean Adams?

  Hey guys, we are back with the analyst from ARK Invest. Want to introduce you to Yaseen Al Madra. He's been on the podcast before. Yaseen joined ARK Invest in July 2018. He was Arc's blockchain crypto analyst, still is. His research focuses on crypto assets, of course, as well as a Bitcoin mining. I've been told Yaseen is the Bitcoin bull in the group. Also joining, who's joining us is Frank Downing. Frank joined Arc in April 2021. He was an analyst for Arc's next-generation internet strategy. He's focused on cloud computing, software as a service, now crypto assets. Guys, the two of you wrote a fantastic report. Really excited to dive into it. Welcome to Bankless.

• 8:11Speaker 04

  Thanks for having us. Honored to be here. Good to be back again, this time with my partner in crime, Frank. So we're really excited to share some of this moon juice that we have for you.

• 8:25Ryan Sean Adams?

  Good description, moon juice. All right. You know what? I think just maybe getting some background on both of you would be useful before we dive into the details of this big ideas report. Maybe listeners want to peek in the inside life of an ARC analyst. So what does it actually mean to be an analyst at ARC? What's the day to day you see? And why don't we start with you?

• 8:48Speaker 04

  Sure. I mean, I guess the best way to describe it is it's really just a front row seat on all things tech. By way of background, I studied engineering and finance when I was in school and fell down the crypto rabbit hole in early 2017 and kind of told myself, okay, I'm committed to finding an opportunity that will allow me to basically fall down the rabbit hole even further and stumbled upon ARC through Twitter. And ultimately, here I am about four years later as an analyst that that really has a lot of flexibility in terms of discovering kind of the different multiple rabbit holes within crypto. So I'd say much of the work is divided

• 9:33Speaker 04

  between this day to day kind of research of, okay, let's think kind of top down, long term thesis of how we think the industry is evolving, combined with, you know, more of the product development side of, okay, we are asset managers and what, how do we answer the question of what's the best way to gain exposure to this asset class?

• 9:54Ryan Sean Adams?

  Frank, how about you? So you've been at ARC for almost up to a year now. So what's the day to day like for you? What would you add to what you've seen so far?

• 10:03Speaker 05

  Yeah, getting up on a year now. It's pretty crazy how fast time has flown. But I actually, similarly, you see, and I studied business and computer science and fell into the crypto rabbit hole also in 2017, building my spending pretty much all the cash I had to build a few GPU mining rigs at my house and had to convince my parents that I wasn't going to set the house on fire.

• 10:24David Hoffman?

  Well, that is the same exact story how I got into Ethereum.

• 10:27Ryan Sean Adams?

  Same time.

• 10:29David Hoffman?

  Same timing.

• 10:30Ryan Sean Adams?

  Yeah.

• 10:31Speaker 05

  But the day-to-day at ARC, I mean, it was pitched to me as essentially getting paid to study and report on what you're most interested in, which for me is both crypto and cloud computing. My previous career, I was a data engineer and a cloud engineer, and I now get to do both of those day-to-day at ARC, which is awesome. We spend our weeks kind of chalked up into a few different segments. Mondays are always portfolio reviews, looking at our holdings and in aggregate what happened over the market in the past week. The middle of the week is more this long-form, long-term thinking, research that you seen mentioned.

• 11:14Speaker 05

  And then Fridays, we have a brainstorm with a group of advisors and external parties to help battle test our thinking and talk about the latest and greatest things. And crypto, even just over my time here, crypto has taken up a larger and larger portion of that brainstorm, which is always pretty fun.

• 11:31David Hoffman?

  Well, guys, it sounds like you guys both have dream jobs that you have a ton of fun in. And right before we get into this report, I just kind of want to also give context to the listeners about what this report actually is. It's not just about crypto. It's about everything that ARC pays attention to, which is a lot. And so there's even more than just crypto in here. Crypto actually does one of many sections in here as well. But are you guys' fingerprints in this report? Did you guys help write this? Or how were you guys involved with the actual creation of this report?

• 12:06Speaker 05

  Sure. So maybe taking a step back and giving context as to how we're divided across the analyst team. So we aren't kind of a traditional asset management shop where our analysts are divided by sectors. They're actually divided by technology platforms. And we have three, I'm sorry, five technology platforms that we effectively center our research around. So crypto is one of those. We have genomics, DNA sequencing, energy, robotics, AI, deep learning. And so our analysts are kind of experts in

• 12:41Speaker 04

  These thematic platforms. So there are five thematic platforms that all have 14 emerging technologies that come out of those platforms. And you can see here, there, there, you know, a dozen or so sections that touch on it. And each analyst effectively is, is the one, you know, drafting and, and, and building out their respective sections.

• 13:05David Hoffman?

  Okay. So just to reiterate, Yaseen, you are the big Bitcoin bull. So it sounds like you had a lot of your, your fingerprints on the Bitcoin section. And then Frank, you're the, the Ethereum ETH bull. Were you also involved Frank with the NFT metaverse side as well?

• 13:20Speaker 05

  Yeah, it was myself plus our other next generation analyst Nick Gruce and Andrew Kim, who also work on that team. We try to be as collaborative as possible, particularly because a lot of these technologies are converging. And crypto is, especially when you get into web three metaverse is so tightly integrated to the consumer internet. That Nick plays as much a hand in that section as we play. And we, you know, the, the crypto overview section, the first crypto section that's in there was really the whole team working on it. And it's, it's awesome to see that report come out and get to talk about it in more long form environments like this. It really is the culmination of like six plus months worth of work to, to put that together.

• 14:02David Hoffman?

  Well, you guys are certainly making our job easier at Bankless to report on why these big ideas are so fun to talk about. So let's go ahead and dive right into it. And it sounds like this show is going to come in three sections. And also I'm going to start reformatting this OBS. That's why the screen is moving around for these viewers out there. So we're going to talk about Bitcoin first, and then we're going to talk about ETH second, but then NFT metaverse third. So Yaseen is probably going to have most of the floor for the first half of the show. And then we'll finish up with Frank for the Ethereum metaverse stuff for the second half of the show. But this is, this, this is probably the section that you were talking about where everyone probably had their hands in these first few slides about blockchains and crypto assets. And it's just a really nice slide to start on first. And again, if listeners want to go and click that link in the show notes, so they can follow along.

• 14:46David Hoffman?

  This is slide number 41. But this is just the bull case for crypto and blockchain at large. The title of this slide is "Public Lockchains Could Transform Every Traditional Asset Class." And this is the metaphor that I think maybe people have heard before where, you know, we had all these different communication mediums, the radio, the TV, the newspaper, and then the internet came along, and then all of a sudden, all those things got bundled up into the internet. And this slide is doing the same thing for financial assets. Is this basically, is the conclusion of ARC and also this part of the report just that every single financial asset will eventually become a crypto asset?

• 15:25Speaker 04

  I think that's spot on in terms of the framing. I think part of the reason for this slide is that usually the framing to describe crypto assets as entirely new asset class is one that suggests that it's distinct from traditional asset classes, right, and spans every super class. So, you know, we published a paper in 2017 that basically suggested that crypto assets can't really fit under the equity bucket, or the bond bucket, or the physical commodities bucket. It is not really a capital asset, or a store of value asset, or a consumable, transformable asset. It's almost like all in the same. So, the initial premise is not only is crypto distinct from traditional asset classes, but it also is going to transform traditional asset classes.

• 16:09Speaker 04

  And it's going to affect the same asset classes that it doesn't really fit under. This was actually a framing that was introduced by Balaji Srinivasanam, who like quite eloquently explains how we're seeing a generational shift from internet to crypto, in the same way that we saw shift from like desktop to the internet. And the analogy that he likes to give is like blockchains are to scarcity what the internet was to information. And this fundamentally changes kind of how software is developed, how it's funded, how it's monetized, and how it's used. And we're moving from kind of online to on-chain. And by moving online to on-chain, then we have these sort of assets

• 16:52Speaker 04

  that can, that of course can represent scarcity, that can represent ownership, that effectively, you know, that affect traditional assets. Asset classes, so whether that's synthetic equity exposure through crypto equities, whether it's kind of the crypto commodities through kind of the ability to send bandwidth or storage, we're seeing the rise of NFTs and crypto art and store of value assets, or you know, maybe the traditional kind of corporate structure in DAOs. So all of these really are derivatives of traditional asset classes that cryptos distinct from, but in turn, we're actually seeing that it's impacted them.

• 17:31David Hoffman?

  Frank, if you want to add anything on to that, go ahead, but I also want to throw to you the question. I'm assuming at some time in your role in ARC, you guys have to explain concepts like this to people who are still trying to wrap their heads around it. How does that mental model land with people? Is that helpful to explain crypto? Or are people skeptical when you explain that concept to them?

• 17:53Speaker 04

  So I would say that the easiest explanation is one that shows crypto as being a distinct and separate asset class, right? So it's like, okay, how do you value crypto? Well, you can't value it like an equity, or you can't imply like a DCF necessarily, especially for these non-productive monetary assets. It's not really like a bond. It's not really like a commodity. And so, and so providing a framework by which they understand how to assess traditional asset classes, you can then just say crypto asset, the reason why you don't understand it is because it requires an entirely new framework. So effectively, don't try to force fit the traditional

• 18:31Speaker 04

  framework into trying to understand crypto assets. I think increasingly, there is, people are resonating with how crypto can transform every traditional asset class, especially as the investment theses and the use cases in crypto develop, where there isn't necessarily a one size fits all model. We're seeing a lot of kind of revolutions emerge that are in parallel with, you know, the Bitcoin or the monetary revolution that might require like a new kind of framing that more closely aligns to what they're familiar with. So any opportunity that we have to draw to kind of the old world or traditional frameworks is one that resonates

• 19:15Speaker 04

  with with the people that we're speaking to. And I think this does a pretty good job doing that.

• 19:19Ryan Sean Adams?

  Frank, you came from like a software as a service, next gen cloud platform sort of world too, and like the engineering background, you know, A16Z talks about this in a similar term, they talk about it looks software is eating the world. And now the framing for crypto is software is coming to eat money and finance and digitally scarce things, all of the scarce things that we have as assets. Is that good framing in your mind? Do you think that this is just the same movement of software eating the world and this time it's coming for banks?

• 19:52Speaker 05

  Yeah, I think it is. And I'll steal, I think, one of Yacine's lines, but we're at a stage where, you know, every bank and traditional financial firm has to have a fintech strategy now because fintech has been disrupting the traditional banks. And I think we're getting to a stage going forward where every fintech needs to have a crypto strategy. And crypto is where that industry is evolving and moving on to more crypto native rails. And with regards to kind of this slide, and especially relating it to the internet and software, I think the more that we can tie these new paradigms to, you know, what the traditional world thinks, I think like the evolution of the internet is a very tangible topic for people because

• 20:34Speaker 05

  they use these services every day and being able to relate that to how crypto is slowly taking over those more traditional platforms or the more traditional financial services, the better we can be at educating.

• 20:46Ryan Sean Adams?

  Okay, so let's keep moving in the slide deck. And I want to move maybe to slide 43, which the title of this slide is each revolution involves a different level of trust. And I think at this point in the crypto section, you sort of established that crypto is coming for finance and digital scarcity. It is eating the world. This is another, you know, software eating the world type moment. And the next question that somebody new to crypto might have for you, even somebody in crypto is, okay, yeah, but what's the difference between a Bitcoin and Ethereum and Avalanche and a Terra and like Binance Smart Chain and go down the list of all of these assets? And to someone who's new, they look at the assets and they're just like, ah, they kind of all look the same. Like, what's the difference?

• 21:30Ryan Sean Adams?

  And I think this slide does a really good job talking about the spectrum of centralized trust and decentralized trust. So decentralized trust on the left and centralized trust on the right. And the use cases that generally fall out of that section. So there are three use cases here. The first requiring the highest degree of decentralized trust is the money revolution. We could talk about that. Somewhat in the middle, but still skewing towards the decentralized trust side of things is the financial and internet revolution. So we might fit DeFi here as well as, you know, some of the Web three things that are coming out. And then on the, on the right side of the spectrum, the centralized trust side of the

• 22:12Ryan Sean Adams?

  spectrum is basically traditional finance where we have the status quo and the banking system as we know it. And each of these platforms, each of these chains, each of these assets sort of fit in different places on the, the spectrum of centralization and decentralization. Yaseen, could you give us kind of the big idea from this slide? And talk about where some of these major platforms fit and why they fit in the places they do, in your opinion?

• 22:41Speaker 04

  Sure. Honestly, I think you've summed it up perfectly. And it's, it's great that, that you did because we grappled a lot with this slide. With the main takeaway that we wanted from this slide to be that there are no solutions. There are only trade offs and these trade offs are made to achieve the functionality and the security appropriate for a specific use case. So the, the, the idea that we compare blockchains without recognizing their distinctive design or value proposition, I think is, is very counterproductive and why, you know, there's so much animosity between chains. What we've tried to present here is that there are different revolutions that are evolving in parallel. We think that the most profound is the money revolution, but each of these revolutions

• 23:24Speaker 04

  are going to require a different set of trade offs and network implementations. And so you have especially these newer market participants that are questioning, you know, why are Bitcoiners so only interested in Bitcoin, right? Or why do you have these Bitcoin That think all these other chains are a scam. And and they kind of fault them for being closed minded or unwilling to compromise. But it actually ties back to some of Bitcoin's principles, which, you know, in our view can't be replicated by other public blockchains. And this includes like a very strong regard for property rights or a high predictability in monetary policy. A commitment to cheap validation and decentralization, a fairness and issuance through proof of work.

• 24:06Speaker 04

  All of these, we think, make it a prime candidate to compete as a global based money. Uh, which we think is a revolution that necessitates decentralization and security over something like scalability or features. Uh, but as we move along the spectrum and to your point, Ryan, we we start to see public blockchains like Ethereum. And to an even larger extent, Solana and Avalanche and Terra that are that are trading off that potential trust minimization for convenience, for more features, for higher throughput. Which it, which to your point, if you are going to kind of create a DeFi ecosystem or a web three dot O. It is likely, you know, necessary to to fulfill those those demands that users have.

• 24:52Speaker 04

  Um, so the biggest question is like, what does that that perfect balance look like, especially in the financial internet revolution? I think we have a good idea that the money revolution is going to require max conservatism. Uh, and the more boring and predictable it is, the better. And on the status quo, it's like you're unapologetically centralized. So if you're a Visa or PayPal. It's like, I kind of trust the the intermediaries that are facilitating the flow of transactions. So the big question, and I know Frank has a lot on a lot of thoughts on this is what does that perfect balance look like? Um, and what are some of the dynamics that are emerging, let's say, between Ethereum versus Solana and trying to strike that perfect balance?

• 25:33Ryan Sean Adams?

  I think it's interesting. So, uh, you know, how you how you drew this where Bitcoin is squarely in the money revolution. You have Ethereum sort of spanning money revolution and financial and internet revolutions. And like in the in the center, not necessarily dipping into money are like Solana, Avalanche. And Binance is sort of almost a little bit status quo.

• 25:53David Hoffman?

  Ridiculously centralized.

• 25:55Ryan Sean Adams?

  Right. It's much more centralized. And I do think probably some people looking at this slide might quibble with where the placement is. So like myself personally, I probably would have extended Ethereum even further into the money revolution. But also, it's interesting because some of these platforms change over time. And so maybe you might argue Ethereum squarely started in the center and has kind of stretched into the money revolution over time as it's being used more as money. But regardless, I'm curious, Frank, maybe you could weigh in here on the rationale. So why is Bitcoin squarely on the left? Why is Ethereum sort of spanning? Why are Solana,

• 26:35Ryan Sean Adams?

  Avalanche, and Terra kind of in the center? Why is Binance Smart Chain? Why is it sticking into the status quo lane? Can you just give us a high level for why these specific projects in the place that they're in?

• 26:48Speaker 05

  Definitely. And first, I draw the difference. One of the primary differences that leads to placement between the money revolution and the financial and internet revolutions, like Yacine said, is conservatism. For a base money that is resistant to nation-state level attacks or influences, that has maximal assurances of seizure resistance, you need to know that what you're building on or what you're holding is consistent and not changing. And that's actually completely different from what you may need to compete in the financial and internet revolutions, which is the frontier of technology, being able to push out updates so you can process more transactions, or enable new types of transactions, or generally enable greater functionality. And so

• 27:31Speaker 05

  that's why Bitcoin, because it has this ethos of "we are not changing, we are not evolving", at least to the extent that these other chains are, puts it in that monetary revolution. When you look towards financial and internet, to compete, Ethereum, we know, has the ETH 2.0 vision. We're going to go proof of stake. We're going to enable sharding. We're pushing on rollups. We have many EIPs that are being Rolled out and and that's what enables it really to to compete with some of these newer chains like Solana Avalanche and Terra, which don't necessarily have the stability or the track record to be considered money.

• 28:12Speaker 05

  And the economies that are built on top of them are much smaller, so they're not really being used as money to the extent extent as Ether is. If you look at Ether and DeFi, it's a pristine form of collateral. It's with ETH 2.0 or with proof of state going to be this internet bond, so to speak, with the staking yield. It it does for and it's the main currency denominating a majority of NFT volume across any chain. So it is functioning as money and that's why we have it splayed across. Solana, Avalanche and Terra are making this what I we would consider a distinct trade off of pushing through more throughput at a lower fee, but sacrificing some of that stability and some of that level of decentralization

• 28:56Speaker 05

  by having greater requirements to operate the network or having a more centralized token holder base, which is increasingly important in terms of the level of decentralization in proof of state compared to proof of work. Because in proof of state, your influence is denominated in the tokens that you hold rather than the mining hardware, which is off network. When you look at Binance Smart Chain, it has some of the aspects of public blockchains. It's composable. It's open and transparent. Mostly anybody can read and write, with the exception that that guarantee that anybody can read and write is dictated by a much smaller, more centralized group of validators. So it may look like it offers you everything as a public blockchain,

• 29:41Speaker 05

  but you need to make a trust assumption that these validators will continue to operate that network in a way that gives you these features. And so that's what pushes it closer to the status quo. If there was a desire to to censor some transactions or throttle the network in some way, the validators controlled by Binance could probably do that pretty easily, which is not unlike Amazon delisting a seller, Visa blocking certain transactions. And the the more you make these trade offs in terms of this trust assumptions required to operate the network, the closer you get to the status quo on the right.

• 30:16Ryan Sean Adams?

  Fun fact about Binance Smart Chain, they just renamed themselves to BNB Chain, I saw this morning. I think they want to separate, I think they want to separate the Binance name from this thing that they're creating so that they're not known as like Binance affiliated, right? So it's an interesting way to try to, try to span these columns here.

• 30:36Speaker 05

  Yeah, and that's also like, to your point, how they, they can change over time based on how the network evolves. Is that, is Solana, which is, I would say, made sacrifices in decentralization to promote high throughput, going to progressively decentralize and move its place on this chain? And is Ether or Ethereum in necessity to compete with Solana on the throughput? Is that going to force Ethereum to make some sacrifices on decentralization as well to compete on the throughput side?

• 31:07Ryan Sean Adams?

  And what's, what's always funny about this game too, Frank, is like, there's a lot of profit and money to be made in playing the decentralized theater game as well. Which is why it's hard, I think, for outsiders to like, look at the space and get some objective viewpoint. Because all of these chains, I think, will tell you, many of them will, that they are equally decentralized as well, right? At least some of their marketing language will. The, the trade-offs don't always get acknowledged. This is a separate discussion, of course, but yeah, David, you wanted to say something.

• 31:41David Hoffman?

  Yeah, you got, you talked about how these things tend to change over time. So I'm, I'm hoping next time you guys write this report, this big ideas report, that you guys keep this slide and, you know, reorient the placement of these different chains as they get updated in 2023 and 2024. If I had a prediction, we would actually see some Ethereum Layer 2s also on the right side of the financial and internet revolution spectrum, filling up that gap as well. And even perhaps Ether's deflationary aspect allows Ether to push into the left side, into the money revolution as well, in addition to that, but this is the

• 32:14Ryan Sean Adams?

  David, if you want that, write your own report.

• 32:16David Hoffman?

  This is the bankless bias coming out now, so there's that.

• 32:18Ryan Sean Adams?

  These guys wrote the report.

• 32:21David Hoffman?

  Anyways.

• 32:22Speaker 04

  It is well, I think it is well taken. One of the questions that we had is, should we make these bands of equal length? And just kind of commit to a more, you know, subjective placement? But perhaps there is a scenario where the bands lengthen in some ways. You know, I go back to the fact that I still think that, you know, there are no solutions and only trade-offs, and that's the trade-off. That people that these chains are gonna have to make, but well taken, definitely well taken.

• 32:51David Hoffman?

  As I want to skip ahead to slide 55, because this is where we start to get into some of the fun stuff. This is the Bitcoin headline title, "The price of one Bitcoin could exceed $1 million by 2030." And there's a bunch of math that goes into it, and this is the reason why I'm not an analyst, because I kind of don't really understand how these numbers came to be. But Yaseen, can you kind of just walk us through the slide about how this $1 million Bitcoin prediction came to be?

• 33:18Speaker 04

  Sure, I think for context, it'd be helpful if you could just briefly go to the previous slide to give you just what that actually means in the context of traditional asset classes. So first off, if you believe that crypto broadly is a distinct asset class, it's also going to affect other asset classes, then you'd imagine that, you know, in the next few decades, it is going to be on par with other asset classes. So, you know, we've sort of sized the opportunities in the next 10 years as being, you know, 25-fold from where it is today, which would amount to about a $28 trillion market cap. But in the context of global equities and M2 and global bonds and real estate,

• 34:00Speaker 04

  that's actually still only a fraction of the broader kind of asset class base. So with that, the $1 million does sound, you know, quite like an insane number to throw around. So if you go to the next slide, we can break that down.

• 34:19David Hoffman?

  Yeah, and real quick, I will note, Yaseen, though, that this, you know, $28 trillion like price would be, you know, almost 3x gold. So that in itself is fairly bold.

• 34:32Speaker 04

  That's right, that is right. And so you can kind of make the argument again that Bitcoin is going to challenge gold as a global store of value. You can see in the opportunities slide that we actually estimate that Bitcoin will, in the gold use case, only capture around 50% of gold's market share as a digital store of value. But I'd make the argument that, you know... Bitcoin is a hundred X better version of gold. It's it's more portable, it's more divisible. You know, every marginal kind of in individual who's transitioning from the physical to the digital world isn't thinking about buying gold. I've never considered ever buying gold, and yet every chance I have, I buy Bitcoin.

• 35:15Speaker 04

  So there is kind of just a shift in the mentality of of of these kind of next generation asset holders. But with that being said, it it it is a big number. It's it is relative to when we first sized the opportunity, though, a smaller jump. So we actually first gained exposure to Bitcoin in 2015 through GBTC when Bitcoin was trading around $200. And at the time, we had predicted a $50,000 price. And you'd imagine like a $200 to $50,000, you must be absolutely absurd, right? That's a 200X from from here.

• 35:53Speaker 04

  So, you know, we're effectively predicting a 50X to, I'm sorry, a $50,000 to $1 million price, which in relative terms is a 20X. So actually, an order of magnitude less than kind of the previous predictions that we've had. I think that the main takeaway from sizing the opportunity broadly and how we think about it is Bitcoins use cases, given it is a monetary asset that has a fixed supply, are additive, right? So there is a fixed 21 million Bitcoin supply cap, which means that for every Bitcoin that's being used as a digital gold can't be used as a remittance asset. And for every Bitcoin that's being reused as a remittance asset can't be used as protection against arbitrary asset feature.

• 36:33Speaker 04

  So when you combine kind of the 21 million fixed supply with the fact that that supply itself is becoming more and more longer term focused, where people are buying and never, you know, adding to and and and never willing to sell, then the price multiplier as well increases. We're now for every dollar that flows into the asset, the the reflection on what that looks like for market cap is not necessarily $1. It might be $10. It might be $25. So the point is that for many of these use cases, specifically for the nation state treasury and for the corporate treasury, we have assumed a price multiplier

• 37:12Speaker 04

  where you look at kind of the liquid supply that's available in Bitcoin and you just take that as kind of the denominator set that's absorbing, you know, new demand.

• 37:21David Hoffman?

  Before we move on, I want to just reiterate that point because that's a point about Bitcoin that I've never heard before that I think is really cool. What you just said is that because buyers of Bitcoin tend to be long-term focused, a dollar of buying Bitcoin at $30,000 price tag has some amount of impact on the price, but a dollar at buying the $300,000 Bitcoin price has an outsized impact in comparison to the $30,000 price tag, is that right?

• 37:48Speaker 04

  That's exactly right. I look at Bitcoin as like what many people call like a Veblen good, which is a good that actually the demand for the good increases as the price increases. So like, you know, luxury is considered a Veblen good. But more than that, it's like if you employ Bitcoin as this long-term asset where the number one rule of Bitcoin should be that you forget that you own any Bitcoin, then by definition, there is a supply shock that isn't necessarily priced in today. In 10 years, if you have nation-states competing on, you know, amassing satoshis, then every dollar that's going into Bitcoin is going to be sucked up by a subset of that 21 million Bitcoin supply.

• 38:31Speaker 04

  So there is definitely a case to be made that the more we see nation-state adoption institutions and the more it's seen as less of a speculative bet and as a long-term investment, then we might see this kind of fly based on just small inflows. And even if we don't see the small inflows, and you know, I'd urge you to read for the audience, our white paper that was published a year and a half ago, that details some of these use cases, including economic settlement network and digital gold and teaser resistant asset. You know, these are all, I think, pretty reasonable estimates.

• 39:10Speaker 04

  If you do believe that Bitcoin is this global monetary asset and really kind of a generational opportunity to really put your foot in the ground in the digital world as the economy shifts to the digital world.

• 39:26David Hoffman?

  You see, and I want to go through some of these categories really quick, particularly for the podcast listeners.

• 39:31Ryan Sean Adams?

  So if you're watching on YouTube, you can you can see this slide and you can see the breakdown. But you know, for the podcast listeners, I'll just rattle them off really quick. And maybe you could give some color commentary, you know, where you think it requires it. So when you say this thing, like the estimates are somewhat conservative, they're not wild, they're not crazy. The way you get to 28.5 trillion dollars, which is a million dollar Bitcoin price is by consuming 50% of gold's market cap and being the digital gold. So that's where a chunk of this comes from. By being a corporate treasury, that's where 5% of this, 5% of cash on the S and P 500 would be invested in corporate treasury.

• 40:16Ryan Sean Adams?

  We've seen some of this with MicroStrategy, we've seen some of this in other, you know, companies that are acquiring Bitcoin for their balance sheets. 2.5% of institutional asset based basis is Bitcoin. Like right now, it's it's got to be far less than than 1% for institutional investments. Right. And then we have 5% of global high net worth investments. So these are all of the kind of the global whales, the billionaires and the, you know, hundreds of millionaires of the world. They choose to store 5% of their wealth in Bitcoin as a seizure resistant asset. And then 1% of total reserves of nation state treasuries go to Bitcoin.

• 40:56Ryan Sean Adams?

  And this is just like what you see here in the in these things is just kind of an extrapolation of a trend that we've already seen. Right. So El Salvador, they're acquiring Bitcoin. Okay, now what would it look like if you throttle that up to 1% of all nation state treasuries? You know, high net worth individuals billionaires are already buying Bitcoins. What happens if that becomes 5% institutional investments? We're already seeing that with institutions are coming with, you know, big endowments and that sort of thing. Corporate treasuries, the MicroStrategy example, and then this belief of digital gold. So all of these things are happening. What you're doing is you're just kind of extrapolating them and quantifying, you know, as a percentage of market share of how much they would consume in each of these categories. You have any color commentary on that?

• 41:41Speaker 04

  An example of like how we get to, let's say, the two and a half percent or the five percent, right? I think to your point, all of these are are taken from initial signals that we've seen the market grow at us, right? If we see a Tesla allocating eight percent of their balance sheet into Bitcoin and a square and a micro strategy, it's like, okay, do is there a trend that's emerging? So for for the institutional investment, we we conducted a Monte Carlo simulation that basically asked, what is the optimal portfolio allocation of Bitcoin? For an investor, a traditional investor that that has exposure to all asset classes

• 42:24Speaker 04

  from emerging market currencies to real estate to bonds to equities, that would like to basically either minimize volatility of their portfolio or maximize their risk-adjusted returns. So what percent of Bitcoin should they put in their portfolio to achieve one of one of those two optimizers? The two and a half percent is basically to minimize the volatility. So we basically took the last 10 years and saw the returns of asset classes, including Bitcoin, and said, okay, what percent of Bitcoin would need to be allocated into this portfolio? The answer was two and a half percent. This was actually the lower bound. The upper bound was six and a half percent, where to maximize risk-adjusted returns,

• 43:07Speaker 04

  an investor should allocate six and a half percent, consistent with the asset class returns that we've seen in the last 10 years. Now, of course, this is on a on a on in hindsight. So there's also an analysis that we conducted on a prospective basis where it's like, okay, if we were to size the opportunity, what would that look like? That ranged again between one and seven percent. So this is really like, if you pitch to an institutional investor of, look, you're a strategic allocator, you want to minimize the correlation of returns across your asset classes. Adding Bitcoin to your portfolio is going to do exactly that. I don't think it's necessarily a tough sell for institutions.

• 43:49Speaker 04

  The seizure resistant asset is another, you know, good example where we take the use case of Bitcoin, where with good public and private key management, Bitcoin isn't a seizure resistant or unseizable asset, right? If I'm custoding Bitcoin on cold storage, unless like someone comes knocking on my door and takes physically my private keys, there's no way for anyone to seize my Bitcoin. And as such, you can see it as really an insurance policy against arbitrary asset seizure, whether that's through indirectly through inflation or directly through the outright confiscation of wealth or the freezing of bank accounts like we're seeing now in Canada, like we saw during the Hong Kong protests. And there, the 5% estimate is really, you know,

• 44:33Speaker 04

  us estimating what the probability over a lifetime would be for an individual to have their assets seized. So you can say in any given year, it might be one one thousandth of a chance. So over 50 years, you multiply that, it's about 5%. So we're effectively equating that 5% to the probability that your assets might get seized over your lifetime. And as such, a sensible allocation should equate to that probability. So you take the $80 trillion of global high net worth wealth, you multiply that by 5% and it gets you that $4 trillion opportunity alone. So that's kind of the rationale and some of the logic that we employ

• 45:16Speaker 04

  going through these different opportunities.

• 45:19David Hoffman?

  Just like I said at the beginning, these are not just, you know, numbers that have been made up out of thin air. There's actual thought and analysis and rationale put behind the $1 million Bitcoin price tag, like there also is with Ether and Ethereum and also some of the consumer metrics in the Metaverse. So that is what is coming up next in the show, right after we talk about some of these fantastic sponsors that make the show possible. If you're going bankless, you need MetaMask. This is your tool to unlock the world of DeFi without giving up custody over your private keys. MetaMask is Both a secure in-browser wallet and also a secure bridge for your hardware wallet. You can now trade tokens on any Decks or Aggregator. MetaMask Swap gathers real-time pricing information across all the DeFi exchanges,

• 46:02David Hoffman?

  allowing you to select your best price while getting all the MetaMask benefits of self-custody, lower gas costs, and increased transaction success rates. MetaMask also has a fantastic mobile wallet that I use when I'm out and about, which I use to collect PoApps, NFTs, and do all my DeFi things while I'm away from home. If you haven't downloaded MetaMask, you gotta try it out. Web3 wouldn't be the same without it. Download MetaMask for desktop and mobile at metamask.io and load up your Trezor, Ledger, Lattice, or Keystone hardware wallets so that they too can get into the world of Web3. Polygon is Ethereum's largest and most vibrant scaling solution to date. With millions of monthly users and all of the biggest DeFi apps, the Polygon ecosystem has turned into a blossoming metropolis of DeFi activity. Transactions on Polygon are quick and cheap,

• 46:45David Hoffman?

  allowing users the freedom to achieve their DeFi goals, all while being economically anchored to Ethereum. But Polygon isn't just the proof-of-stake sidechain. The Polygon team is building a suite of scaling solutions, including Polygon Hermes, Midan, Nightfall, and Zero, all with different design choices in order to be optimized for all possible crypto use cases. If you're a developer who wants to build on the Polygon ecosystem, go to the link in the show notes to check out their fantastic documentation. And if you're a user who just wants to experience fast and cheap DeFi, you can bridge over your ETH or other tokens and start playing around with any of the thousands of applications that are available on Polygon. Bankless is proud to be sponsored by Uniswap. Uniswap is a new paradigm in asset exchange infrastructure. Instead of a cumbersome order book system where trades are matched with other humans,

• 47:30David Hoffman?

  Uniswap is an autonomous piece of software on Ethereum that lets you trade any token at the current market price. No human counterparties or centralized intermediaries, just autonomous code on Ethereum. Input the token you want to sell and receive the token you want to buy. The Uniswap Grants Program is accepting applications for grants. Do you have something of value that you think you want to contribute to the Uniswap ecosystem? No matter how big or small your idea is, you can apply it for a unique grant at uniswapgrant.org and help steer Uniswap in the direction that you think it should go. Thank you, Uniswap, for sponsoring Bankless. All right, guys, we are back with Yaseen and Frank from Arc Invest, talking all about the Big Ideas Report, specifically the crypto section of the Big Ideas Report.

• 48:13David Hoffman?

  And this is where we're going to get into the Ethereum, DeFi, Metaverse, NFT side of the conversation. And this is a theme that we've talked about on Bankless a number of times before. And to me, it explains how Ethereum and stuff on Ethereum is always just so goddamn investable. It's very investable things. And this is a slide that says, talks about the LTM revenue per employee in the millions of dollars. Frank, can you explain for the listeners what LTM revenue per employee means and what this chart slash graph is showing?

• 48:47Speaker 05

  Yeah, definitely. So on the definition front, LTM is last 12 months revenue. We used on-chain data for the crypto-based protocols you see here. We used quarterly financial statements for the traditional finance companies. And then for employee, we used LinkedIn numbers. But the really key idea here is, we wanted to show, one, the scale of what kind of revenues are these crypto-native applications or companies operating at? And how does that compare to traditional financial institutions? And, well, it's not the same on the absolute level. If you look at the amount of revenue that these protocols are generating per employee,

• 49:28Speaker 05

  which has significantly lower operating costs and operating needs than some of these traditional companies, you can see you get a massive amount of leverage in crypto-native protocols compared to traditional institutions and traditional financial networks. And that's for a few different reasons. It's because you don't have counterparty risk, you have less parties involved, you could spend way more money on developers and way less money on compliance and marketing and operations. Your protocols are global by default. You have all these things that allow you to gain a lot of leverage. And to like, sum it up broadly, I'd say it's the power of building on top of open source networks. You can also think of composability.

• 50:09Speaker 05

  MetaMask didn't have to build its own AMM to operate as a brokerage in your pocket. It can plug into Uniswap, and it can plug into SushiSwap, and it can get you the best rate across all of DeFi. And so this composability is another thing that lets, you know, decentralized protocols operate at much higher leverage than a traditional company.

• 50:30Ryan Sean Adams?

  I want folks to just kind of really understand this because it's something we've talked about on Bankless. The amount that, let's take Uniswap as an example, the amount that they've been able to do with like 15 to 20 employees is absolutely mind blowing. And you have a chart that compares Uniswap to the New York Stock Exchange on LTM revenue per employee. So what's interesting about this is it's revenue per employee, right? So it's like, normalizes it on an employee basis. And if you look at the Uniswap section, we're talking about $40 million worth of top line revenue that Uniswap generates per employee, if I'm reading this correctly, Frank. And the

• 51:11Ryan Sean Adams?

  direct comparison, if you want to take an analog to Uniswap, what is Uniswap? It's kind of like a DeFi's New York Stock Exchange. And the New York Stock Exchange per employee generates revenue too, but it's like, you can barely see it on the chart. It's like below a million here. I don't know if it's like 300K or something like that. It's in that range. So we got a Uniswap with 20 people generating 40 million per person. And we've got a New York Stock Exchange with like, buildings full of people, lots of paperwork, lots of infrastructure, all of this stuff that they have to register in the real world, and they're generating far less revenue per employee.

• 51:51Ryan Sean Adams?

  If that doesn't show you the efficiency of software eating money, software eating banks, software eating finance, I don't know, I don't know how else to show it because this is incredible to see. Did I get some of that right, Frank?

• 52:05Speaker 05

  Yeah, definitely. I think that sums it up well. To be a little bit fair to the New York Stock Exchange, their revenue is listing fees and market makers are the ones keeping the market efficient. Uniswap doesn't even need market makers because it's an automated market maker, and it has liquidity provided from anybody who wants to provide liquidity and earn a yield on trading fees. So it's not 100% apples to apples, but it gives you a really good feel there. And I actually think, you know, another way to look at this, but it's harder to measure, may have been inspired by a former Bankless podcast, I might have heard somebody say that Uniswap The most valuable code base line for line ever, based on the market cap or the revenue per lines of code.

• 52:46Speaker 05

  And it's going to show that same thing. I think this is, this, yeah, go ahead.

• 52:51David Hoffman?

  I'm pretty sure that was Chris Dixon. No, that was Chris Dixon, Ryan.

• 52:54Ryan Sean Adams?

  Oh, that was Chris.

• 52:55David Hoffman?

  That was Chris Dixon on our first podcast.

• 52:56Ryan Sean Adams?

  I was gonna say it was probably my, the smarter co-host, David Hoffmann, probably said that because I don't remember saying it.

• 53:02Ryan Sean Adams?

  Well, let's keep moving here.

• 53:03David Hoffman?

  Wait, no, before we do, one last thing on this line, but I, there was something stuck out to me in this report. And it's this TradFi word, revenue, revenue per employee illustrates DeFi's efficiency relative, relative to that of traditional finance. In parentheses, TradFi. Frank Yacine, is TradFi about to be a term that's going to be adopted by TradFi?

• 53:24Speaker 04

  After GM and Wag me, yeah, probably.

• 53:28David Hoffman?

  Okay, so maybe not.

• 53:30Ryan Sean Adams?

  I think it's SadFi, if I'm looking at this chart correctly.

• 53:34David Hoffman?

  All right, well, let's get into the, the HappyFi, which is the next slide that's coming up next. If it's a slide 65 for those following along, which is Ether's market cap could exceed $20 trillion in the next 10 years. And it's, we've got a pretty simple looking chart here with a little bit of an, of an explainer comparing the current market cap of Ether, which is clocking in at 0.4 trillion dollars and comparing that to all global financial services. The market cap of all global financial services at $22.5 trillion. Frank, can you explain to us why this comparison is justified? And how this kind of lends itself to why Ethereum, Ether's market cap might exceed $20 trillion?

• 54:18Speaker 05

  Yeah, definitely. So going back to something that we opened this conversation with, there's a lot of things about crypto assets that are so new and so different that you can't model them like traditional companies. But there's also some places where they overlap and you can. And you can think of all of the transactions that are happening on Ethereum, especially post EIP 1559, where the transaction fees are burnt and returned to token holders as revenue for that chain. And it actually directly translates to earnings in that the revenue is fully burnt and going back to token holders. And so you can kind of look as as more and more volume moves on chain, how revenue accrues to that to that underlying currency in this case Ether. And what we see with DeFi across not just, you know,

• 55:03Speaker 05

  one or two segments of financial services, but across the full spectrum of exchanges to lending, to asset management, to insurance, everything that was on that previous slide plus more, plus net new things that don't even exist in traditional finance. You're seeing more and more revenue at the margin sucked out of traditional finance and moving on chain and net new financial services revenue being created on chain. And so what we see is, you know, over the next 10 years, this market cap, which is, you know, oh, you could think of as a multiple over revenue or a multiple over earnings, moving into the the protocols that power this future financial system, in this case Ether. So we think over, you know, the next 10 years, and we see this really as the market cap opportunity

• 55:46Speaker 05

  for what Ether as supporting a global financial system could look like.

• 55:51David Hoffman?

  And this reminds me of the very first slide that we talked about in this show, where blockchain networks really allow for, kind of in the same way the internet allowed TV, radio, you know, insert your communication medium here, all came on to the internet. Perhaps Ethereum allows all global financial services to eventually make its way on to Ethereum or, you know, pick your favorite smart contract blockchain here. Is that is that kind of what we're alluding to here, Frank?

• 56:16Speaker 05

  Yeah, exactly. And that's also like just a generalized development platform with smart contracts. You get all the financial services that you can code up. Plus, you get new things that people create with it. And that kind of gets into the the NFTs and the Web three and all of that as well. But the the other thing I'd call attention to here is the is the global M2 opportunity, where we're increasingly seeing, you know, if you have a global financial system built on top of Ethereum, the native currency, the the most secure form of of currency on that blockchain, you can ascribe ascribe it some value, a some monetary value. And you can do it almost similar to how we did it for Bitcoin, and we don't break out a specific number here. But you see, like,

• 57:00Speaker 05

  El Salvador is adopting Bitcoin, for example, and that's an emerging market. In the same way, Ethereum is being adopted by NFTs, and that's its own emerging market that gives value to Ether. So we're kind of, you know, seeing this hybrid between a global development platform that earns revenue from the economies built on top, plus value to the currency or to the token as being the native currency in that economy.

• 57:26Ryan Sean Adams?

  This is cool. And I think maybe for Bankless listeners, you know, we'll start to see some repetition here in terms of how other analysts we've had on the podcast see Ether as an asset in terms of how we see it. But Frank, if I'm interpreting you correctly, basically, almost the base case here, if you ignore the monetary premium, if you start thinking about Ether as what we might call a capital asset and start doing like things you do with equity analysis, which is discounted cash flow analysis, right? And you think about the DCF of Ether as an asset accruing, you know, blockchain fees, not going to people who stake as something that is, you know, productive and income generating is sort of like, you know, a dividend, if you will, the stock buybacks and Bankless

• 58:11Ryan Sean Adams?

  listeners will recall the DCF episode that we did just two or three episodes ago that talks about that discounted cash flow analysis. That's how you get to Ether getting to like, you know, the size of the global financial services industry, which is about $20 trillion. Okay, so that alone is almost like the base case for this thing. And that assumes maybe something like Bitcoin eats all of the monetary premium in the space. None of that flows to Ether. But then you stuck this global M2 next to it, which shows like the potential for monetary premium that also exists if Ether does continue to transition more towards a monetary asset and a store of value, medium of exchange.

• 58:55Ryan Sean Adams?

  And then the potential grows to like. The tens of trillions to hundreds of trillions and you start to look at some of the factors that went into the Bitcoin price analysis and you add that to Ether as well. So at some level, depending on how things work out, like of course, we never know, but like the $20 trillion, which is 180k ETH price point is sort of the conservative base case for what Ether could become, or at least maybe the smart contract platform segment as a whole, if you believe that Ether's lunch is going to be eaten eaten by all of these other chains. Did I put that correctly?

• 59:33Speaker 05

  Yeah, definitely. And that goes towards the what I was going to just wrap up with is that it's important to note that the financial and internet revolutions, kind of this whole space is actually a lot more competitive than the money revolution. And so we can pretty confidently say, we think, based on our rather could call it conservative or crazy bullish, depending on which way you look at it, but why we feel really good about Bitcoin there. This is the opportunity for Ether, but it also has a lot more competitors. And we'll see, you know, quickly over the next few years, how the market weighs, the different decisions and the different trade offs that each blockchain is making.

• 1:00:09David Hoffman?

  So I just want to paint the most bullish possible scenario. Say I'm an ETH maxi and I think Ether is not only going to win the smart contract wars, but also the money wars. Would we take that $22.5 billion market cap, the 56X that Ether is already going to grow, and then multiply that by five more, four, or no, six more times to get to the global M2? Is that, is that what would be the logical conclusion of this?

• 1:00:41Speaker 05

  Dean, what's your point? What's your thought?

• 1:00:44David Hoffman?

  If Ethereum is the one that completely swipes the floor of the whole entire crypto industry, which I don't think is going to happen, but if it did, would it go to $122?

• 1:00:52Ryan Sean Adams?

  I think David wants to hear the answer of yes on that.

• 1:00:54Speaker 04

  If Ethereum swipes the floor, it would be more so you'd add the 22 and a half to the 28 and a half that we sized for Bitcoin.

• 1:01:03David Hoffman?

  Okay.

• 1:01:04Speaker 04

  So it would be, call it 50 trillion.

• 1:01:08Speaker 04

  Because the global M2, like you have to, I don't, you have to assume that it replaces global M2 entirely, when I don't think that's necessarily the case. I think what, to Frank's point, though, which is really interesting, is that there are, you know, creative additive opportunities that Ethereum is unlocking, where we don't even know, like, how to size that. I think it's analogous, like, how do you size the internet in the late 90s? I think that that's where the opportunity for Ethereum is, is like, there could be these, these parallel opportunities that emerge outside of the money case, that we don't even know exist today. So, in that sense, there is no upper bound, David.

• 1:01:50David Hoffman?

  That's what I like to hear you say. All right, guys, so that was the Ethereum section. We've covered Bitcoin, we've covered Ethereum, but there are two slides left in the Web 3 NFT era that I thought were just really, really good. And so I want to, I want to unpack those a little bit. So we're getting into slide number 70 and 71, Ryan, if you want to go there. And this slide is, "NFTs Could Shift From Static Collectibles To Dynamic Digital Assets." So you're saying the end game of this whole NFT phenomenon isn't to just to collect JPGs? What is it actually going to be when it actually matures and develops along its trajectory?

• 1:02:24Speaker 05

  Yeah, I think the, you know, especially because of how the market has been over the past year, the trend is, you know, we're flipping JPGs, it's just art, you know, there's not much to it. But when you really think of it, and what, you know, a lot of this section of the, of the report is predicated on, is that NFTs are functioning as a form of digital property rights, that give us the ability as internet users to own our data for the first time. In Web 2, you have social media where it's really user-generated content, but you don't own that content that you're generating. It's the centralized platforms like Facebook and Instagram that are owning the data. NFTs allow the user to own the data that they're generating, and that unlocks pretty profound things.

• 1:03:08Speaker 05

  And it also incentivizes more spending on digital content, because you can actually own that content, and it can't be taken away from you as Easily. So when we, when we look at how these NFTs are evolving from just images or JPEGs, they, they'll be used actually similar to what Yaseen just said in use cases we can't even think of yet. But I think the first, you know, that we're really seeing, and this is showing that as well, but the first that we're really seeing is gaming. There's, you know, there's games like Fortnite that generate $5 billion, which blows my mind every time I hear it. But $5 billion in revenue from in-game assets that users can't do anything with. It just makes their character look cooler, but they still want to buy it.

• 1:03:49Speaker 05

  And there's this social like aspect to it. There's a status signaling aspect to it. But increasingly, we're seeing more and more projects adopt this, I think, or adopt the same concept of in-game purchases, but on crypto native rails that gives you the option to exchange assets or sell assets or cash out or have portable assets that can be used across multiple virtual worlds or games. Creating a much more like interactive and high fidelity experience that you can use your NFTs for. And I think like a really good example of this, like where this ties into, you could do things that we didn't think would happen or be possible.

• 1:04:30Speaker 05

  Is something that we caught on Twitter in, I think it was Indonesia. The Axie Infinity, one of the native tokens, when you're playing the game is Smooth Love Potion or SLP. And the, the game has been popular, you know, really blown up as a way to actually make income in some of these developing areas. And so much so that people aren't actually exiting out of SLP to, to do things in real life or in the physical world. There's a cab and what I'm getting to is a cab driver and a cab company accepting SLP as payment for your cab. So you have an in-game asset that's something that you can use to breed your axes and, you know, a full game mechanic utility.

• 1:05:13Speaker 05

  But you can also use it outside that platform if somebody's willing to accept it as a form of payment. And that merging of, you know, data portability plus your, your in-game asset is also utility outside of that game. It is really incredible.

• 1:05:29David Hoffman?

  And guys, I want to go on to this last slide because this is what I think culminates in this grand story that we're all talking about, these new digital experiences, and that's slide 75 and 76, where we were, Ark has predicted, or the just the online consumption, the online monetization, money moving around in digital worlds across digital products, starts to move beyond our real products, you know, web 2 products, or just actual, you know, physical atoms. And to me, when I interpreted slide 75 and 76, it was really just the growth of the metaverse. This is really what we're talking about at the end of the day, especially this one with the chart here. Frank, can you just unpack these

• 1:06:13David Hoffman?

  charts here and kind of tell us your interpretations of them?

• 1:06:15Speaker 05

  Yeah, so ultimately, you know, you can trend over time that we've been spending more and more time online, and that's only been accelerated by the pandemic. And with technologies like crypto-native NFTs that allow you to actually own your assets, we're seeing, and we forecast, an acceleration of spending into digital goods over physical goods, that will ultimately, we think, converge the monetization rate, or the dollars of revenue generated per hour spent online. The online version is going to approach the monetization rate of offline, basically saying, you know, in short, that users will eventually, or individuals will eventually value digital goods as much as they do physical goods.

• 1:07:00Speaker 05

  And that's going to have, you know, massive ramifications, and one of those being of reducing the spending, and what you see on 76 is reducing the spending on physical goods, and increasing the spending on digital goods.

• 1:07:12David Hoffman?

  Yeah, well, that doesn't scream the metaverse, and I don't know what does. And that's something I think that so many people already resonate with. We already know that people spend money on Fortnite skins before they were actual digital on-chain goods, and having it actually be able to be an on-chain good is just an unlock for the value of those things, and really incentivizes even more consumption. Guys, Yaseen, Frank, thank you so much for running through some of the most profound slides about Bitcoin, Ether, and the metaverse in Web 3. Just any last open-ended comments about where you think this industry is going over the next five, five to 10 years that might not have made it into these slides? Frank, you want to take that one first?

• 1:07:58Speaker 05

  I think, I mean, what's really interesting, and we were kind of talking about this before we hopped on the show, is the proof points that we're getting, that crypto is becoming more mainstream and higher adoption and more of a day-to-day topic that I think has more legs than the speculative thing that we saw in 2017 and 18. That cycle with the ICO boom and bust had a lot of hype and a lot of speculation and very little follow-through. What we're seeing now is a market where you can see actual products being developed, millions of users actually engaging with these projects, and also a segmentation and diversification outside of just, hey, this is a token like Bitcoin and Litecoin

• 1:08:42Speaker 05

  and Bitcoin Cash, you know, all of these things that are kind of copies of the same. We're seeing more differentiation in crypto. And the more that, you know, things like El Salvador adopting Bitcoin as legal tender, or Canada potentially freezing bank accounts, essentially asset seizure, the more that we're seeing the proof point for crypto play out. And I expect we'll see more and more of those over the next five to 10 years. The last thing I'd say, which I also think is really interesting, is that regulation is often talked about as a negative for crypto, or something that will eventually, you know, slam the hammer down and stop the industry. But we're seeing, you know, two recent proof

• 1:09:23Speaker 05

  points. One is both, you know, Miami and New York City mayors accepting paychecks in crypto. Crypto is becoming a popular thing for politicians to support, rather than crack down on, at least in some segments of the political sphere. And also, how increasing acts of regulation can actually provide the clarity needed for more people to join the system. So you saw BlockFi being fined $100 million for their interest accounts, and they're pausing that for now, but they're going through the formal process with the SEC to register those as a security, so they can eventually offer those to consumers again, which not just allows them to continue selling that product and offering that product,

• 1:10:05Speaker 05

  but it opens the door for somebody like Coinbase, who was blocked from offering a similar product, to offer that product. And for many other companies, now they see the proper process to go through to launch crypto-based products. And so I think we'll see that continue to develop, and how more rules of the road that come in will broaden the, you know, the total market for crypto.

• 1:10:27Ryan Sean Adams?

  Yeah, it's so funny to me that BlockFi thing. We have other thoughts on we'll get to you in an episode later this week in the roll up, but how that is widening the lane for for more adoption in crypto. And it's funny how BlockFi had to actually do it and then ask for forgiveness later for the SEC to actually weigh in, but it's really forced the SEC's hand. Yaseen, what would you say? Closing comments for us reflecting on all of this?

• 1:10:50Speaker 04

  Yeah, I mean, I just echo Frank in saying this is all unbelievable to be witnessing in real time. And so this is my fourth big ideas. And when I look back at like the first 2018 or 2019 big ideas of we were assessing Google trends of Turkey and saw a spike in emerging markets to fast forward four years. And it's like, you have an emerging market currency that is adopted as as legal tender. It's like, who knows what the next four years is going to look like. So these are always great to just kind of see the evolution of crypto in real time. And I mean, I don't know what's next. Just like I didn't know what was next the last year and compared to

• 1:11:33Speaker 04

  where we are today. So in any case, it's awesome. Definitely be on the show and appreciate you guys having us on.

• 1:11:40Ryan Sean Adams?

  Well, thank you, guys. We we do know one thing that happens next, and that is number go up. I think if these things come to fruition.

• 1:11:47Speaker 04

  I must say disclaimer, this is not investment advice.

• 1:11:50Ryan Sean Adams?

  Of course, of course.

• 1:11:52Speaker 04

  Purely for informational and research purposes only.

• 1:11:55Ryan Sean Adams?

  Informational and research purposes only, but definitely definitely bullish on this report and these statements. And Ark has had a fantastic track record predicting some of these things before they happen. So Yaseen and Frank, thank you for joining us today.

• 1:12:12Speaker 04

  Thank you so much, guys. Thanks for having us.

• 1:12:14Ryan Sean Adams?

  Bankless listeners, if you like what you heard, make sure you like, make sure you subscribe to this podcast. If you're on Apple iTunes, write us a review. Give us a five star as well. We'll include links to resources in the show notes, including the slides that we talked about today. Go scan those when you have some time. Of course, as Yaseen said, none of this was financial advice. It never is on Bankless. Bitcoin is risky. So is ETH. So is DeFi. You could definitely lose what you put in, but we are headed west. This is the frontier. It's not for everyone, but we're glad you're with us on the Bankless journey. Thanks a lot.

• 1:12:48David Hoffman?

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

• 1:13:33David Hoffman?

  fantastic content. Thanks everyone for watching and being on the journey as we build out the Bankless Nation.

• 1:15:06David Hoffman?

  The.