121 - The Bear Market Gift | Vance Spencer

✨ DEBRIEF ✨ | Ryan & David's Unfiltered Thoughts on the Episode https://shows.banklesshq.com/p/121-debrief https://shows.banklesshq.com/p/120-debrief ------ Vance Spencer of Framework Ventures returns to Bankless to walk us through a tremendous opportunity—the Crypto Bear Market of 2022. With a steadfast thesis and a sober approach, Vance is bullish on Layer 2 ecosystems and GameFi. And of course, all roads lead to Ethereum. Crypto is a “coiled spring on a path to hypergrowth.” Bear Markets are where legends are born. How will you take advantage of the opportunity of a lifetime? ------ 📣 METAMASK | The Easiest Buy in Crypto https://bankless.cc/MetaMask ------ 🚀 SUBSCRIBE TO NEWSLETTER: https://newsletter.banklesshq.com/ 🎙️ SUBSCRIBE TO PODCAST: http://podcast.banklesshq.com/ ------ BANKLESS SPONSOR TOOLS: ⚖️ ARBITRUM | SCALED ETHEREUM https://bankless.cc/Arbitrum ❎ ACROSS | BRIDGE TO LAYER 2 https://bankless.cc/Across 🏦 ROCKET POOL | DECENTRALIZED ETH STAKING https://bankless.cc/RocketPool 👻 AAVE V3 | LEND & BORROW CRYPTO https://bankless.cc/aave ⚡️ MAKER DAO | THE DAI STABLECOIN https://bankless.cc/MakerDAO 🦁 BRAVE | THE BROWSER NATIVE WALLET https://bankless.cc/Brave ------ Topics Covered: 0:00 Intro 5:00 Vance Returns 7:39 Where Crypto Needs to Be 16:44 Bull Market Lessons 21:38 Alt L1 Blockchains 26:40 The Layer 2 Rotation 32:13 The Future of ETH Killers 41:07 The Future of Layer 2’s 47:30 Optimism vs Arbitrum 49:35 The Ethereum Market 58:30 ETH is Money 1:02:18 Veblen Moneygoods 1:07:19 Who Buys ETH? 1:10:15 Bull Market Timelines 1:16:05 The Future of Tokens 1:21:30 DeFi’s Make or Break 1:28:25 Winners will emerge 1:32:15 The GameFi Rabbit Hole 1:37:18 Lessons from Axie 1:43:15 Metaverse Money 1:47:45 The Bear Market Gift 1:50:30 Closing & Disclaimers ------ Resources: Vance on Twitter: https://twitter.com/pythianism?s=20&t=z7tmj0LJ3O71UyWH9xlFqQ https://twitter.com/pythianism?s=20&t=z7tmj0LJ3O71UyWH9xlFqQ Vance’s Tweets https://twitter.com/pythianism/status/1528501361452584960?s=20&t=IDHtibGbBEp1t1lnsMyrIg https://twitter.com/pythianism/status/1528501361452584960?s=20&t=IDHtibGbBEp1t1lnsMyrIg https://twitter.com/pythianism/status/1531719941853892609?s=20&t=OyT_N9CEGQ8-dWs1MVapcQ https://twitter.com/pythianism/status/1531719941853892609?s=20&t=OyT_N9CEGQ8-dWs1MVapcQ https://twitter.com/pythianism/status/1526968297794723840?s=20&t=ndBaWVS2JCaliYyt24jViA https://twitter.com/pythianism/status/1526968297794723840?s=20&t=ndBaWVS2JCaliYyt24jViA Rune Christensen’s Endgame https://forum.makerdao.com/t/the-endgame-plan-parts-1-2/15456 Crypto Fees https://cryptofees.info/ Betting the Fund on the Merge https://shows.banklesshq.com/p/betting-the-fund-on-the-merge-hal?s=w#details Bull Case For DeFi https://newsletter.banklesshq.com/p/the-bull-case-for-defi-vance-spencer?s=w Bull Case For DeFi II https://shows.banklesshq.com/p/-defi-verticals-vance-spencer?s=w ----- 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?

  Welcome to Bankless, where we explore the frontier of internet money and internet finance. This is how to get started, how to get better, how to front run the opportunity. This is Ryan Sean Adams and I'm here with David Hoffman and we're here to help you become more bankless. Guys, this is a gift of an episode today with Vance Spencer, because what if I told you, you've just been handed a tremendous gift, maybe the biggest gift, the biggest opportunity of your life. What is it? It's the crypto bear market of 2022. It's the bear market that we're in. We talk about how to maximize that opportunity, crypto in the bear market. How should we think about it? That's the number one thing to take away from this episode. Number two, we go through which alternative layer ones will survive

• 0:50Ryan Sean Adams?

  and which layer twos will thrive and explode coming out of this bear market. We actually go through them one by one. Solana, Avalanche, Polygon, Optimism, Arbitrum, all of them. We get Vance's takes. Number three, how to find the hidden gem in the bear market. Vance is an expert at this. In fact, number four, he actually thinks GameFi is the biggest opportunity of the bear market and he explains why. And then, of course, number five, we talk about the bull case for ETH. And David, this was a finding for me. Apparently Vance is now a member, certified member of the ETH is Money cult. And he wasn't, I think, last time we talked to him. So we talked about that change. What were your thoughts in this episode, David?

• 1:30David Hoffman?

  Yeah, we first brought Vance on the podcast very, very early, episode like in the 20s, I think. And it was because of Framework's just outsized success coming out of the 2018 to 2020 bear, making bets on things that everyone thought was never going to come back. Tokens. Back in 2018 to 2020, everyone got burned by tokens. And so no one wanted to touch tokens, except for Framework. And they made high conviction bets on things that did outside, huge outsized gains going into the next bull run, things like Link, Ave and Synthetix. And so he has been through the wringer of what it means to be an investor in a bull market, an investor in a bear market, and also a public versus private investor as well.

• 2:12David Hoffman?

  And overall Vance has just such a strong finger on the pulse of everything about this industry. And so that's why this conversation touches on almost everything that is relevant these days in the world of crypto. Of course, DeFi, Ether, alt layer ones, layer twos, gameFi, public and private markets, a little bit of everything. So it felt like a candy conversation all the way through and through. And Vance is just someone that no matter what phase of the market we're in, he always is very sober. He always can see things very clearly. And so it's such a treat talking to Vance every single time.

• 2:42Ryan Sean Adams?

  Yeah, this is like the bible for the bear markets, the hitchhiker's guide for the bear market because we cover just about everything you need to know about how to position yourself during times like this, because we've certainly been there before. Guys, we're going to get right to the episode with Vance. But first, we want to talk about these awesome tools to help you go bankless from these sponsors.

• 3:02David Hoffman?

  Rocketpool is your friendly decentralized Ethereum staking protocol. You can stake your ETH with Rocketpool and get our ETH in return, allowing you to stake your ETH and use it in DeFi at the same time. You can get 4% on your ETH by staking it with Rocketpool, but you can get even more by running a node. Rocketpool is the only staking provider that allows anyone to permissionlessly join their network of validating nodes. Running a Rocketpool node is easier to set up than running a solo node, and you only need 16 ETH to get started. Why would you do this? You get an extra 15% staking commission on the pooled ETH, so your APY is boosted. So if you're bullish ETH staking, you can increase your APY and get some extra tokens by adding your node to the decentralized Rocketpool network, which currently has over 1,000 independent validators. It's yield farming, but with Ethereum nodes. You can get started at rocketpool.net and also join the Rocketpool community in their

• 3:47David Hoffman?

  Discord. You can find me hanging out there sometimes in the chat, so I'll see you there. The layer two era is upon us. Ethereum's layer two ecosystem is growing every day, and we need bridges to be fast and efficient in order to live a layer two life. Across is the fastest, cheapest, and most secure cross-chain bridge. With Across, you don't have to worry about the long wait times or high fees to get your assets to the chain of your choice. Assets are bridged and available for use almost instantaneously. Across bridges are powered by Uma's Optimistic Oracle to securely transfer tokens from layer two back to Ethereum. A token proposal is being deliberated as we speak in the Across forum, where community members will decide on the token distribution. You can have your part of Across's story by joining the Discord and becoming a co-founder and helping to design the fair, fair launch of Across. If you want to bridge your assets quickly and

• 4:31David Hoffman?

  securely, go to across.to to bridge your assets between Ethereum, Optimism, Arbitrum, or Boba networks.

• 4:40David Hoffman?

  Arbitrum is an Ethereum Layer 2 scaling solution that's going to completely change how we use DeFi and NFTs. Over 300 projects have already deployed to Arbitrum and DeFi and NFT ecosystems are growing rapidly. Some of the coolest and newest NFT collections have chosen Arbitrum as their home, all the while DeFi protocols continue to see increased usage and liquidity. Using Arbitrum has never been easier, especially with the ability to deposit directly into Arbitrum through all the exchanges, including Binance, FTX, Quobi, and Crypto.com. Once inside, you'll notice Arbitrum increases Ethereum speed by orders of magnitude for a fraction of the cost of the average gas fee. If you're a developer who wants low gas fees and instant transactions for your users, visit arbitrum.io/developer to start building your DApp on Arbitrum. If you're a Dgen, many of your favorite DApps on Ethereum are already on Arbitrum, with many moving over every day.

• 5:25David Hoffman?

  Go to bridge.arbitrum.io now to start bridging over your ETH and other tokens in order to experience DeFi NFTs in the way it was always meant to be: fast, cheap, secure, and friction-free.

• 5:37Ryan Sean Adams?

  Bankless Nation, super excited to introduce you to our next guest. Actually, he's been on the show before, so he probably needs no introduction to the longtime Bankless listener. This is Vance Spencer. He's the co-founder of Framework Ventures. Vance and Framework, both of them rose to fame out of the 2018 bear market. How? Making high conviction bets in DeFi at a time when everyone else was afraid, everyone else was fleeing the market, doing all of this before DeFi was even a thing. In fact, I don't even think we were calling it DeFi back then. So he's been on Bankless twice before, updating us in the state of DeFi, bullish catalysts, the things that are going on behind the scenes. We wanted to bring him back because we are in another B market. All right? It is bear market territory.

• 6:22Ryan Sean Adams?

  And so at some level, having you on the show, Vance, it feels like we're back home in the bear market. How are things going?

• 6:28Speaker 02

  Things are going great. Thanks for having me back. It certainly feels like we're in familiar territory once again, but it feels like we kind of have them right where we want them in terms of, you know, we're making progress and things are a little bit... More calm and it feels like fundamentally the space is progressing faster than ever, even though the prices are down.

• 6:46Ryan Sean Adams?

  Let's talk about this. So we want to talk about, I think the theme of the episode is crypto in the bear market, right? How does it change? What does it look like in the bear market? How are things different? Where are the opportunities? We want to talk about all that with you, kind of like sector by sector. So maybe DeFi and then Ethereum and alternative layer ones and what people should do. Hopefully leave with some advice near the end, but want to start here. You tweeted this out recently and we actually think we covered something like this on the Bankless podcast before in one of our weekly rollups. You said this, "Crypto is exactly where it needs to be right now. Very much not dead, very much alive, washing out the excesses, very much building things people want to use. Coiled spring on a path to hyper growth."

• 7:28Ryan Sean Adams?

  I love that. I love that optimism. Vance, what do you mean by crypto is exactly where it needs to be right now?

• 7:35Speaker 02

  Yeah, so I think one of the bigger opportunities right now is frankly to reflect on what happened over the past, you know, two or three years as we're in kind of this secular bull cycle for crypto. And I think, you know, one of the learnings that I have at least is, you know, you could probably separate the bull run into two component parts. And the first one was the high conviction rally that was built around DeFi. And, you know, people were using the products for the first time. We had, you know, found this addressable market that we hadn't even discovered before. It was very high conviction rally. People were using the software. It felt like it was very fundamental. And then the second half of kind of the bull run, it felt like a lower conviction rally. And I would kind of define this as like the period after summer 2021, where people were excited about the futures ETF launch of Bitcoin. People were excited

• 8:18Speaker 02

  about the metaverse and NFTs. And that kind of felt like an apathetic run where interest rates were at all time low. And, you know, we just didn't have the requisite product progress. And so that time actually made me feel quite nervous about the space, just in terms of there was probably going to be some sort of coming downturn. And then today, You know, interest rates are at, you know, very high levels. Crypto has been, you know, largely crushed, but what we have is a lot more rationality, a lot more people focusing on, you know, things that have real product market fit. And we have a calling of the herd of entrepreneurs who probably weren't, you know, built for the long term in this space versus ones who, you know, have been in a, you know, a market for three, five years that are just finally figuring out how they get to product market fit and how they scale their businesses.

• 9:00Speaker 02

  And so, you know, when you're, when you're down 70, 80% as a project and you're starting to kind of really get into shared sacrifice territory where you figure out your business, that's where the most positive and constructive things happen. It's just so hard for these entrepreneurs to build in bull markets that really all of the best ideas really happen in the bear. And so for me, you know, I'm as positive as ever. I have a very long-term perspective and I understand that this is where, you know, the progress is made and we're just excited to be here.

• 9:29David Hoffman?

  I want to go and identify that high versus low conviction rally because I think what you're implying is that another high conviction rally is formed in the bear market. And so that's kind of what like perhaps we are at the very, very beginning stages of a high conviction rally that will happen much later because of what's being built now. But I want to go back and parse apart what you mean by high conviction and low conviction rallies to classify how the 2021 bull market works, where you're saying that there was real utility, everyone just had real excitement about DeFi yield farming at the end of 2020 and going into 2021. But then that got replaced, I'm going to go ahead and guess around like after that May crash, the May 2021 crash. And then the second half of the bull market was like the alt layer one movements.

• 10:12David Hoffman?

  It was the NFT movement, the metaverse movement, which is largely undefined. Can you talk about just how you interpret high conviction and low conviction? You made it seem like it's a gut take or like an emotional interpretation, but I'm wondering if like you could put more parameters or definitions around what you mean by a high conviction and low conviction rally.

• 10:29Speaker 02

  Yeah, I mean, high conviction rallies are usually based off of, you know, things that are fundamentally used that most market participants respect and know. And then there's also kind of this combination of fundamentals that are being embraced by institutions. And that is generally a very high conviction rally. And people can get behind it because they understand it and from first principles, they can use it. And, you know, those things are usually products of stuff that's happened in the bear market in terms of product progress. But it's also largely a product of things that happen in low conviction rallies as well. And what I mean by this is some of the best ideas that you have coming out of bull markets are usually kind of like the last dying breaths of bull markets. So the last low conviction rally, I would put in that category, the NFT kind of rally,

• 11:14Speaker 02

  that felt to me like low conviction, but there's a lot of promise there. The gaming rally, there was only really Axie, and so it was kind of a low conviction rally, but it feels like there's a lot of promise there. And then you take that stuff that you find in the tail end of a low conviction rally, which is usually the end of these bull markets, and you kind of put everything under the microscope during the bear market. And then by the time you kind of develop product market fit and you develop conviction in these ideas, that's what leads to these higher conviction rallies. And for me, I can see the setup for another high conviction rally. And I can see the ideas from the low conviction rally and how you could really push them forward and find product market fit, and not all of those products or ideas will. And so, yeah, that's kind of how I separate the two. It is largely an emotional feeling, though. But I also feel like you can tie it towards just the amount of people that are using these things

• 11:59Speaker 02

  and in what nature. Is it purely speculative or is it for some higher level of utility? And the DeFi versus the metaverse and the NFT rallies, those felt very different to me as a result.

• 12:09David Hoffman?

  Would you say that you take the low conviction rally and you add time, research, thought and effort onto the good ideas of the low conviction rally? Maybe also you add a bear market and then at the under end of those things, the ideas that do make it through those filters turn into the high conviction rallies of the future?

• 12:27Speaker 02

  Right, you're just kind of squeezing out all of the excess. You're developing the idea and the thought process a little bit more and you're putting real work behind it. And so I'm very bullish, obviously, on the future of gamefi and the future of NFTs. But it's just worth being honest with everyone about what level of belief there really was in those rallies, just based on the level of product market fit that they had.

• 12:47Ryan Sean Adams?

  Is this basically something we see repeat in every market? Maybe it has repeated in crypto before too, right? So like, I guess maybe the low conviction rally of 2018, would you say? Or 2017 was sort of all of these ICOs, which led to kind of these like futility tokens? And it wasn't the case that tokens were a bad idea. That seemed to be after the big ICO crash, there was this counter movement of all tokens are a bad idea and only Bitcoin is the thing. And Ethereum got even lumped in there as kind of an ICO platform that would never recover all of these things. It wasn't that tokens were a bad idea, or even some of the DeFi protocols were a bad idea. It's that the market just went out too far on its skis, right?

• 13:30Ryan Sean Adams?

  The market like overpriced the success before actually seeing the evidence. And I think we've also seen this in the early internet as well. We had like the dot com boom, of course, and then followed by a bust. It wasn't that the ideas of the dot com boom were wrong. It was just that the market was far outpricing like what the current capabilities of these things are. Is that kind of what you're seeing? It's just echoes of maybe 2017, it's echoes of the dot com boom. We see this play out in every sort of innovation cycle.

• 14:05Speaker 02

  Yeah, I think that's exactly the case. Right now, what I'm doing is just a lot of like looking back over the tape and seeing exactly what happened and how certain entrepreneurs did and then how certain markets fared. And I think like separating these stages between each other can really help you frame what's working? What's likely to work? What are the trends that are important to take out of this last kind of dying grasp of the bull market? But it also helps you just conceptualize how the market works and how it values narratives and how those can eventually unwind, but then become real again. And ICOs were basically the precursor to DeFi. People weren't using financial applications other than capital formation in 2017. But that laid a lot of the groundwork for not only the infrastructure, but also the DeFi products themselves.

• 14:48Speaker 02

  And I think we're going to see that as well in the markets that were very hot and low conviction side of the rally. The things that I look for on like these developing trends are, if you think about gameFi and DeFi, and a lot of our intuition that led us to DeFi is leading us to gameFi now. With DeFi, right when it started to really pop off with Compound and their token launch, You know, people had a mental model. They had an understanding of like, okay, we can do tokens. We can incentivize usage. And Axie at the tail end of the last bull market really kind of was the same thing for gaming. You know, people understood that, okay, I can play this game. I can make money using it. It might not be the best game, but like, there's value there from a gaming perspective. And so a lot of the kind of mental models from the low conviction rallies, you know, help you kind of form theses around,

• 15:31Speaker 02

  you know, like what the future looks like. And so for us, you know, that's just, it's a good hallmark of where the space could go.

• 15:38David Hoffman?

  So let's talk about what the future does look like then. So if we take the lessons of 2021 and the end of 2022, what are the big takeaways from this particular bull market? As somebody that also took away lessons from 2017 and 2018 and turned that into wins going into the 2020 bull market, what are the lessons that you are looking at out of the 2021 bull market? And how that is change your attitude or perception or investment thesis moving forward to whenever the next bull market comes?

• 16:04Speaker 02

  Yeah, I have to go category by category for these answers to really be specific or be helpful. But the first one I would just think about is just base layers. And I think what we learned about base layers and specifically, you know, alt L1s or Ethereum killers, or whatever you want to call them, is, you know, how easy it is to build something that looks like, you know, a competitor to Ethereum, but how hard it is to actually bootstrap it in the long term and keep it going and build economic security and build just a monetary premium. And I think that's really the first thing that I learned about with alt Ethereum chains, you know, in this bull run. And a lot of these chains said that they had, you know, all of the answers and that scaling was fixed and there was no trilemma. But that just didn't turn out to be true at the end of the day. And so I think, you know, with that lesson, what that tells me about the future is that, you know,

• 16:49Speaker 02

  whenever things really start to pop off in the next bull run, it's not going to be people building alt L1s anymore. It's people going to be building L2s. It's easier to build. It's, you can build economic security faster and cheaper. All the developer tooling is there. And so that's kind of like the first thing that I learned just by these people being able to get kind of to some sort of like seeming feature parity with Ethereum, but not ever really able to achieve escape velocity. So that's probably the first thing that I learned. In DeFi, I think, you know, what I learned was really, we have dominant players in most existing categories today. And One of the memes of DeFi was that these projects are the victims of their own success. You know, Uniswap happens and then Sushi Swap copies them and then Compound happens and then AVE

• 17:32Speaker 02

  copies them. And you know, all of these things, which was just that, you know, DeFi is just a race to the bottom and unlikely to accrue any value. I just don't think that actually played out the way that the market expected it to. And I think it's fundamentally positive just to show the pathway how winners can emerge from DeFi. So for Uniswap, you know, they just keep gaining market share. And the second they turn on that fee switch, it's going to be just an enormously valuable token. AVE and Compound, you know, they're dominating the borrow lend space like, and there's a reason that you don't see new AMMs or new borrow lend protocols funded, you know, very frequently anymore. It's just like acknowledged that the, it's too far gone from a competitive perspective. And so I think the thing that I learned from, you know, DeFi is, is that, you know, it's largely the same things that dominate, you know, the web two, you know, or determine the web two

• 18:17Speaker 02

  kind of competitive spectrum. It's just how good is your team? How willing are they to, you know, stick around, stick it out, build products that have real demand? And I think with DeFi, you're going to see a very different market in six months, 12 months, where the winners start to really pull themselves out of the bear market without this entire like, you know, bullish DeFi narrative emerging. I think, you know, things like Uniswap, things like AVE, things like, you know, Synthetix, like they're going to be absolutely gigantic just because they have the management and the team that will stick it out. And so for me, the learning on the DeFi side is that the market is very large, but really what you want to bet on is longevity. And there's not a lot of projects that have longevity because most of them have been funded in the past year. And I think those are likely to die. So that's kind of DeFi. GameFi, I mean, I just think it's going to be the world's biggest

• 19:02Speaker 02

  market, honestly, you know, of really any type of software. And, you know, we've seen early indications of this with Axie, but we've kind of only seen like the tip of the iceberg with what this could become. And, you know, these things take multiple years to ship. It's not like three guys in a smart contract, building a DeFi platform. And so for us, you know, we understand that it's going to probably take another six or nine months for these things to leave their gestation period. But this is the next mega trend that's happening. And so all of these things, you know, learnings about tokens, learning about community building. You know, there's just such a rich amount of information over the past two years that like, we're really focused on taking stock and actually trying to apply what we learned versus just repeating the same lessons over and over again.

• 19:44David Hoffman?

  All right. So there's three categories, three rabbit holes that I think you just opened up for us. Alt layer ones and the horizon for layer ones versus layer twos. Also DeFi, I have a question about what I think crypto Twitter has deemed the fat application thesis, which I think is what you alluded to also. And of course, game five, what you just finished with and my brain goes there is like, what about the current landscape of trad gaming informs your game five thesis? So I think we'll go down each one of those rabbit holes, but let's go back to the layer one conversation. You kind of alluded to how you think that the layer twos are the new layer ones. But I'm wondering if there is in your brain, like a place for a contrarian bet on alt layer ones, where like alt layer ones, there were so many of them that rose to fame in the second half of 2022

• 20:29David Hoffman?

  or 2021, not all of them are going to work. Most of them are going to die, but is there a place to place a concentrated bet on an alt layer one? And, and do you think perhaps that as people rotate into like the layer two narrative, there might be one big successful alt layer one to actually make it through the bear market? I'm just wondering how you're placing bets and how you kind of think about the contrarian bet on the alt layer one space?

• 20:51Speaker 02

  We don't actually hold any alt L ones, so probably not the best person to ask about this. But really I think that the market breaks down between Ethereum, probably Solana, probably some newer age kind of data availability plays. And then, you know, frankly, the other one that I see that's having, you know, a bunch of usage, even though it's probably low quality usage is B and B. But like, most of these are kind of EVM chains. And really the thing that differentiates them is not their technical prowess. The best tech is probably not going to win in the base layer or smart contract wars anyways. But the things that are more regional or ideological about these chains, you know, you have SBF and FTX behind Solana, you have CZ and the Binance crew behind B and B. And then you kind of have Ethereum, which is this kind of.

• 21:35Speaker 02

  You know, Switzerland style, open internet, Ethereum is the base metaverse money play that looks very different from really any of them. And I think there's enough room for each of them to succeed, but it's going to be a power law distribution. And there's a future where most of the transaction volume doesn't live on Ethereum, but it is the most valuable smart contract chain. A good example of this is Apple. Apple only has 14% of all smartphone market share, and yet it has 73% of the total smartphone market cap. And that is really kind of what I'm aiming towards as a technology investor. That's the clearest and most interesting opportunity for me.

• 22:11Ryan Sean Adams?

  I think interesting question, though, is, Van, since you don't have any bets on alternative layer ones, the question of why? Why don't you? Because venture capitalists, you operate a fund, you're in the business of making money. Many VCs, many funds have made a lot of money on alternative layer ones, both betting on them early, but also maybe trading them, selling them at certain points in the market. Why have you guys decided to just sort of opt out of the alternative layer one hype fest? Because if you ask, I think, 9 out of 10 VCs right now, or fund managers, they will tell you that the world is absolutely going to be multi-chain. And by multi-chain, by the way, they don't mean many layer twos, they mean many alternative layer ones, of which Ethereum is like kind

• 22:55Ryan Sean Adams?

  of one among this whole slew. And there may not be as clear a case for a power law winner. So why have you made this decision?

• 23:02Speaker 02

  I think for me, a lot of the investing style that we do on the liquid side, where potentially we would be buying all L1s, but we haven't, is just the simplest version of our highest conviction, best idea. And for us, that is Ethereum. And I think the reason it is Ethereum, because it has so much usage, it has a fee base that we can rely on. It's probably one of the only, like, you can build a smart contract chain that's competitive with Ethereum. There's a very small chance that you can accrue a monetary premium that's similar to ETH as it's used as money. And so for us, Ethereum is always the place that frankly, we've been around and the community that we grew up in. And that's not to say that we didn't regret betting on any of these all L1s as they were absolutely mooning. But we could kind of tell that this was going to happen. There were just so many

• 23:44Speaker 02

  supply overhang dynamics that the prices of these things were likely to crash 90% to 95%. And sure enough, a lot of them have. And so for us, we can bet on these things, and they can run up and they'll run down. Or we can be focused on the highest conviction, simplest version of our best idea. And also on the application layer. And on the application layer, that's where things get a lot easier. You know, you can forecast out cash flows, you can understand the relationship between customers and the product. And that's frankly, spiritually, where I see more framework is playing, is just closer to the metal with founders that are building products, not as much on the platform level. I think most of the, you know, best smart contract layers, those are really funded before framework is even really a thing. And so for us, you

• 24:27Speaker 02

  know, we're focused on the things that we think can accrue value. And right now, it feels like the application layer is the most undervalued with the highest potential to have more users. And there's a future where the pricing power of blockchains goes down, but application layer remains the same. And so for us, that's just a definite hedge on, you know, what if the fee landscape turns out to be less robust than we had thought.

• 24:47David Hoffman?

  Earlier, you talked about how layer twos, they're easier to spin up. You don't have to have worry about consensus security because that's taken care of by Ethereum. And so there's this idea that because layer twos are easier to spin up and establish, and as soon as there's any amount of block space demand for layer twos, it turns the ecosystem into a revenue positive ecosystem because they don't have to pay for security. This has lent itself to a thesis shared by some in the Ethereum circles as they're, just like there was this alt layer one mania, there will also be a layer two mania as well. Just because if they're easier to spin up, especially when optimism comes and airdrops their token and it just lands, you know, still in price discovery at the moment, but we're talking about a $6 billion valuation, that turns investors' heads. And then there's

• 25:30David Hoffman?

  many other like layer twos to also show that they can do similar things, like Arbitrum hasn't released their token yet. Everyone is assuming that they will do one. And there's other layer twos that we could talk about as well, where like, well, as soon as, I mean, optimism is one data point, perhaps Arbitrum is another. And then all of a sudden that we have like maybe two or three data points that these layer twos can establish multi-billion dollar valuations, paired with the ease of setting up a layer two, the thesis is that it's, this turns into a layer two summer, layer two mania. Now, we've had this layer two like summer thesis on Bankless for a while now, for like over a year. But I'm wondering if you like subscribe to this idea and if you have any sort of a trajectory for us?

• 26:10Speaker 02

  Totally agree. And I think you hit the nail right on the head. A good proxy for where froth is going to go in the market is what is the lowest effort way to create the highest amount of market cap? And, you know, with the optimism launch, you now have like a $5 billion potential honeypot for anyone who's willing to. You know, fork it and throw their hat in the ring and you have things like Mai Ti and Boba, which are forks, but you know, really the ease of forking these L2s right now is extremely hard. And so I think there's going to be kind of like some developments there that allow people to fork things probably cleaner, easier, quickly. And that'll lead to just this explosion in L2 activity. I mean, at some point in the next year, I do expect the L2s to be one of the larger consumers of block space. And I think that's when the narrative will really shift where people say like, okay, not only are these things scaling solutions for Ethereum,

• 26:55Speaker 02

  but they're actually adding to the economic security of it as well in a meaningful way. And you'll have people just spin up a ton of L2s because, you know, if you're a DeFi project right now, just this is just a general example, you know, and you don't have product market fit, there's, there's kind of a couple of things that you can do. You can continue to build more applications. You can continue to try things and throw spaghetti, or you can start an L2 and kind of create this ecosystem play. You know, unfortunately, I think a lot of people will take the road that's a little bit easier, which is just like forking this L2. And so in a lot of ways, the incentives are just geared towards this happening. And, you know, all we need to do is just wait for it to play out. The good news is that it's just constructive for Ethereum writ large. And so, you know, kind of no matter what you do, Ethereum is a beneficiary of this.

• 27:37David Hoffman?

  How can we take the lessons of DeFi that you were referring to earlier where Uniswap grabs a ton of market share and then Sushi Swap forks it, right? And then, you know, there's a bunch of like borrowing and lending protocols that have forked off Compound and Aave, but leaning into the whole idea, well, there's kind of just one or a very few winners in each category. How would you apply that same lesson to the alt layer two movement if that indeed does happen?

• 28:00Speaker 02

  It's a good question. I mean, the, the DeFi learnings are just, I think there's a few. The first one is like, the first mover advantage is huge. You know, like Uniswap being the first and the most dominant AMM is not something that you see very often in technology, but in crypto, it just happens to be the case. Same with Compound and Aave. You know, you can make the argument for things like DYDX or synthetics on the derivative sides, but like really the things that matter are, did you launch early? How good's your team? Are you willing to stick it out to the bear market? And really just surviving a lot of your competitors. And if you look at Rin Christensen from MakerDAO, his endgame post. You know, one of the things that he lays out very early on is that Maker Dow is no longer profitable. It costs them about $10 million a year to run this business.

• 28:44Speaker 02

  And you know, now not just Maker, but a lot of these DeFi companies are up against a shot clock. And a lot of them will simply fold. And so I think outlasting your competitors and having a strong product direction and just getting integrated is, is, are really the things that matter on the DeFi side. In terms of how that manifests into the alt L1 space or the alt L2 space, I think it's going to be a very different set of participants. Like, I don't think it's going to be Uniswap launching their own L2. They're probably going to stick on optimism and, and you know, be true to the Ethereum narrative, you know, in its most purest sense. But I think a lot of the people who are, you know, in the desert searching for product market fit, or people who are probably not as just motivated by, you know, direct product market fit success. Those are going to be the folks who launch the alt L2s.

• 29:28Speaker 02

  And so, you know, think about kind of like the Frog Nations of last cycle. Think about like those types of characters. Like, that's what's coming for them and it's coming pretty quickly. And so I think that is, you know, probably a pessimistic take on where the alt L2 space goes. It's probably going to be rife with a lot of, you know, also rans and people who are not ideologically, you know, pure. But that's okay, as long as you're burning Ethereum, you know, like you're cool with me.

• 29:53Ryan Sean Adams?

  Let's get into this a bit more then while we're camping on kind of these blockchain ecosystems, right? Because they are going to be a very important building block. As we said so many times on Bankless, what do blockchain sell? Blockchain sell blocks, all right? And so I'm wondering if we could do like an ecosystem ranking or just tell us for each of these ecosystems, what are the things they have going for them and what are the things they have going against them? And we'll start with some of the alternative layer ones. Give us that sort of summary. Then we'll go to some of the layer twos, like, you know, Starknet and optimism and Arbitrum. And then we'll end with Ethereum and give us kind of your case for Ethereum through the bear market. But starting with the alternative layer ones, what do they have going for them and against them?

• 30:37Ryan Sean Adams?

  Let's take Solana, Avalanche and BNB as the ones that are primarily left standing here. I think, you know, Terra is now, they would be among those four, but is now by the wayside, of course. What do you think? Solana, Avalanche, BNB, what do they have going for them and against them?

• 30:53Speaker 02

  Solana is very clear. They have, you know, SBF, they have FTX, they have, you know, the people who write. Code in Rust, mostly these people are traditional finance folks. And so they have kind of like a differentiated developer pipeline. They have kind of institutional support. And I think at the end of the day, they have a bit like people aren't going to let this die. And a lot of chains just have a lot of people that will let them die. Solana does not have that. And I think that's a fundamentally positive thing. On the negative side, I mean, the chain just like has problems staying live. You know, they need to implement a fee market. There is no L2 model. And I think a lot of the architecture decisions that they made are really going to be put under the microscope under the next year. And you know, Solana is probably going to look a lot different a year or two from now than it does today.

• 31:35Speaker 02

  And you know, a lot of the the value proposition of Solana was like, the monolithic chain gives you a very linear scaling model that everyone can rely on. And you can build on Solana today because it'll look the same in two years. I actually don't think that's the case. I think they're gonna have to pivot pretty dramatically. And so I think that's what they have working against them is like all the decisions that were made almost four years ago to scale Ethereum, all of the work on ZK stuff, all of the work on optimistic rollups. Like you're now playing catch up with that time horizon. So that's not that great. But you know, we like Solana, we back Solana projects. Like we're not ideologically just opposed to it. We're just, we acknowledge the reality of where it is today and it's far behind Ethereum. Solana is going to survive. Solana is going to make it. They're going to make it. Okay, Avalanche.

• 32:17Speaker 02

  Avalanche, I mean, Avalanche is an interesting one where I've seen very smart people disagree on the concept of subnets. And you know, I think it's okay to take either side of that bet. And you know, subnet usage is pretty small right now. There's about two subnets. One is for DeFi Kingdoms and I think it does, you know, pretty well. But really the model in which they scale that up and their unwillingness to kind of recognize the importance of data availability and you know, continuing to double down on consensus is the bottleneck. It's kind of concerning to me, just as someone who likes to think that they know about blockchains and how they work. So. It's TBD. Maybe I'm totally wrong, but you know, it doesn't seem like it. And so I think that they'll survive. I think they have a really strong passionate community, the Red Triangle Army, and they have kind of this weird differentiated

• 33:02Speaker 02

  pipeline of developers from Cornell. And so I think that's enough for them to really kind of survive. I don't know if it's enough for them to thrive.

• 33:08David Hoffman?

  One aspect about Avalanche that I think has stood out to me is that they actually have produced a meaningful fee market. Like, they actually do show up on the Layer 1 fees from David Meehaus' website. That was one of the big critiques of all Layer 1s that Ryan and I had in early 2021. It's like, well, fees are our proxy for actual usage. None of them in the first half of 2021 actually had a fee market, but Avalanche's fee market has actually emerged in the last six months. And we're definitely going to talk about Ethereum's fee market and what that means for ETH as money later in the show. But as a small microcosm of that, what do you make of Avalanche and its adoption proven out by its fee market?

• 33:44Speaker 02

  Yeah, I think, you know, the adoption's proved out by its fee market is largely on the gaming side. So it's Kravata and it's DeFi Kingdoms. And, you know, when developers ask us right now, where should you build games, or where should I build games? The real answer is that there's really not a good place to build a game right now. Like, there's no one that's really cheap enough and ready enough to support like a large game today. But the answers that we hear most frequently are, you know, Polygon Supernets, Immutable X, Subnets, and then building your own L2, which right now is just like too technically complex for most game developers to do. And so I think Subnets are getting a lot of play and a lot of kind of exposure just because that they're one of a few viable options to really scale and they have a proof case of DeFi Kingdoms. And so I think

• 34:26Speaker 02

  that's kind of the bull case for Avalanche is that Subnets are perfect for the gaming model because you have your own little ecosystem that you can control and monetize, and it lives separate from the core Avalanche chain. So, you know, that's why I would be bullish, and that's frankly where the usage has come from so far.

• 34:42Ryan Sean Adams?

  Vance, you mentioned this earlier, you referenced this earlier, but there were smart people on both sides of the Avalanche subnet debate. What is the debate? And what are both sides of the debate? Are subnets like a layer two? Heard people say that, or are they something different? Are they more like just a side chain?

• 34:56Speaker 02

  Subnets are kind of the layer two equivalent on Avalanche, and we still need to see whether they work. I think the bottleneck right now is just like subnet creation. It's extraordinarily hard to spin up your own subnet, and there's a lot of assumptions and contingencies that you really kind of have to think of as you build it. It's certainly not as straightforward as something like an L2 on Ethereum, where you could probably easily fork it, and you can just use the optimism one if you don't really want to. And so for us, like, try not to comment too much on like the ongoing Twitter debates of like the Avalanche community versus the Ethereum community, but it feels like there's a fundamental disagreement between either data availability or consensus being the real bottleneck. And I mean, and the Avalanche team are extraordinarily smart, and you know, maybe the Ethereum community is actually wrong about this, but I think most points in that argument would probably be scored

• 35:41Speaker 02

  for the Ethereum community and just their style of scaling of blockchain.

• 35:45Ryan Sean Adams?

  By the way, David, we got to bookmark that for having a conversation or a debate on subnets scaling as a strategy versus layer twos. I want to dig into that more.

• 35:54David Hoffman?

  Oh, I have that Telegram group already spun up.

• 35:56Ryan Sean Adams?

  All right, thanks, man. It's always thinking ahead. All right, so we got Solana, Avalanche, both are going to make it. Maybe they'll suffer through the bear market. Remains to be seen, but they'll make it out on the other side. How about Binance Chain? Good old BNB and our friend CZ.

• 36:09Speaker 02

  You know, CZ, one of the wealthiest people on the planet, you know, Binance.

• 36:13David Hoffman?

  I always forget that fact.

• 36:15Speaker 02

  Yeah, no, people forget, it's real. You know, Binance, it's one of the largest, if not the largest exchanges. And so they have a lot of leverage, and they have an ability to have a differentiated user base from Asia, you know, doing things that probably aren't as culturally normative as they would be on Ethereum. And so I think, you know, if you look at BNB, that's one of the few chains that actually has structural demand for their token in terms of just people paying gas fees in it every single day fairly consistently. I think there's a lot of issues with the chain. Like, there's a ton of M V P spam, just because it's like a penny slot machine where you can have transactions for free. And so everyone tries to just like, okay, can I front on this person? Can I sandwich this person? Can I do something crazy? And so like, there's a lot of shenanigans going on over there, but.

• 36:58Speaker 02

  That's just another chain that, do I want the future of the internet to be BNB? I don't. Am I realistic in assessing that it will not die? I am. Like, it's not going to go anywhere. If anything, it's only going to grow. But again, think about Apple. 14% of smartphone sales, 73% of market cap of smartphone makers. You can see where the Nokia, where the Android comparison comes in.

• 37:17Ryan Sean Adams?

  I got it.

• 37:18Speaker 02

  It's just how we think it'll play out.

• 37:19Ryan Sean Adams?

  What about the last one here on the alternative layer ones is Cosmos? And I realize that's not just a chain, but it's a whole kind of, you know, philosophy of building all of these interconnected proof of stake chains. How do you think Cosmos fares?

• 37:32Speaker 02

  You know, I'm not smart enough on Cosmos to really, to really be, to say anything unique. So I'll probably hold my opinion on that one.

• 37:39Ryan Sean Adams?

  Okay, let's get to some of the layer twos then. So that's an interesting ecosystem and one that sort of sits in between the separate side chain or layer twos. The first one is Polygon. Of course, they're, they're doing layer two strategy as well as they have the Polygon proof of stake chain, which is somewhat of a modified side chain. What do you think of Polygon? Talk about their prospects. What's going for them or against them?

• 38:01Speaker 02

  So before I talk about Polygon, I will say like, we're rapidly getting to the point where there's probably 10 different approaches to scale a blockchain to, you know, 100 million, a billion plus monthly active users. And as we get closer to that, you know, all of these approaches coming true, it becomes less likely that the best tech-driven approach will win. You know, I'm sure we're going to find the best absolute model to scale blockchain at some point. It probably won't matter because the existing blockchains will already be cheap enough. They'll have a large enough lead where they can just continue to dominate the market. And I think that's kind of like roughly the area that we're going into right now. And so the things that I like about Polygon are just a direct reflection of that. Like, do I think their POA chain is like particularly robust or safe to transact on? Like, probably not. I wouldn't store a ton of my money there. But they have an incredible BD team.

• 38:45Speaker 02

  They have an incredible team that has a focus on gaming. They have an incredible team that's focused on grants and bringing new teams on chain and, you know, collecting teams from Terra that fell off and they're integrating them now. Like, those are the things that they do very well, where it looks a little bit more kind of like the Solana PD strategy, but they're able to just bootstrap and get attention and get interest in. They're building a lot of different chains. They're building a data ability solution. They're building a ZK roll up. They're building an optimistic roll up. Like they're going to hit on one of the scaling models and they'll just be able to kind of sub out their developers and the users for the chain that ends up working. And so I'm a big fan of their approach. And I like the fact that they've always been Ethereum first and like willing to buy into this larger narrative. I think, you know, Polygon will be a successful chain.

• 39:29Speaker 02

  I think one of the bigger things that will come into the valuation of tokens is like, are you money? Are you able to acquire a monetary premium? And I don't think Matic will quite get there. Ethereum will kind of always be that dominant kind of, you know, metaverse based money. And that's something that I've come around on frankly, the past like year, year and a half. I remember David, you were like, you know, is ETH money? And I was just like, I don't even really know what that means at the time, but like, really, I think that's something that I've changed my mind on quite dramatically, especially kind of in the context of high inflation and and just fiat money not being that great as a store of value. I really do think the power law distribution of value will be because of the monetary premium.

• 40:05Speaker 02

  I got into the space because of the technology and it's kind of ironic that I'm now kind of like basing a lot of my highest assumptions for what Ethereum could be based or be worth based on its monetary premium. But I really do think that's what's happening here. And so bullish on Polygon. You know, I think it'll be a great scaling solution. I don't think it'll acquire a huge monetary premium, but yeah, I'm pretty bullish on them.

• 40:25David Hoffman?

  A narrative that has come out around this Starknet ecosystem in the last six months are these like whole L2 plus L3 dynamics where like the Starknet as an L2 to Ethereum can offer layer twos to Starknet, making them layer threes to Ethereum. I'm wondering if how well informed you are about this whole like strategy of, I guess it's a scaling strategy for an L2, which is like kind of interesting to have. Cause like L2s are themselves scaling strategies for Ethereum. So I'm wondering your familiarity with this like Starknet strategy of L2s to L3s and if you have a bullish or bearish opinion on it.

• 40:56Speaker 02

  I'm not extremely familiar with it. What I will say is like, this is something that we're seeing a lot, like we're seeing supernets with Polygon. We're seeing, I think it's like Nitro or Turbo for Arbitrum. Like everyone's, you know, kind of doing this as like an optimistic roll up within an optimistic roll up, which, you know, at least in the Arbitrum context, that's what it feels like. I think it's bullish for Ethereum. Like, my base case is that fees are going to collapse dramatically, and then people are going to be like, "Oh, my God, you know, is it over?" And then fees are going to ramp way back up once people realize that you can do everything on-chain. You can build an application, you can store data, and that's kind of fundamentally what blockchains are eventually used for. And so, you know, for us, I think the focus that we have and the thesis we have for Ethereum is that it's used as the data availability later,

• 41:40Speaker 02

  and it becomes a form of money. And the more scaling solutions, the better. But, you know, everyone paying a tax to Ethereum, I would rather own a much smaller percentage of a much larger market, you know, on the path to hypergrowth than I would just kind of like occupying all of the fees that exist on L1 and collecting those. So we're pretty open-minded in that regard.

• 41:58Ryan Sean Adams?

  Vance, what do you think of this, though? Like Starknet as a whole? Because there's this intensifying war of not just alternative Layer Ones versus Ethereum, but Layer Twos against each other. So we've got Polygon, Starknet taking a different approach. What do you think about their headwinds or tailwinds in that ecosystem?

• 42:14Speaker 02

  Yeah, I mean, this comes back to the point of like, you know, the best tech is not going to win. And I think what is going to win is just like the ecosystems that are able to bootstrap themselves the most effectively. And I think the thing that Starknet is doing a really good job at is getting like all of these very endearingly, you know, strange builders that would be building applications, even if there was never going to be a user ever. And they just love the tech, they want to build, and they've done a great job with their grants program, you know, basically just incentivizing for people to come and stay on Starknet. And, you know, the people that I would categorize in Starknet are, you know, very hardcore cryptography maxis, a lot of Israelis, a lot of people that were in the cybersecurity industry before, and then a lot of gaming, you know, companies and people. And so like, you have kind of like this weird,

• 42:59Speaker 02

  like crypto is always a reflection of like who's in it, or your chain is always a reflection of like who's in it. And so Starknet is the same way, and it's got like this weird amalgamation of people, but it's great when you put them all together with a grants program that's cohesive. And so... I think they're doing a great job of building out what they need to build out. I think it's probably further along than people think, but their traction with the gaming specific people, that's a fundamentally bullish indicator. That's kind of what you really want to be indexing for is the next largest market. And they're certainly occupying a good degree of the mind share for the gaming developers as a result.

• 43:31Ryan Sean Adams?

  I mean, people forget that immutable is built on Starknet as well and Starkware technology.

• 43:36David Hoffman?

  And so to tie this conversation off, I want to go into the red versus blue conversation, the optimism versus Arbitrum conversation. These are both optimistic rollups. They're both going for EVM equivalents. They seem to just be kind of like leapfrogging each other over and over and over again. I'm wondering if your perspective on this particular part of like the L2 wars where they're very much operating in the same space, very collaborative, but also very competitive at the same time. What's your take on optimism versus Arbitrum?

• 44:03Speaker 02

  We're fans of both. You know, full disclosure, we've invested in optimism, but like I know and like the Arbitrum team and know that they're legitimately good for the space and taking a good approach. And so we're not maxies of one versus the other. I do think the optimism approach is frankly just more reflective of the Ethereum ethos and Ethereum community, which, you know, at the end of the day, if you have the thesis of the best tech is not going to win, it's probably something else. And on the community side, like I see them as kind of matching the ethos of Ethereum most purely. And I think there's a lot of addressable market in that. At the end of the day, these things are going to come down to, you know, who has the better team, which can bring developers on chain. And either that's kind of like this amorphous brand halo that slowly, you know, people recognize it and come to you even without asking, or it's you have some aggressive

• 44:48Speaker 02

  BD people that are just out there pounding the pavement, getting people on, giving people grants. And I think Arbitrum probably has the more kind of aggressive BD side. I think optimism has kind of the larger brand halo. The scoreboard would tell you right now that the BD side is probably more powerful than just the overall brand halo based on their TVL and usage. But like, these things are such early days, like you're fighting between like, you know, thousands, if not tens of thousands of user differences between these two chains. And those things can flip instantly if one app, if one game hits. And so, you know, I've seen so many people call apps dead or call, you know, the competition over between two things. It's never that way, you know? People love to anoint winners early and I just don't think it's a time to do so. So we're just going to have to wait and see.

• 45:31Speaker 02

  But overall, we're bullish on both and we're bullish on Ethereum.

• 45:35David Hoffman?

  Yeah, speaking of Ethereum, last but not least, there are a bunch of things, of variables, to discuss about Ethereum. So we want to get your overall take on where Ethereum lies in this current market, because many, many people in the deep Ethereum circle are getting very, very bullish about the merge. But also, the merge keeps on getting pushed back over and over again. And meanwhile, like, while the merge keeps on getting pushed back, macro markets keep on hammering Ethereum. So how would you illustrate Ethereum's current place in the world? What's it got going for it? What's holding it back? And when it comes to just the variables around Ethereum, what captures your attention the most?

• 46:10Speaker 02

  Yeah, so I think just in terms of where Ethereum is right now, you know, the fee bases are always kind of like our North Star. What are people paying to use this every single day? And Halbrecht did an amazing job on a Bankless pod about this. So if you haven't listened to it, please go listen to it. I think, you know, right now, where Ethereum is, there's probably around 6,000 ETH that are used in transactions per day. About 85% of that is burned. You know, to $2,000 Ethereum price, ETH is making about $12 million a day, just in terms of fee demand. And that's just like fundamentally very, very healthy. And if you look at it on a price to earnings basis, you know, basically saying, you know, what would you pay for $1 of earnings, which is how most, you know,

• 46:52Speaker 02

  public software companies are valued? You can make the case that it's pretty undervalued. It trades at around probably like a 13 to 14 price to earnings. And when you look at, and tech companies, there are really good kind of analogies, because, you know, they trade at probably roughly like a 20 price to earnings. And so Ethereum on that context is pretty undervalued. And when you look at price to dividends, like what you would pay for $1 of dividends, and you compare it to companies that do pay dividends, the first thing to note is that none of these software companies pay dividends. They don't basically make any money. And it ranges from, you know, Salesforce.com that has $167 billion valuation that actually makes $0 of profit per year. To Google, which actually is profitable, but doesn't pay any dividends. And so like the best companies to look at when you're comparing just like the dividend

• 47:36Speaker 02

  yield of Ethereum are things that are a little bit strange, kind of like Exxon and, you know, Phillips Altria, people who sell like oil and cigarettes, like those are kind of like consumer staples that pay high dividends. And what you can see is that people are paying far more for dividends in these companies than you would, assuming that the merge goes through. And so for me, how I think about it is, I think the dividends are going to be the thing that, you know, really kind of gets Ethereum, you know, bid up and people excited about it. And you're just going to have a larger price to earnings, you know, ratio as a result. And it reflects just the higher growth of Ethereum. And so that's kind of like what we're most excited about is just when you compare this to public software companies in terms of just their growth rates, Ethereum is growing faster, it's more profitable, it has higher gross margins. And when you compare it to the people who pay dividends, you know, the Phillips Altria

• 48:21Speaker 02

  is the Exons of the world, they're just paying dividends at a cheaper rate to people that, you know, have a higher claim on the overall dividend pool. And so for us, those are the things that are exciting. Why do I think people are fading the merge? The merge was supposed to happen in 2017. Yeah, I remember Slidec from Vitalik, which, you know, 2016, the merge is nine months away. Like, people have very good reason to doubt that this is going to happen. And the Ethereum Core Foundation is an amazing spot that does just, you know, not a great job of communicating to people, you know, how these things work. And there's like 50 people on these Ethereum Core Devs calls, there's basically nobody there. And so how would anybody really do their own primer research? There's just kind of like this apathy around, you know, we don't think it's going to happen, we're not getting communicated the right information.

• 49:05Speaker 02

  So people are kind of right to fade it in a way. Frankly, for us, like, we just are on these calls, we are in the ETH R&D Discord, you know, we talk to various members of the ETH Core Dev Team. It's going to happen, you know, in the next six months, in our opinion. And our hope is that, you know, at first, the structural supply dynamics and the reduction will drive the price, which will eventually drive the narrative, which will drive the price. And you'll get into this kind of reflexive basket of just Ethereum becoming metaverse based money with high yields and get bid up relative to software companies. So that's kind of how we think about the merge.

• 49:38David Hoffman?

  Going back to the dividends conversation, I mean, I think everyone here is bullish that one day, the actual value of the Ethereum fees and the dividends that it pays through EIP 1559 will become fairly reflected in the market, but that is not the current state of things today. For some reason, the market discounts the value of Ethereum's fees and the way that it injects the value back into Ether, the asset. And so I'm wondering, where do you think the source of that dislocation comes from? Is it come from the fact that people just aren't comfortable with a crypto asset and don't understand that these things kind of do actually act like dividends, even though they don't act like the dividends that they're familiar with? But there's also the conversation of like, well, like, since these are very unfamiliar form of dividends, maybe like we have a regulation conversation

• 50:23David Hoffman?

  where like this kind of feels like something just unfamiliar on a regulatory standpoint. Just where do you think the discount comes from when we see Ethereum, which has, it's a network, and so it has an insane amount of growth potential, far greater growth potential than something like Salesforce, but it's the value of its dividends is discounted so heavily. So where do you think the source of that discount on Ethereum dividends comes from?

• 50:43Speaker 02

  I think it's from, people don't doubt Ethereum, the platform. I think they doubt the applications because they just view them as being not valid. And so they're like, NFTs aren't valid, games are not valid, you know, DeFi, like, you know, those fees are going to compress as scaling solutions come out. And they just generally don't believe kind of this idea of certain block space is more valuable than others. And it's not just going to be a race to zero as these technological paradigm shift. And they also kind of believe that all of these applications probably go to zero as well, you know, once the real bear market kicks in and people are no longer willing to just part with discretionary income for speculative reasons. I mean, the reality is that it's the opposite, you know, as Ethereum has kind of, you know, gone down in price, we've seen relatively stable levels

• 51:27Speaker 02

  of fees, you know, on chain, you know, most days we're seeing four to five to six thousand, you know, ETH that's being used as fees. And, you know, it was certainly higher when it was four or $5,000, you know, per ETH. But, you know, even then, the relative stability has been impressive for me. I would have expected it to actually go down much further. And I think a lot of this is also just like the time horizon, you know, the Ethereum fee market, and I might be wrong on this, it's only been really, really big for the past 18 months. So this is relatively new phenomenon and people are expecting this to kind of trickle down as the market also, you know, goes down. But I think what we're seeing are early positive indications that that is not the case. You know, come, you know, hell or high water, there is a lot of demand for block space on Ethereum, and it's differentiated from other blockchains.

• 52:11David Hoffman?

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• 53:39David Hoffman?

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• 54:23David Hoffman?

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• 54:38Ryan Sean Adams?

  So we've talked a little bit about the case for Ether as an asset, because it's a productive asset, particularly in a post proof of stake world and economy, post-merge. But I want to get back to the other thing that you mentioned, because it sounds like you were almost like converted to the ETH is money cult, if you will. And I'm curious about that conversion process. Like, why do you think ETH is money? Why do you think it will accrue monetary premium? What was the path like to getting you there? And what are its prospects as a portion of the value? Is it going to be primarily valued as a money? Or is it going to be primarily a productive asset? Is there a combination of both? Just give us your entire thesis on this.

• 55:19Speaker 02

  I think in the future, you'll be able to model Ethereum based on purely its fundamentals. And then you'll have kind of this delta between, you know, what its fundamentals say it's worth and what it, you know, is actually worth in the, in the open market. And that's roughly going to be construed as its monetary premium. And really kind of my conversion to, you know, the ETH is money cult was just as a result of me just comping Ethereum to public software companies. And Ethereum is such a different asset when you compare it to public software companies, where, you know, every single year it's paying 100% of its revenue as dividends to the people that hold it and the people more specifically that stake it. When you think about equities, you know, let's take Exxon for an example. There's $400 billion market cap. There's $10 billion of dividends.

• 56:03Speaker 02

  And, you know, everyone that owns a share of Exxon gets a dividend. There is no staking behavior. There is no behavior where you say, I want to go off and stake this equity. And you know, there is also no behavior where the people who are not staking the equity are using it as some form of money, as some form of transaction fees, as some form of medium of exchange. Like, there's just very different behaviors between the two assets. And so when you comp them to each other, it just becomes a lot clearer that Ethereum is an asset that really the world has not really seen before, in the sense that it's high growth, it's high margin, it pays stakeholders in its native asset for using and staking the asset. But also, you have this entirely other use case of the asset where it's used as money, it's used to buy NFTs, it's used in DeFi, and it accrues yield. And, you know,

• 56:47Speaker 02

  I think that it's just gonna be very different when, you know, Ethereum yields are 10%, 15% and people are just holding it and using it as a base form of money. And that's really the only time that we'll really get to see this. To me, it's shocking that Ethereum trades at as high value as it does today, because there are no fundamentals. All of the fundamentals of the network go to the miners. But when the switch is, I think it's just gonna be a massive paradigm shift where people see an asset like they haven't really ever seen before, and they might not ever really see again. Like, it strikes me that, you know, the race for, you know, base money is, you know, probably winner takes most market. And so I think there's just a lot of really different nuance when you compare this to public software companies, and just companies who pay dividends. And you can see why Ethereum is money as a result.

• 57:28Ryan Sean Adams?

  And you don't think, Vance, that some of these alternative Layer Ones have a high potential of achieving that ETH level of monetary premium? Is that the case? And if so, why? Why can't Sol do it? Why can't AVAX token do it?

• 57:42Speaker 02

  I think the first thing is you need a ton of fees on the network. You know, use cases, you need a large brand halo, you need liquidity on exchanges, you need, you know, all of the VCs to sell out their bags and, you know, go through price discovery multiple times so that, you know, people aren't arbitrarily, you know, controlling 5%, 10%, 15% of these networks. Like, those feel like preconditions to becoming money. And Ethereum, in many ways, has just gotten very lucky, in the sense that it launched first, there really was no venture capital participation. You know, the fee market and the, you know, the developer market has developed relatively organically. It has all the developer tooling, it has all the infrastructure. So it feels like this is kind of like a once in a generation opportunity to create something that could become money. And there's so many different contingencies that relies on, and Ethereum has just managed to hit all of them. And I think the chances that

• 58:25Speaker 02

  another all L1 does it as well is pretty small. Getting people to use things as money is extraordinarily difficult. Like seeing NFTs priced in ETH at first, I thought it was extraordinarily silly. But now, like I realized that it really did reinforce the network effects of Ethereum in a way that I had not anticipated before. And it's going to be very hard to build that consumer behavior elsewhere.

• 58:47David Hoffman?

  Fans, there's a tweet that you tweeted out on May 31st that I'd like for you to explain to me and the listeners. You say, ETH's inverse price sensitivity when used for fees as a form of money is something markets haven't seen before. In December, with ETH at above 4K, we averaged 10 to 15 ETH burned in fees per day. In May, with ETH at 2K, we see 3 to 4K ETH burned per day. Huge potential for earnings, reflexivity, uh, actually don't know this word, dynamic, apocal? Dynastic apocal. Dynastic, okay, I'm butchering this last part. Dynastic apocal. And then you followed that up with another tweet saying ETH is a Veblen money good. Can you explain what all this means and what a Veblen money good is?

• 59:28Speaker 02

  Yeah. So the first part of the tweet is basically like, let's roll back the clock and look at like all of the consumer behavior that happened on chain and see like how people and why people were spending money. And, you know, at the very highest price of Ethereum, probably about 4,900, just call it 5,000, people were spending about 10,000 to 15,000 ETH a day, just buying stuff, transacting on chain. And that's, you know, anywhere from 50 to 75 million dollars of revenue. Logically, you would expect that the higher the price would go of Ethereum, probably the less of it you would use. There's obviously like the gas abstraction and that matches, you know, the supply and demand of ETH to the network's, you know, usage. But, you know, really, this is kind of the opposite of what you would see, where the higher the price goes, the more people spent it. And the lower the price go, you know, like, and now it's, you know, at 2,000, people are

• 1:00:13Speaker 02

  spending $4,000 or $5,000 of Ethereum per day, the less they're spending. And so it's kind of the inverse of the behavior that you would expect to see. And what I mean by earnings reflexivity is Let's say that this continues. Let's say that the fee based on Ethereum hits an all time high of 15,000 ETH used per day again. And now let's say the price of Ethereum is $10,000. That's 150 million of revenue. And you'd actually expect, based on that trend, the usage of ETH to increase. You would probably be burning or using maybe 30,000, maybe 40,000 Ethereum per day, maybe 50,000. We don't know. There is the chance that these earnings could be so reflexive where you have days like OtherSide where there's a few hundred million of fees being

• 1:00:54Speaker 02

  used. You have all of these kind of micro events where the changes accrue such dramatic fees and shows such reflexivity to the price and the usage of Ethereum that the earnings will be far, far higher in the future than we can expect. And I think that's the mega, mega bull case. And what I mean by the ETH Veblen money good is a Veblen good is something that the more expensive it gets, the more attractive it gets to have or to use. And I think that is the case with Ethereum, or at least this data would suggest, is that the higher the price of Ethereum, the more people see it as valuable, the more they want to spend it, they want to use it, they want to transact it with it. And the fact that they don't just hold it and put it under their mattress is fundamentally positive for it being construed as money. And you've talked about the conversion of me to the Ethereum ultrasound money camp. I think I'm there. And I think mostly what got me

• 1:01:39Speaker 02

  there is just looking at data like this and seeing people really not only choose to hold Ethereum as it goes higher, but choose to spend it as it goes higher, as they feel some sort of wealth effect from just their base money. It feels very strong in terms of just an argument for ETH being money. Are you sure it wasn't the Justin Drake podcast, though, Vance? That was also a big one.

• 1:02:02David Hoffman?

  Speaking of spending ETH as it goes higher, I think listeners are like, "Yeah, I kind of wish I hadn't spent all that ETH when it was all that high, though." Because many, many listeners and myself included are kind of all tapped out. I don't have any cash left to buy ETH because I'm so bullish ETH. And I feel like a lot of listeners are probably in that camp as well, which means that in a post-merge world, who is going to actually be buying the ETH? Who becomes the new marginal buyer of ETH in this ETH is ultrasound money form? Because going into bear market, unless you magically sold the top, you're already allocated. At least I think that's probably the consensus for the majority of the market. Who's going to come buy these bags in a post-merge world?

• 1:02:41Speaker 02

  I think the first folks are going to be BTC folks that, frankly, like, you know, you look at the, I don't think this is particularly controversial, but if you look at the ETH BTC ratio, like, obviously, people are kind of like fading this idea that Ethereum will be, you know, the merge will happen, it'll be productive, fees will reach the all-time high again. But once the merge happens, and it just starts to trade lighter as a result of no miner supply, and Bitcoiners see the fees that are accruing to people at stake, like, it feels like that's probably going to be the moment where a lot of them jump ship. And people forget that we really haven't had any yield or really fundamentals to buy in this industry for almost 10 years. And this is the first time that that's changing. And so I think initially, a lot of the flows will come from people who are

• 1:03:23Speaker 02

  holding Bitcoin who realize that, you know, Ethereum is the only other asset that, you know, kind of has this like grandfather regulatory status that has, you know, the platform play with all the developers, and that has just like a bunch of yield. And so I think like initially, the first moves that you look for in the bear market are from capital moving from one ecosystem to the other. That's usually like a very good trend of like where things are going to go. And people think that because we're in this bear market, that, you know, Ethereum is going to go from 0.16 where it was at, or 0.12 where it was at in the last bull market, you know, back right down to like 0.025. And that's just like people's instinct. But the next move is going to be very constructive as to like how Ethereum trades it over the next few years. And I think that that's going to be dominated by Bitcoin flows. But then, you know, the next question is like,

• 1:04:08Speaker 02

  all right, price drives narrative because there's a lack of supply, and Ethereum will trade lighter than Bitcoin. And so it'll probably start to get a little bit of a bid. But then the narrative will drive the price. And the narrative driving the price looks like institutions buying. It looks like Bitcoin holders capitulating and buying ETH. And that's kind of when you get that potential for the reflexivity that I've talked about, where, you know, if Ethereum is the thing that leads out of this bear market, That's when things really start to, you know, you could kind of like squint to see the future with that example I said, where, you know, if ETH is at $10,000 and people are spending 10,000 to 15,000 ETH per day, like you have the reflexivity. That's where I think that kicks in. You know, the narrative really starts to drive the price and then, you know, all bets are off. And so that's kind of how I think of this playing out, but.

• 1:04:52Ryan Sean Adams?

  Do you have any idea or conviction on how long this will take to play out, being a multi-bear cycle veteran? I mean, like, are we talking about, like, that's the other thing about this bear market is some people, I don't know if anyone said V-shaped recovery. I feel like some people think that it might be a sharp but fast blip down and then back up, whereas others are anticipating, hey, welcome back. It's 2018. See you in two to three years.

• 1:05:18Speaker 02

  Goblin town.

• 1:05:19Ryan Sean Adams?

  Was it the Goblin memes where they get like, no accident that they are at all-time highs as well. What do you think? What's your gut take for this bear market advance? How long is it going to be? How sharp is the pain going to feel?

• 1:05:30Speaker 02

  I mean, the last time we didn't have anything to come back to. Yeah, we didn't have any games, we didn't have any DeFi, we didn't have any NFTs. Like, we had no natural retail funnels that would ever bring anyone back. And so like, you know, we were cold starting back then. Right now, we have like the worm start, maybe like the lukewarm start. But, you know, we have fundamentally things that will bring people back on chain and we don't have to, you know, rely on any hail Marys to create entirely new categories that we can depend on. And so I think that's one thing that, you know, we have going for us that would make me believe that it would be a shorter bear market, not like, you know, two years, maybe like a year. The other thing I'll say is that crypto kind of trades in the future, where if you look at it, like, it's pricing in a lot of the moves that are coming to equity markets, just if you've kind of seen correlations or if you've seen

• 1:06:12Speaker 02

  crypto lead equities before. And so I think really kind of the moves that crypto is making lead me to believe that it'll probably bottom before equities. And then the last part that I would say is just like crypto and markets in America are just like addicted to drama. You know, we don't want to see the 18-month rounded bottom. We want to see the WIC down to 1,100 Ethereum, everyone pukes and, you know, has an awful time. And then, you know, we kind of get back on with our lives and the presumption of, you know, crypto just becoming ubiquitous. And so that's more of my feeling about. About how the bear market plays out is that there's going to be some sort of, you know, violent capitulation where everyone kind of pukes up, you know, whatever they ate last night in terms of financial assets and then the party keeps going.

• 1:06:55Speaker 02

  But it'll need to be something that's based on high conviction and it won't be able to be something that's just kind of like this apathetic, low conviction rally. And so I think there's significant preconditions, but that's roughly how I see this kind of shaking out.

• 1:07:07Ryan Sean Adams?

  Let's, let's talk about the sharpness of the pain. So a debate David and I have going back and forth is to, you know, that puking moment is how severe that will be. I very much think that it could, I'm not saying it will, but I think we could get to triple digits. I don't want to put words in your mouth, David, but I think you're, you think that triple digits is much less likely, is that the case? I think Ryan is in the camp of people will puke and I'm in the camp of eh, queasy at best. What do you think Vance? Settle the debate.

• 1:07:34Speaker 02

  I, I think people are addicted to drama and they want to see other people puke. And so, you know, like that is, I think the most likely candidate. I just don't think there's like that big of an appetite for like this long rounded bottom where everyone feels like kind of bad. And I think that's more based on just like the psychology of markets more than anything else. But that's generally how I see things. There's a reason that, you know, you look back on the bottoms and you see four sellers. And there's already been evidence of that, like LFG puking 80,000 Bitcoin. That's crazy. Like, I don't think I've ever really seen that before. And, you know, maybe there isn't something like that quite on the ETH side, but it feels like, you know, we're still midway through the process of cleansing.

• 1:08:14Ryan Sean Adams?

  I think there's other like camps within Ethereum that sort of say like, I mean, last time, let's remember 95% from top to bottom, last bear market for Ethereum asset. There's other people I've talked to in Ethereum, maybe this is the hopium kicking in that are like, hey, you gotta remember some of that puking has already happened Vance. If you were the Terra ecosystem, my God, I didn't even know what that was. It's like worse than puking, like you're in the hospital, like it's kind of over, right? Their point would be some of these other chains have already felt the level of pain that you're talking about. And maybe the Ethereum's of the world and to some extent Bitcoins might be a bit more insulated from that. So maybe, maybe we're close to the bottom or maybe we've seen it. What do you think of that argument?

• 1:08:52Speaker 02

  You know, the comparison is in the last cycle, the four sellers were all of the ICOs that had ETH and you could just see them like shelling the market, you know, day after day. When it dropped to 85, I thought like we were under attack, basically, or something. I thought like the chain was halting. Like, that's how bad it seemed. And, you know, we haven't gotten there to this point. And, you know, I don't think there's as many forced sellers. And so I think there's like a lot of credence that's lent to the idea that, you know, maybe the worst of it is over. But that's also when, you know, people start to get complacent. And then, you know, you go into kind of like a low liquidity summer and, you know, the merge, you know, who knows what happens? Maybe it gets moved up a month, maybe it gets delayed. Like, people are just gonna try stuff. Chop is a specifically designed mechanism to transfer coins from people who want to have it to people who like are trying to get it from them.

• 1:09:37Speaker 02

  And so I think that this is just gonna be a market that's intentionally designed for that. But I do think it's gonna be something that resolves sooner rather than later. And I think I just am on the side of just like, maybe we have seen enough drama. And maybe Ethereum is just kind of like this thing that is resilient to it now, given that it's been up so much and down so much. But yeah, it's just hard to tell.

• 1:09:57David Hoffman?

  I want to resume a conversation that I don't think we completely finished off earlier in the show where during the 2018 cleansing, where Ether went all the way down to $85 and Ether went down 95%. Many, many, many other tokens went down more than that. And the difference between going down 95% and going down like 99% is a difference of 80%. And so like, and so like, if you're holding a token, like the average ICO that went down 99%, you lost 80% more than something that went down 95%. And so it turned into this culture of like, I'll never touch tokens again. Like, all my tokens went to zero, never again, I'm only ETH, only Bitcoin.

• 1:10:41David Hoffman?

  And then all of a sudden, we see things like Link and AVE and SNX just rocket off the bottom and make generational wealth. And I remember looking at these charts every single month, being like, wow, it's higher, wow, it's higher, wow, it's higher, for months while I sat on ETH. I mean, not to claim that like Link, AVE and Synthetix were anything remotely close to what the average ICO looks like, but in the moment, you had no idea. Like, it was just another ICO that somehow wasn't dead. But then it somehow not dying turned into somehow it's doubling versus ETH, somehow it's tripling versus ETH. And so like, the lesson here is while some people are swearing off tokens and say, "I'll never touch another token again," there are some tokens that like had their moment

• 1:11:25David Hoffman?

  to claim and really actually kind of led the 2020 bull market. If we followed that pattern going into the 2022 bear and perhaps, I don't know, the late 2023, 2024 bull, how are you thinking about the same sort of pattern? Like, are you on the hunt? Because like, one of the reasons why we had you on Vance for the first ever DeFi Bull Case podcast, which actually is a fun piece of Bankless trivia, is the podcast that held the number one most downloaded podcast on Bankless for the longest amount of time. And it was because Framework made these high conviction concentrated bets in Link, AVE and Synthetix, I think all three, if my memory serves me correctly. So how are you trying to play the same pattern going into the next bull run? Like, how are you thinking about these opportunities?

• 1:12:08David Hoffman?

  Not that they're necessarily will be in DeFi, but perhaps some of them are. But just going forward with this pattern of while, while everyone else swears off tokens, while everyone else is going one way, perhaps it's the smartest thing to do is just go to the other way. What are you thinking about this?

• 1:12:22Ryan Sean Adams?

  Yeah, because this time I'm going to listen to you, not like 2019, where I forgot to do that, Vance.

• 1:12:27Speaker 02

  So there's kind of a difference between the public liquid world and the private startup world. And our investment kind of process and strategy is, you know, mostly the same across both scenarios. But when things start to go into a bear market, really the first things that crash are the liquid markets. And, you know, you're at a point where tokens are down 90, 95% that are alt. You know, Ethereum is down probably like 60, 65%. You're starting to get to the territory where You know, the cash flows that are produced by these things, you know, they would indicate deep value. And when you're trying to buy, you know, capitulation bottoms, when you're trying to get into these things, you usually size the bets smaller than you would like. But that's because when you're buying them, they're usually so far down that there's some

• 1:13:11Speaker 02

  degree of like career risk to even being there, even bidding. And, you know, I think that's something that we've gotten comfortable with over the past cycle and that we're going to do again. And so we feel comfort about that. But really, the preconditions to us bidding on anything are like, it has to have real cash flows. It has to have a team that, you know, we know that unfortunately, you know, for some people is doxed and that we can interact with and that we can give feedback to. And so for us, we're on a hunt for a lot of those assets right now. We're also continuing doing the private startup investing. You know, a lot of the intuitions that led us from DeFi are now leading us towards GameFi. And that is an area where I generally do think it'll be the largest software market in existence. And people have a really bad taste in their mouth from Axie Infinity,

• 1:13:54Speaker 02

  from all the NFT kind of like Moon Boy people. And they just say that, you know, the games really can't ever be made. They will never be interesting. I just don't think that's true. And I think we're going to prove that wrong pretty soon. But overall, you know, the other thing that we're doing is just having conversations with founders and saying like, you know, how do we get you through this bear market? How do we get you to product market fit? And those are conversations that we haven't had to have in probably two and a half years. And those make us better as investors. Those make the companies better at what they do. But generally now is, you know, we've heard of people being like, thank God, the bear market's here. We're going to go on vacation. And it's like, man, like the bull market for me is kind of where I have the most trouble thinking and the most trouble, just like reading things and getting my head clear. Right now, I feel like I am

• 1:14:37Speaker 02

  so clear and so have so much clarity on where I think the space is going to go. And I have the balance sheet to really go off and fight the battles that I think are worth fighting. And so a lot of what I'm doing right now is just figuring out how and when and what to bid.

• 1:14:50Ryan Sean Adams?

  Okay, okay. Well, we want to get into that. And I also want to talk about GameFi. But before we do, let's stick with DeFi for just a minute here. Okay, because I feel like DeFi is kind of at that moment where people think, oh, DeFi, at least from a token perspective, will not recover. It will never again appreciate relative to ETH. Like the complete opposite to what we were hearing a year ago or so, or at the end of DeFi summer, where it was all about DeFi tokens. How you're thinking about DeFi right now? It's like, how do you divide the DeFi world? I know you've talked before about horizontal versus vertical primitives. Interested to know what that means, if that's how you divide the DeFi world. But what's going to survive? And then what's going to resurrect on the other side of this?

• 1:15:31Ryan Sean Adams?

  What we want to know is like, what's the Synthetix, Link, Ave play? Like for this cycle, without naming specific tokens, but you can, Vance. I like, tell us what kind of categories you're looking at and how you're shaping this up.

• 1:15:44Speaker 02

  So broadly, I think the vertical categories of DeFi can roughly be described as like the B to C categories of DeFi. And so things like AMMs, things like derivatives exchanges, things like Barlen desks. Like those are the vertical primitives that came out right as DeFi was starting. And they got this huge head start. And then what happened was they had all these competitors launch because it was relatively easy to fork. And you had like, you know, the third largest Barlen desk on the fifth most popular chain. And it was like, you know, there was kind of like death by a thousand cuts. And oftentimes, these teams that launched after the DeFi, you know, OGs would get, you know, paid more in tokens. They would, you know, kind of do things that were a little bit more self-serving. And it really kind of like, not only clouded the atmosphere of competition, but it like,

• 1:16:28Speaker 02

  kind of like demotivated these DeFi 1.0 teams. What's happened since then in the DeFi vertical land is that, you know, the incumbents, the winners have kept winning. The teams that have really not been in it for the right reasons have faded. And now you have this environment in the DeFi vertical primitives, where a lot of the blue chips have the potential to just like pull themselves out of the spare market. Ave, like Maker, like Synthetix, like Maple, like, you know, there's going to be a lot of these categories where you have the right team, they're generating cash flows. And unfortunately, like, we're not all going to make it, you know. We're all gonna make it, probably like a tenth of the DeFi protocols that exist today are gonna make it, but they're gonna be huge as a result. And I think what we've seen is that the rough, probably order of magnitude that we're looking for in TVL for DeFi

• 1:17:12Speaker 02

  is probably like one to 10 trillion. We hit 100 billion this cycle. It feels like we can get to a trillion probably the next one. And if these people can take 1% of the fees of their TVL, you know, these are gonna be Deca coins. And so that feels relatively obvious for me. You see something like the growth of a Maple finance when compared to Genesis. They've done like a billion and a half of loan originations. They're growing like 50% quarter over quarter. Like they can get to that scale of Genesis, which has, you know, 130 billion loan originations a year fairly quickly. But it's not gonna be obvious. You're gonna have to do a lot of research and frankly, you're just gonna have to bet on the teams with the most longevity. And so that's kind of like how I would think of DeFi for, you know, the vertical primitives right now.

• 1:17:52Ryan Sean Adams?

  Did you just give the case for DeFi blue chips though, Vance? I want to be clear.

• 1:17:56Speaker 02

  In a way, yes. And like, you know, Degen Spartan called for an 18 month, or sorry, a 36 month bear market for DeFi almost like a year and a half ago. And when he started doing this meme, I was just kind of like,

• 1:18:09Speaker 02

  like, man, like, you're gonna do us like that. But he was right, you know, he was right for a couple of reasons. The first one is just like, we needed to weed out all of the competitors. And the second reason is just like, we need to figure out which teams have longevity, which teams have product market fit. And it feels like we're reaching the point where that is true. And so I'm not gonna say it's gonna be another 18 months, but it feels like we're gonna have the winners at least sorted out in the next, you know, six months. And so that's kind of how I think of the DeFi vertical primitives.

• 1:18:33Ryan Sean Adams?

  But what about on DeFi verticals still? What about this multi-chain world? Another question in my mind, will we have geographic winners? Like, because if you're gonna bet on the the Aves and the compounds of the world, or even the Maples of the world, you know, expanding beyond Ethereum to all of these other layer twos, maybe alternative layer ones, are they gonna be able to scale in that way? Or do you think you'll have regional competitors, right? On Avalanche, you have Trader Joe rather than Uniswap, for example. How do you think that shakes out?

• 1:18:59Speaker 02

  Yeah, I mean, obviously not financial advice, all this podcast, but I think to the extent that these, you know, teams can go off and find new asset markets on these new chains, they will. And to the extent that there's like captive consumers on these chains, I think they will go there. But my sense is that, you know, people are going to be more drawn towards these DeFi primitives because of their brand. And also because of what I think is coming next for a lot of them, which is like building out their own wallets, building out their own front ends, building out their own direct to consumer brands. Like it won't be about which chain you're on, it'll just be about like what your brand is and what your connection to the end user is. And so going forward, I see moving on to new chains as less of a catalyst than just like executing really well and building out your top of funnel. So that's kind of at least what I think of them.

• 1:19:42Ryan Sean Adams?

  All right. So that's the vertical piece. What's the horizontal piece then?

• 1:19:45Speaker 02

  Yeah. So the horizontal piece is more of like the B2B side. And so like, these are things that transcend blockchains, that transcend use cases, that transcend, you know, customers even like, and I think about it kind of like as an order book. At the very top of the order book, I think of things like payment for order flow. And these are protocols that really haven't been launched in crypto yet, things that like can plug into wallets, give them out of the box monetization, give their users cheaper fees. And that can kind of like live across all wallets, all UIs as an abstraction layer for DEXs. I think that's relatively interesting. At the very bottom of the order book, I think of things like MEV and, you know, protocols like Flashbots or protocols like GTO on Solana. Like those are the things which are more about like, who has the rights to the flow of the most complex transactions that are probably the most profitable.

• 1:20:29Speaker 02

  And so I think those are very interesting. And then somewhere in the middle of those, I think, you know, you have staking protocols, decentralized derivatives like Lido, decentralized derivatives like Swell and Rocket Pool. Those are things which are just kind of like going to ride the trend of staking to, you know, what we think is a very large outcome. And you look at Lido and they're probably making, you know, a mill and a half every few days. Like, these are real revenue producing protocols. And I think they're just riding the transaction fee wave that's currently happening on Ethereum and other chains. And they'll be successful as a result. And that's where like, we haven't had as much experimentation. All the DeFi vertical primitives have had a ton of competitors, a ton of competition, a ton of just like shaking out of the market. The horizontal ones, like we haven't seen a ton of competition, we haven't seen how these markets shake out. And so that's kind of where I think.

• 1:21:15Speaker 02

  The DeFi 1.0 vertical primitives are going to have to really pull themselves out. I think the horizontal primitives are still in a little bit of a horse race between themselves as to like how the eventual market actually shakes out.

• 1:21:24Ryan Sean Adams?

  So you think that there might be a second class of competitors in the staking and MEV world specifically coming?

• 1:21:31Speaker 02

  Yeah, I think we'll see Coinbase institutional launch and take a lot of the market. I think we'll see natural demands for diversity of staking derivatives result in it not being a winner take all of market. And I think we're going to see the same thing on the MEV side. Like, it feels like they're entering the space where DeFi was in 2020 summer, where all of the competitors just came out of the woodwork. I think that's what we're going to see on that side.

• 1:21:53David Hoffman?

  One last question to round out this DeFi conversation. If we take Dgen Spartan's timeline, he's at 36 months, 18 months ago, that gives us about a year left. I do subscribe to the idea that some very dominant winners are going to emerge and they are probably in that world extremely underpriced at this moment. But also at the same time, you know what else is underpriced is ETH. Within one year, we will certainly be in a post-merge world. The inevitable question of DeFi tokens are bullish dollars and Ether is also bullish dollars, but are DeFi tokens still bullish Ether? So Vance, when you allocate capital into tokens, how do you consider the contrary, which is Ether? And how do you weight to these things? And do you focus on price performance versus dollars or versus Ether?

• 1:22:38David Hoffman?

  And how do you balance out these two tug of wars?

• 1:22:41Ryan Sean Adams?

  By the way, Vance, this is another debate David and I have been having, so please settle this one for us, too.

• 1:22:46Speaker 02

  I think there's certain things that are levered to Ethereum. If you think about the growth of the underlying fee market for an application. And so a good example of this is a staking derivative. That's perfectly levered, one-to-one with Ethereum, where something like Lido, which has a third of the market share, if ETH gets to $10,000, Lido might be making high nine figures of revenue per year. And that could mean and imply just like a more explosive growth opportunity than Ether itself. So that's like one that's obviously directly correlated to Ether. And like most of the horizontal primitives, like staking derivatives, like MEV, I would expect those things to be highly levered to Ethereum and have the potential to outperform.

• 1:23:32Speaker 02

  The vertical primitives are more based on just like, is the management team executing? You know, it doesn't matter Maple and ETH, like they aren't really related in many ways other than, you know, is Maple able to get more borrowers, more lenders on chain? Are they able to execute and move faster? And how big is the market opportunity? And you know, you kind of need to answer that for each one of the vertical primitives, but the answers are more surprising than you might think just because look at something like Maple, it's at about four or 500 million. Look at something like Ethereum, it's at around 230 billion. The amount of capital that's required to move each of these outcomes is much, much different. And so that's where you get the basis of outperformance from if this starts to move in the right direction. And so I've seen the charts, I've seen the DeFi charts, like I have my eyes open. You know, I've seen those going down for the past 18 months.

• 1:24:18Speaker 02

  Impossible to tell if there's a bottom or when it'll happen, but if you just look at the individual projects, you know, for us, and this is what we do all day, the research is pretty compelling in that, you know, there are sources of outperformance that you can find, it just might not be in the most obvious places and it might be in the private markets and it might be in the public markets and things that are beaten down. But that's the great thing about crypto. It's like, you know, you always have a chance to kind of do your diligence and do your research and find something that maybe not everyone else does.

• 1:24:44David Hoffman?

  Switching gears here to a new conversation. Vance, from following your tweets and chatting with you at Permissionless, it seems to be you are going down the game five rabbit hole, but listeners might get that, okay, like an Axie Infinity type game five or just like a alluvium type game five. But from what I've gathered, what you're up to is you've done some like deep research about the actual structure of trad gaming and that whole ecosystem. And you're seeing a lot of potential for trad gaming to be disrupted by crypto in ways that are different than just like an economic game like Axie or like whatever the listener might imagine when I say the word game five. So when you hear the word game five, what do you think? How is game five going to disrupt? What is the path for game five to disrupt the current gaming status quo?

• 1:25:27Speaker 02

  Sure. So, you know, we all lived a time where we were putting discs into consoles and paying $60 for them. And that seemed like a pretty fair deal. And, you know, that was what was known as like proper games. And then we had free to play games. And, you know, when those came out, the Candy Crushes, people said that these aren't real games. And how could you put these out as something that really isn't even in this paradigm? But, you know, today, the free to play games industry is generating probably 80 or 90% of the revenue in the entire game industry. So if you look at something like Activision Blizzard, you know, what they're doing is they're taking all of the profits from these free to play games and investing them in these awful console titles that they think have like a brand halo. And the games industry is largely broken over the past 20 years. All the indies have pretty much died. All, you know, basically, it's just been a story of consolidation.

• 1:26:12Speaker 02

  All of the free to play games now rely on, you know, basically in-app advertising for any monetization. And with the cutoff of IDFA, really what you have is the breaking of their business models. And IDFA is basically the unique identifier that game developers use to track users across multiple different applications and sessions. And so really, you know, the opportunities for game developers right now are sell your title to a major studio in some really kind of shitty earn out deal. Or try to chase down this monetization opportunity of ads, which is increasingly deteriorating. And so all roads for these developers kind of lead to crypto where people are excited. There's lots of funding, you know, you can actually build things that are relatively interesting and outside of the scope of just like the traditional games that you're supposed to build.

• 1:26:57Speaker 02

  And so we see a lot of kind of like bottoms up people just coming into the industry. And from the top down, the metrics are fairly clear. There's 3 billion people who play games a year. There's 1.5 billion people who make less than $5 a day. And these people are going to be the first users to play their own games. And, you know, obviously, the traditional gaming establishment has been pushing back and will continue to push back because these are not deemed as real games. And the financialization of games is largely a taboo. But, you know, for us, there's global distribution of wallets. Tokens is a new design space for growth. You know, DAOs that own the assets and the community which can take part in the upside of the game. These are things that if you build a good game, these should work. And so I feel like it's kind of like the bell curve meme where like people in the middle of the bell curve say like,

• 1:27:40Speaker 02

  the games are too complicated. You can never build them. They'll never be valuable. But on both sides of the bell curve, you know, the really smart guy and the really dumb guy are kind of like. You know, games on crypto is just like fun. And I think that's going to be the base case for where we're going is like, it's not going to be play to earn, it's going to be play and earn. And even if you're able to increase the economics of an industry that's, you know, hundreds of billions, you know, 20, 30, 40%, you know, that's just like such a fundamentally constructive thing that you're going to see a lot of activity as a result. And so we've been investing in a ton of single titles. We've been investing in a ton of gaming infrastructure. And just like last time, you know, everyone thought tokens were bad and DeFi would never happen. Like, just because you saw that at the very tail end of the bull market of 2017, when the ICO froth got out of control,

• 1:28:22Speaker 02

  we're seeing it, same thing here, but Axie is now the poster child for like the malfeasance and how this could never work. You know, it's just a cat game. But betting against that stuff is always good. And when you've hit a taboo that people feel very sensitive about, that's usually a good sign that you're on, on the right path to something that might be successful.

• 1:28:37David Hoffman?

  Yeah, that's exactly where my head went, where in 2017, all the ICOs that went to zero, in hindsight, it makes total sense. But then when we look at like the tokens that came out of that bear market, Synthetix, Ave, Link, they weren't like the tokens that went to zero. They were fundamentally different. They were an order of magnitude improvement upon the previous systems. And if you could just look at the previous ICO tokens and then use your imagination about how these might be improved, you might get something like Link, Ave and Synthetix. And I think we can take that same example with Axie and say like, okay, Axie had this blowout success. It succeeded for some of the metrics that you illustrated. There's billions of people out there living on less than $5 a day who have access to a smartphone or a way to play a game.

• 1:29:21David Hoffman?

  And like, you don't really have to get too creative after that to assume like, well, there's a lot of latent potential here. I'm wondering, what were the lessons that we learned in 2021 GameFi with like, why Axie succeeded, why GameFi succeeded? That are illustrative of why, as soon as we figure out what is the next upgrade to GameFi, the dynamics that will actually turn GameFi into a real sustainable thing in the same way that DeFi became sustainable post the ICO mania. It's like, what are the fundamentals in the world of both gaming and crypto that is ultimately going to drive GameFi moving forward in the next year or so?

• 1:29:54Speaker 02

  I think the first thing, and this isn't necessarily learning from 21, uh, this is just like learning just from thinking about it and talking to game developers about how they might use these crypto economic primitives. It's just like true free to play is really possible for the first time ever with crypto. And what that means is like you play Candy Crush, you get a couple of levels in, they'll make you buy more. You know, gems or diamonds or castles or whatever. It's not really a free to play game. It's like a freemium game where once you pass a certain point, like then you have to pay. With true free to play games, what I kind of mean by this is you can give someone a sword, a shield, an F T. And you don't need to charge them. The only thing that you need to charge for is every single time that changes hands. You know, the money goes into a communal treasury and that makes for the first time true free to play gameplay actually possible.

• 1:30:39Speaker 02

  And so that like is one that kind of runs counter to the learnings of Axie where like, you know, people were paying for the cats and they had to like, you know, go through the game and pay more like. I think that that's going to go away and what crypto gives you is actually an ability to charge people less rather than more in a communal economic setting. And so that's kind of the first thing that I think, you know, I'm taking away from this. The second one is just like the business model for game developers is probably going to be somewhere between, you know, earning money on the velocity of secondary market transactions. And just owning the vertical stack of own your own L two, which has its own token, which accrues value from the game. Like those are going to be the new business models of these games rather than anything advertising based. And that's kind of, I think, another fundamental learning. The last one I would say is just like, these games need to be fun.

• 1:31:22Speaker 02

  You know, the reason Axie didn't go anywhere is just because the entire economy was based on kind of like DeFi-esque and like bad DeFi-esque, like Ponzi economics. Where, you know, there really wasn't a path where this didn't unwind, not gracefully. And so for us, like the things that we see now, and it's always a little bit strange when you're out of your comfort zone. We're talking to indie developers that are building first person shooters, you know, real time strategy games, MOBAs, like things that really have nothing to do with crypto. And we're helping them weave the crypto elements into it. And what we're learning is there's some things that we should, you know, take, and there's probably some things that we should leave. And maybe the, this idea of like this open reflexive economy is powerful, but you really need to leg into it and be, you know, cognitive when you really put that into the game's economics and design.

• 1:32:07Speaker 02

  And so for us, it's like. These things are going to take a long time to really find their footing, but that's not to say that they'll never get there. It just might take nine months and we're just being patient with it overall. You know, we're not expecting these things to launch overnight and become smash hits. There's a long road for games and it's just going to take a while.

• 1:32:23Ryan Sean Adams?

  Ben, do you think the opportunities are primarily in the private space, right? Like all kind of credited investors sort of you got to fund the game and retail doesn't necessarily have access to that. Or do you think some of these are closer to public that there will actually be tokens? That, um, you know, people can invest in. I mean, quite famously, the last bear market, you know, 2018 was a fantastic time to buy some link or SNX or, you know, lend. But I'm wondering if the game fi market is structured differently.

• 1:32:50Speaker 02

  The game by market is structured differently right now because there's no, you know, it's only Axie. You know, if you want to go buy Axie down a lot, you know, you can certainly do that. You know, I'm not as strongly convicted that that's where the future of this is going to be. It's more so right now on the private side with gaming because all these things are literally just getting started. Probably in a year, you're going to have a hundred, 200 games that exist and you'll be able to kind of categorize them. You'll be able to separate them in terms of which management team is good or not. You'll be able to see what the cash flows are for each. And that feels like probably the optimal time to be, you know, in a position where you're actually making an investment decision around, you know, what do I believe the most in? Right now, there's just not a bevy of choices and I think that's more reflective of just where the industry is. You know, if you look at the landscape of opportunities right now and you look at DeFi,

• 1:33:36Speaker 02

  that's where there's the most dispersion. There's the biggest difference between the best and the worst team. There's the biggest difference between the fees that one's generating versus the other. And there's a difference between their future trajectory. And so I think like right now, you know, again, not financial advice, but you know, that's where frankly, most of the opportunities should be just because DeFi is a more mature category than anything else, with the most competitors that are the most public, the most tokens that are down the most from their all time highs.

• 1:34:00Ryan Sean Adams?

  It doesn't DeFi just become game five's like banking system essentially? I mean, aren't these markets tied together at the end of the day? I mean, if you want to trade your skin or your token, your game five token, you're going to do that on Uniswap, right?

• 1:34:11Speaker 02

  Yeah, I mean, Uniswap, like, this is kind of the, uh, the tension, right? You know, DeFi is going to be this huge top-of-funnel retail, you know, magnet. And DeFi is going to have to kind of like shuffle and get closer to that. You know, if you're Uniswap, you're trying to get integrated with the gaming wallets that are coming out. You're trying to get, you know, on immutable X, so you can get the flow from, you know, Luvium. You're trying to kind of position yourself closer to these opportunities. Because I think we're moving to a point where DeFi has historically been both the means and the ends. But now it's probably just going to be the means to an end of participating in things that retail would do anyways. In a lot of ways, DeFi, like every use case on a blockchain is DeFi. And DeFi will need to kind of just move closer to these top-of-funnel retail use cases to become as large as it possibly could be.

• 1:34:55Ryan Sean Adams?

  It's just an interesting concept to me that like, maybe for some people out there, the best way to get exposure to GameFi is actually by way of DeFi. Or even more concretely, by way of Ether. Or buying some other layer two block space to bet on the future. It's sort of like, you don't necessarily have to go and do diligence to figure out the specific game that's going to do 100 X and onboard millions of users. You can just buy into the crypto use case.

• 1:35:23Speaker 02

  That's what makes it so interesting and also so hard. You have to figure out what layer of abstraction to play at. Because like, you can buy the token of the game and you can be 100% in on that fee base and it turns out to be zero. Where you can take more of a platform approach where you're hedged across multiple games, multiple outcomes, and you're just holding ETH. Uh, but maybe you don't have access to all the upside. But when everything is down as far as it is right now, that's when you can really actually make an informed decision about what's powerful versus what is not in an atmosphere that's relatively calm. I do think this is kind of a gift in many ways. I would be very concerned if we went straight to 10K and, you know, the Board Ape Yacht Club people were like all billionaires and like, I don't think we're ready for that timeline necessarily.

• 1:36:04Speaker 02

  I think we're in a much stronger position to kind of get to these areas at a time when the technology and the product progress is requisite with the hype and the, you know, price points. So, yeah.

• 1:36:14David Hoffman?

  Something that has fascinated me as a result of the 2021 bull market is, especially with NFTs, is this like relationship between the growth of crypto and NFTs and also human like culture, right? All of a sudden, like, we are funding and spawning new forms of art that we were never really able to do before. And this very much is relevant to the gaming industry, which has really just like consolidated and really made the indie gaming the true. Game artists of the world, rather than like the game profiteers of the world like EA, for example, there's like this massive part of the gaming world that are, they're here to make cool games and they are not willing to compromise on that at all. They want to make cool games with

• 1:36:55David Hoffman?

  cool art, with cool gameplay, and they will sacrifice profitability in the name of the art. But being in that cohort of the gaming world in the last like 10 years has not been awesome for you. It's been very, very hard to be an indie gamer. And I'm wondering if there's something here where if NFTs can like recreate like a renaissance level of human creativity and human flourishing, if we can apply that same sort of mental model towards the gaming industry? Do you have any thoughts on that?

• 1:37:22Speaker 02

  When I first started going very deep on gaming, I just like flew to Europe and there's certain countries in Europe which are very hot gaming hotspots. And I just like talked to a lot of the indie studios there. And it was kind of funny, like you walk into these gaming studios and there's like 200 people working there. And, you know, they're not getting paid very much. They're doing it mostly out of the love of games that they have. And, you know, they have a love for game. They're not getting really paid that much because the outcomes aren't that large. And really kind of, they're just hypersensitive around, you know, things that would make the game unpure or, you know, like corrupt its values just to be on crypto. And, you know, that was frankly, the first couple of months of just like explaining to these people that you don't have to, you know, kind of like prostitute your values to make something interesting in

• 1:38:04Speaker 02

  crypto. You can do it from first principles. You can build the game that you want to build, and you can make it even more interesting as a result, just by incorporating these primitives. And so for us, like, you know, that is the ground truth of most of these indie game studios is that most of them hate crypto. And, you know, pulling them forward to kind of understand and see the light and understand why that crypto is not just purely evil, was kind of like the first order of business that we did with most of the studios that we invested in. For us, like, that is like the ground truth of what's happening right now. And we're just starting to convert these people into true believers and Have them accept that you can build the game you want. You just have global wallet distribution. You have NFTs that the players own and you have a fungible token that you can integrate if you want to really bootstrap the game. We're not asking you to do anything that would really compromise your values.

• 1:38:48Speaker 02

  It's just an extension of that. And so that is like the ground truth of what these games could use are right now.

• 1:38:54Ryan Sean Adams?

  This has been so much fun, Vance. You know, the theme of this episode, I think we carried it forward to the end has been crypto in the bear market. And you said a line that I think is really important is this really is a gift. Look at every bear market as a gift. This is the gift of the bear market. We talked about so many opportunities that are available for those who persist, who those who build, those who settle, for those who are long-term oriented, for those who have maybe some cash available or some time to spend during the bear market. These things are very important. This is the time and it's a gift to each and every one of you who are listening. Vance, I want to maybe end with this tweet because I think it was some wisdom you were dropping as well, some bear market wisdom that we all need to hear. I'm going to read it out and you said this.

• 1:39:38Ryan Sean Adams?

  "A very wise man once told me that you don't measure net worth peak to peak across cycles. You measure it trough to trough. This has stuck with me. Not peak to peak, trough to trough. Tell us what that means."

• 1:39:51Speaker 02

  Yeah, so in the first framework fund, there were three investors and Michael and I were two of them. And the guy who told me this line was actually the only other outside investor. And this is someone who is one of our mentors and is one of our close friends. And he's a very legendary hedge fund guy, kind of leave it at that. And he's someone who's seen multiple cycles where he's been up 100X and then he's been down 95%. And really, the idea that it's not about kind of like, you know, looking back at your net worth from like the absolute bottom of the barrel and you can't even really see it. It's about kind of like every single time the market turns, you're going to lose money. The only thing that matters is that you're making incremental progress off of your last base.

• 1:40:33Speaker 02

  You have a better understanding of the space and you have a better playbook for how to move going forward. And for us, as long as that's been the case, I haven't really ever felt nervous. The only times I really feel nervous are when things are super frothy and we aren't making requisite tech progress. And so generally, I think that If your net worth is only visible with binoculars, your peak net worth, that's okay. The bear market is going to last as long as it kind of needs to. But the only thing is that losing money is bad. Losing your conviction or getting wrong footed about how you feel about the space is worse. And as long as that the case, you know, the troughs will keep getting higher and you'll be okay. So that's kind of how I think about it. And, you know, everyone's gotten hit, us included, but conviction is not wavered. And we're ready to make the most of this period of time.

• 1:41:16Ryan Sean Adams?

  What a great way to end it. Vance Spencer, thank you so much. A reminder to Bankless listeners, the last trough for ETH was about $80. So we're still a ways from that. And we'll see where this bear market trough ends up. Vance Spencer, thank you so much for joining us. It's always a pleasure.

• 1:41:30Speaker 02

  Great. Thanks a lot, guys.

• 1:41:31Ryan Sean Adams?

  Guys, no big action items for you, except for listen to that episode again. All right. I think there are a lot of opportunities hidden in that episode. Once again, Vance Spencer and the Sema framework were some of the main folks who identified these opportunities back in 2019, back when I didn't even believe them. I was very bullish on Ether and Ethereum is an ecosystem, but I didn't know the potential of tokens. And Vance saw it then, so I think he's probably seeing some things now. But of course. There's a reason why Vance is basically a reoccurring segment on the Bankless Podcast. This being the third episode. That's right. As always, to be clear, none of this has been financial advice. You'll never hear that sort of talk on Bankless. Crypto is risky, ETH is risky, so are all the DeFi assets in GameFi. You could lose what you put in, but we are headed west.

• 1:42:16Ryan Sean Adams?

  This is the frontier. It's not for everyone. But we're glad you're with us on the Bankless journey. Thanks a lot.