56 - Authenticity in Crypto | 1confirmation

Nick Tomaino and Richard Chen are partners at 1confirmation, a crypto venture fund with $75M+ in assets under management (AUM). In this episode, we explore the relationship between narratives and fundamentals in the space. ------ 🚀 SUBSCRIBE TO NEWSLETTER: https://newsletter.banklesshq.com/ 🎙️ SUBSCRIBE TO PODCAST: http://podcast.banklesshq.com/ ------ GO BANKLESS WITH THESE SPONSOR TOOLS: ⭐️ AAVE - BORROW OR LEND YOUR ASSETS https://bankless.cc/aave 🚀 GEMINI - MOST TRUSTED EXCHANGE AND ONRAMP https://bankless.cc/go-gemini 💳 MONOLITH - GET THE HOLY GRAIL OF BANKLESS VISA CARDS https://bankless.cc/monolith 📈 KWENTA - DERIVATIVES TRADING WITH INFINITE LIQUIDITY https://bankless.cc/kwenta​ https://bankless.cc/kwenta%E2%80%8B ------ Topics Covered: 0:00 Intro 3:05 How this bull market feels 10:57 1confirmation's Thesis 14:40 Authenticity 18:26 Crypto-Natives vs. the fakes 26:05 Authentic 'ETH Killers,' Fake VC Chains 38:58 BinanceChain 43:53 Narratives vs. Fundamentals 49:30 On-Chain Verifiable Authenticity 1:01:00 MaRkEtS aRe eFfiCiEnT 1:05:07 Narrative Bull, Fundamental Bear 1:10:31 Dune Analytics & Data 1:20:25 What's The Next Big Thing? 1:24:02 The Changing Landscape 1:33:13 Bull Market Predictions 1:39:32 Closing & Disclaimers ------ Resources: Nexus Tracker https://nexustracker.io/ Richard's Superrare dashboard https://duneanalytics.com/rchen8/superrare_4 Crypto Art https://cryptoart.io/ Three Underrated Predictions https://thecontrol.co/under-the-radar-product-trends-2020-recap-and-2021-predictions-61125c98415 Dune Analytics Blog: The Revolution Will Not Be Reported Quarterly https://duneanalytics.com/blog/revolution-not-quarterly 1confirmation https://www.1confirmation.com/ Nick on Twitter: https://twitter.com/NTmoney?s=20 Richard on Twitter https://twitter.com/richardchen39?s=20 ------ 📣REGISTER FOR COINDESK CONSENSUS 2021 AND SAVE $20 W/ BANKLESS: http://bankless.cc/consensus2021 ------ CATCH UP ON BANKLESS 🗞️ Weekly Rollup (3/12): https://shows.banklesshq.com/p/rollup-march-2 🧢 Weekly Action Recap (3/13): https://newsletter.banklesshq.com/p/weekly-action-recap-683 🛠️ Tactic | Synthetic Stocks (3/9): https://newsletter.banklesshq.com/p/how-to-trade-synthetic-stocks 🏴 State of the Nation | 3LAU (3/9): https://youtu.be/5KY9W3Ybmdc ✏️ The Digital Culture Revolution: https://newsletter.banklesshq.com/p/defi-options-strategies-for-traders ⚫ The Case for $100 SUSHI: https://newsletter.banklesshq.com/p/the-case-for-100-sushi 🐦 Follow Bankless on Twitter: https://twitter.com/BanklessHQ ----- 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, and how to front run the opportunity. I'm Ryan Sean Adams. I'm joined with David Hoffman, and we're here to help you become more bankless. David, fantastic episode. Lead us into it.

• 0:27David Hoffman?

  Yeah, we had Nick and Richard from One Confirmation, which is a venture firm in the crypto space, and they are particularly dancing the line of playing with fundamentals, which is something that this crypto industry is particularly well-suited to communicate, because this is a very transparent industry, but then also playing with narratives, the story, right? And this is not something new to crypto. Stories are very, very important, especially in young firms, young startups. Being able to spin a story is extremely important to attracting investments. But in crypto, it's always a little bit different. Everything's a little bit different in crypto. In crypto, and everything is completely available, all information is equally accessible to everyone. So now the game is not can you access information,

• 1:12David Hoffman?

  it's can you interpret information? And then the other game is the narrative game. Can the narratives that are spun around L1 protocols like Bitcoin and Ether and other L1 protocols like Polkadot and Binance Chain, like are those legit narratives or are those fake narratives? And then there's also the same narratives around smaller applications. We talked about the narratives behind something like Nexus Mutual versus, you know, something more closer to a yield farm. There are different narratives that surround these things, and they are backstopped by different fundamentals. So it's a very interesting dance that must be danced around these two balances. And Nick and Richard of One Confirmation do a fantastic job playing on both sides.

• 1:55Ryan Sean Adams?

  Yeah, absolutely. And the one word that I've kind of added to my arsenal, the word of the episode, the word of the week, right? If we're here on Sesame Street here is authenticity, authentic. That's what they look for. So it's not just fundamentals investing where you're just looking for a set of metrics and revenue and discounted cash flows. They're also very willing to invest in narratives, but the narratives have to be authentic. The fundamentals have to be authentic for it to be of interest. And I think this is a great mental model for you to add to your bankless arsenal is when you're investing in crypto for the long term, look for authenticity. And these guys showed some very practical ways you can you can look for it.

• 2:38Ryan Sean Adams?

  And that's in the first part of the episode. So fantastic episode. Once again, David and I are doing a debrief. We've done a debrief for you. So if you are a premium subscriber, catch that debrief. It's an extra 20 to 30 minutes where David and I talk about the episode right after we record the episode. So you get our raw thoughts. And with that, I think we should get right into the episode. But before we do, we want to tell you about our fantastic sponsors who made this possible.

• 3:06David Hoffman?

  If you want to live a bankless life, you need to get a Monolith DeFi Visa Card. Monolith is a one-two punch of both an Ethereum smart contract wallet and an accompanying Visa Card that lets you spend the money that you have in your Ethereum wallet everywhere where Visa is accepted. When you swipe your Monolith Visa Card at the grocery store or at a restaurant, it actually makes a transaction on the Ethereum blockchain that spends some of the money you hold in your Monolith wallet. It's insanely cool and it's one of the best tools out there for living a bankless, but still normal life. Monolith also offers on-ramp services for getting your fiat money into the world of DeFi. So it's trivial to top up your Monolith card if you ever need to.

• 3:48David Hoffman?

  And your deposited money goes straight into your non-custodial wallet. So your money is never held by a centralized intermediary. Because Monolith is native Ethereum infrastructure, the money you hold in your Monolith wallet still has the power of DeFi behind it. Swapping assets on Uniswap or earning yield in DeFi is at your fingertips. Go to monolith.xyz and sign up to get your Monolith Visa Card today. If you are looking for a product that connects your fiat bank account with DeFi tokens and products, you need to download the Dharma mobile app. Dharma is a non-custodial smart contract wallet and comes with a bridge that connects you right into your bank account.

• 4:29David Hoffman?

  Dharma is the fastest and most efficient wallet between your fiat in your bank account and any token on Uniswap, or even any vault in Urn. With Dharma, you can get over $25,000 per week into the DeFi universe, and you can do it non-custodially. If you or anyone you know is hot on DeFi and you're trying to get your money into a DeFi investment, Dharma is the place to go. Signing up and going through KYC is an absolute breeze. It took me just under three minutes, and after signing into my bank account via Plaid, I am now just one transaction away from any token that Uniswap has to offer. Go to www.dharma.io, that's D-H-A-R-M-A dot I-O.

• 5:13David Hoffman?

  Download the Dharma app and get yourself unbanked today. Bankless Nation, we are so excited to bring our two guests, Nick Tomaino and Richard Chen. They are from One Confirmation. One Confirmation is an ultra-successful crypto VC firm. It is backed by individuals such as Peter Thiel, Mark Andreessen, and our own Bankless guest, Mark Cuban. It is a venture fund with 75 million in assets under management, and we're going to talk a bit about their thesis for crypto, because I think this is super interesting. Nick, Richard, how are you guys doing?

• 5:52Speaker 02

  Great, how are you guys doing?

• 5:54David Hoffman?

  Good, you know, it's the bull market. We're excited. Are you guys excited?

• 5:57Speaker 02

  Yeah, it's pretty, pretty fun right now.

• 6:00David Hoffman?

  Well, you guys have been through a few bull markets. Maybe, maybe we could start there, Nick. How, how is this one shaping up? How's it feel different or similar to, to the previous ones you've been through?

• 6:11Speaker 02

  Well, I think it feels pretty similar. You know, anyone in crypto knows that kind of the booms and busts in crypto are unlike anything ever seen before in financial markets, right? Because cryptocurrencies are global and the internet is more connected before, things always go higher than you think they're going to go and then go lower than you think they're going to go, right? So I think that's certainly the case now. We're in another boom and, you know, I couldn't tell you whether the crash will be tomorrow or a year from now when we're orders of magnitude higher. But I do know there will be another crash. And I think, you know, from the beginning, we've taken a long-term kind of venture approach to investing in this space.

• 6:50Speaker 02

  And I think that's kind of what you really need to do unless you have a trading skill set or something like that, which we don't.

• 6:58David Hoffman?

  Nick, since you've been through multiple cycles in these markets and Richard as well, you can feel free to chime in. A lot of, you know, listeners to podcasts these days, perhaps this is their first bull market, bull cycle. Maybe you could kind of bring our listeners up to speed with the comparing and contrasting of how this particular cycle feels different. Like what is unique and compelling about this particular cycle versus the cycles that you've experienced in the past?

• 7:25Speaker 02

  Well, to me, and Richard, you should jump in as well. But I mean, to me, this is the most mainstream bull market that we've had, right? And I think NFTs are playing a big role in that. Like I've been in this space kind of nine years or so, waiting for a moment where, you know, my friends, my family that are not into crypto, you know, are interested and that time is now. I think, you know, in 2017 ICOs, that kind of happened very briefly, but it wasn't the degree to which people outside crypto are engaging now.

• 8:05Speaker 02

  So I think, you know, in that sense, it's more exciting than ever, right? Because this, the NFTs are really relatable to people in a way that nothing else in crypto has. And I think the extent to which You know, the mainstream is getting interested is probably not even fully understood by, you know, crypto people like us.

• 8:27Speaker 03

  One thing I'd like to add, like comparing now to 2017 is like in 2017. Yeah, like ICO has raised like billion dollar valuations from like just a white paper. But this time around, like when you look at the billion dollar valuations of DeFi projects, like there's actual. Like cash flow fees that these protocols are generating, like you can maybe make the argument that. The valuations like the PE ratios are overvalued relative to like how many fees. How much fees they're generating, but at least there's an actual product for people to use unlike in 2017 was just ideas.

• 9:02Ryan Sean Adams?

  It's interesting, Richard, just a quick follow up on that. You mentioned kind of PE ratios or price to sales ratios in crypto and DeFi is actually generating cash flows, which is amazing. None of that was present in 2017. And you said you could argue that maybe maybe the valuations are still a little bit too high, although we've seen massive growth. In DeFi that maybe someone argue would justify this. But we also, when we look to the stock market and we look at PE ratios in the stock market. Those are, those are like at all time highs too. Well, maybe not like all time highs throughout the course of all human history, but. It's looking pretty frothy on the stock market side of things too. So in that context.

• 9:45Ryan Sean Adams?

  What do you think about DeFi? Is it fairly valued?

• 9:50Speaker 03

  I think this is kind of a consequence of like the global macro environment where we're in like zero interest rates. Which just pushes up asset prices. So like, you know, tech sector. Like blue chip tech companies like Netflix are like a couple hundred PE ratio. And you know, people just get into more and more risky assets like crypto, DeFi. So I think it's kind of like underpinned by like what's going on like in the macro sense.

• 10:18Ryan Sean Adams?

  So Nick and Richard, we're going to get to NFTs in a little bit. And I really like what you were saying, Nick, about NFTs being sort of the mainstreaming event. We had ICOs maybe in 2017, but NFTs are really, they almost exist outside of crypto circles, right? Like we're uncovering whole communities we never knew existed. They don't know we exist and they're diving down the crypto rabbit hole through NFTs. This almost seems to be the way from our conversation with Mark Cuban a week or two ago, that he sort of got super interested in crypto and fell down the DeFi rabbit hole. But I want to talk about this first because I think this sets the context for the rest of the conversation. So what would you guys say, Nick, is, I mean, we'll start with you.

• 11:02Ryan Sean Adams?

  It's kind of the underlying thesis for one confirmation. When you look at this space throughout the years, whether it was a, you know, in 2013 or with the 2017 cycle or now currently, is there one underlying thesis for how this space will evolve? How do you guys invest?

• 11:22Speaker 02

  Yeah, I mean, I think our thesis is very simple, which is we like to back authentic founders that are building products for the crypto community. And they're products that kind of we understand as users, right? I first got in the space, I was one of the first couple hundred users of Coinbase and just really liked the product and hustled my way into, you know, working at Coinbase, right? Because I was excited about it from a user perspective. And that's kind of how we guide all our investments, right? It's products that we understand from a crypto native perspective, led by authentic founders. And those two pieces, you know, are pretty simple, you know, when you say them.

• 12:02Speaker 02

  But, you know, I think it takes discipline to execute on that thesis in a space where there's so much noise, so many different narratives and things like that. But I think as a guiding kind of principle to investing, it's helped us, it's helped us perform pretty well.

• 12:20Ryan Sean Adams?

  Can we talk about this, this term authenticity for a minute? So

• 12:26Ryan Sean Adams?

  Especially in a bull market, there's a lot of noise, right? There's a lot of like copycats. There's a lot of things that that seem authentic, but but maybe aren't. How do you determine what's authentic and what's not?

• 12:38Speaker 02

  Yeah, I mean, part of I mean, the main thing is talking to the founders, right? I think one thing I noticed from outside investors looking in and things like that is because like Bitcoin is, you know, was founded by Satoshi, Satoshi disappeared. And now it's just this kind of thing that exists with no real leadership. People assume that every cryptocurrency is like that. But the reality is that Bitcoin is the only cryptocurrency like that. Right. And every other cryptocurrency is led by a founding team. And that founding team is the most important aspect of the project. Right. So I think that the first thing you can do when kind of gauging authenticity is talk to the founding team.

• 13:21Speaker 02

  You know, assess the founding team and their engagement with the community. You know, things like that, right? And and of course, you guys like Ethereum a lot. We do too. And I think if you think about authenticity, you know, Ethereum is the most authentic project in the space led by Vitalik. And, you know, a really strong community. So we kind of that's what kind of got us really excited about Ethereum. And it's what gets us excited about every single project that we're investing in.

• 13:57Ryan Sean Adams?

  Richard, do you want to add anything to that?

• 13:59Speaker 03

  Yeah, I think another good mental model is like, assume that like cryptocurrency prices were going to crash like 90% tomorrow. Like, would this founder still be around like building this project? And I think for a lot of people, the answer is no, because they kind of FOMOed in and like see the cash grab and like want a piece of it. But, you know, just from talking to the founder, you can kind of gauge what their incentives and motivations are.

• 14:27David Hoffman?

  And Richard, that starts to dive into a topic that I want to just unpack a lot more. Because the word authentic or authenticity, you know, we all know what that means. But really, if you go down to the basement level of it, it's a subjective term. So how do you guys define authenticity? And what are signals of authenticity to you? Nick, you talked about, you know, if or if or Richard, if you talked about if the if the prices collapse, would they still be here? That's a great signal. What other signals do you guys look for when you guys and try and vet founders for their authenticity?

• 15:00Speaker 02

  I think community building is a big part of it, right? So how are they engaging with the outside world? I think, you know, the way you build a cryptocurrency based project is different than how you build a company. And, you know, I think an authentic founder is kind of sharing his ideas and engaging with the community in a way that shows kind of genuine interest rather than shilling a narrative. Right? So a lot of this, at the end of the day, I don't think it's it's a science. It's more an art in terms of kind of feel and evaluating people and and projects.

• 15:42Speaker 02

  But you can certainly, you know, talk to the founder and get a feel for how they think about the world. And and also, you know, what their historical context is on the space. Right? I think that's a big one for us. Like particularly in 2017, like when we launched the fund, the last boom, you know, you saw a lot of Silicon Valley, you know, entrepreneurs leaving Google and Facebook to, you know, start crypto products, right, companies. And most, you know, we sat down and had conversations with a lot of those. But most of them didn't have deep historical context on the crypto space. And they didn't, they were just trying to build a crypto based product because it was hot. Right?

• 16:26Speaker 02

  And you can kind of, when you talk to people, you can assess what their their intentions and motivations are. And and and what their knowledge and historical context is. And those are, I think, really important signals for us and how we think about investing.

• 16:43Speaker 03

  One thing I like to add is like, I think there's a difference between like crypto VCs and traditional VCs in that like traditional VCs like to look at uh like polished founders who are really good at like building a company, like really good at hiring management, like like shilling like a narrative. Um but for like the archetypal crypto founders, they're really good at like building community, which is like a very a different skill set because you're not really like managing any employees. Uh you're really trying to uh get a really passionate group of believers um to like really evangelize the project for you. Um and that's just like a very different uh framework and skill set for like

• 17:23Speaker 03

  the archetypal crypto founders relative to the traditional like polished um VC backed founders.

• 17:31David Hoffman?

  Nick, you were talking about how um you would be able to tell that, you know, Silicon Valley startup founders would come to crypto and and make a crypto product because it was hot. Maybe not because they actually believed in in this subject. And this is something I've been thinking about a lot lately where there is a there's a difference between and and crypto native people like like us, like me, like Ryan, like you guys can really tell when somebody else is crypto native or not. Like we can sniff you out. Like we've got, we've got that kind of like that that ability, right? We know who's real, we know who's fake. But does that come out in the person or does that come out in their product? Because in 2017, it was very obvious that somebody we some people would make a startup and then they would slap a token on it and then they would call it crypto.

• 18:14David Hoffman?

  And that was a very easy way to to identify if they are really about the crypto life. So like where when you when you are sniffing out fake crypto people who are trying to come in and build something in crypto, where where does where does that uh where where do they leak the fact that they are, you know, perhaps not here for the right reasons? And how do you guys um parse a parse out uh people that are crypto like quote unquote here for the right reasons? Or just kind of here just to to be here because it's frothy?

• 18:43Ryan Sean Adams?

  Yeah, what are the tells?

• 18:45Speaker 02

  Well, I think, you know, historical context is probably to me one of the biggest ones, right? Like, if you're building a stablecoin, but you don't know about, you know, all of the past attempts at stablecoins, for example, in depth, then that's a tell that you're doing stablecoins because it's a hot thing, rather than because you understand it deeply and, you know, and can figure it out. So I think that, you know, just, it's not rocket science, but talking to founders and, you know, you kind of have to have deep historical context

• 19:25Speaker 02

  yourself to, you know, to do that. And it's not, I think it's not easy for everyone. But, but yeah, the main thing is talking to founders, right? But, you know, you could, you know, if someone's like actual crypto user, right? Like, if you're building a DeFi product, but you're not actually using DeFi products, then to me, that's another tell, right? And there's, you know, you'd be surprised how many, you know, founders that we've seen over the past couple of years that, you know, want to build something on Ethereum, but they don't, they don't use MetaMask, right? So things like that. But at the end of the day, it's, you know, I think the main thing is talking to founders.

• 20:08Ryan Sean Adams?

  You know what blows me away too, Nick, is it's not just your founders who aren't actually using DeFi, it's investors too. You know, sometimes investors with large assets under management, like millions of dollars, I'm talking about, who are investing in this space practically blind, like they're doing the narrative investing because they haven't actually plugged in and started using DeFi. This is part of the reason David and I started Bankless, is it's just because, like, if you actually use DeFi, so if you're listening to this, guys, and you're actually using DeFi products and tools, like, on an everyday basis, on a weekly basis, you have an edge, because many investors, I don't know if you guys would say most, but I would

• 20:52Ryan Sean Adams?

  say a lot that I've seen, don't even go to that extent. They don't use DeFi at all. A concerning amount. Yeah, a concerning amount, and they're just throwing money at this space without actually understanding how it works. And if you don't use the products, how in the world do you understand how it works? Richard, you want to say something about that?

• 21:11Speaker 03

  Yeah, I mean, I think that's right. I think another advantage for us is because we're so crypto native in like early users of a lot of these projects, like a good source of deal flow, actually, is just to, you know, live in these discords of like new projects that are up and coming. And like, kind of check out the early community, like beta test the project, you can like also message the founder on Discord or Telegram. So like, you really get a feel for like where like the latest like up and coming trends in DeFi, like what those are like.

• 21:43Ryan Sean Adams?

  Yeah, living in the Discord is really like, basically, that's, that's living in the community, right? Because these communities are completely digital, and that's the work that, that you have to put in, in order to do this. Can we talk about something else, too? Because I feel like David and I had a a bear market crypto founder's series. We did this back in like September, I think, David, right? And we brought on like Stani from Ave, we brought on Kane from Synthetix, we brought on Hugh from Nexus Mutual. And these are all DeFi Protocol founders who started in like 2017, 2016, 17. But they persisted through the bear market, right?

• 22:28Ryan Sean Adams?

  When everyone said crypto was dead, DeFi was nothing, smart contracts would never work, Ethereum is a, you know, a pointless platform. These teams kept building through the bear run, right? And if you talk to them during that time, you could see that there was authenticity, because you have to have authenticity if you're going to stay when all the tourists leave, right? I feel at some level, it's easier to find authenticity during the bear market. If you have conviction, you can find these authentic founders because everybody else has left, right? The people who are just trying to be the Johnny come lately, they're gone. And you just have the authenticity, but it gets harder during bull runs.

• 23:13Ryan Sean Adams?

  It gets so much noisier. So is your strategy to, is it, is it better to just deploy capital during the, the bear runs and find the authenticity that way? Or can you still find that authenticity during the, the bull runs? And what advice would you give around that?

• 23:30Speaker 02

  Yeah, well, that it's a really good point, and we think a lot about this. I mean, even dating before DeFi, right? You know, like when I was started at Coinbase in 2013, you know, six months or so after I joined, there was a Bitcoin boom, right? And we saw a ton of companies get funded that were Coinbase competitors. You know, companies like Circle and Zappos and, you know, raised lots of money from big VCs, right? And, and good teams. But they weren't, you know, they weren't the right product at the right time, basically. And they weren't the authentic team doing, doing it, right? And they, you know, they, they, they didn't work out as well, right?

• 24:14Speaker 02

  So I think what, what we really try to do is think about what's going to be hot in two years and try to invest in that, right? So, you know, for before DeFi became really hot, we, you know, invested in MakerDAO and Nexus Mutual and others. And, you know, those became really good investments when DeFi got hot. And, you know, we didn't plow into DeFi in DeFi summer, right? Now, that, that, you know, could have been a mistake. And it certainly, it could look like a mistake in the short run because things are higher now even than they were, right? But for us as a smaller fund, like that's the discipline that, that we like to approach things with.

• 24:59Speaker 02

  Where, you know, we invested in OpenSea in 2018 and, and SuperRare last year. And now NFTs are incredibly hot, right? Those are the authentic teams that were doing it before the thing was hot. And so I think that's really where we want to be investing, right? Is like where people, what, what's going to be really hot in a year or two? And, and think about like, you know, what are the products that we get excited about that aren't hot, right? It's easy to be excited about products when everyone thinks it's, it's, it's hot. And, and that's the case with NFTs right now, right? But you kind of need to filter out the noise in a lot, a lot of ways. And just think about what excites you and what the future might look like.

• 25:44Speaker 02

  I guess that's how, you know, we like to approach things.

• 25:47Ryan Sean Adams?

  So, so guys, when we talk about authenticity,

• 25:51Ryan Sean Adams?

  can you give us some examples, right? So, so Nick, you said Ethereum was an example. David and I listed some. Bear Market founder projects that we feel like are probably examples. Yeah, I'm wondering if you would agree. But can you compare and contrast like DeFi protocols or projects in this space that are clearly authentic versus some that aren't? We want you to name some names here if you're willing to do that.

• 26:19Speaker 02

  Um, okay. Well, look, I'll give an example that you guys, I'm curious how you think of of this one. But because I know, you know, you like Ethereum a lot, right? And there's a lot of, you know, next gen, you know, layer one smart contract platforms, right? That's obviously been a huge narrative the past four years and, you know, EOS and different projects like that. Captured, you know, billions of dollars in market cap from just a narrative, right? Basically, and so there's certainly a lot of those types of of projects.

• 26:59Speaker 02

  But, you know, there's a few that we think are are authentic and that actually could have legs, right? And it's not to say we think they could displace Ethereum, but we think that they're led by, you know, real founders that have kind of new ideas that are pushing this space forward, right? And, you know, one of those would be Polkadot, right? So Polkadot, you know, Gav Wood, you know, he was one of the founders of Ethereum, right? And wrote a lot of the initial code. And he has some ideas in terms of radical on chain governance that that are kind of new and pushing the space forward in different ways.

• 27:40Speaker 02

  And again, you know, we love Ethereum and it's not to say that, you know, Polkadot is going to completely displace Ethereum. We don't, we don't think that, but we think that that's an authentic project that is actually doing some interesting things to push the space forward led by, you know, a team. And if you want to name some names of, you know, projects that are, you know, kind of trying to do that, but aren't really authentic, you know, you could talk about some of the VC chains like Near Protocol. And I don't even, Richard probably knows.

• 28:14Speaker 03

  Yeah, Definity is a big one.

• 28:17Ryan Sean Adams?

  I don't. Say, Definity is inauthentic, is that what you're saying?

• 28:20Speaker 03

  Inauthentic, yeah.

• 28:22Ryan Sean Adams?

  Why would you say that?

• 28:24Speaker 03

  Uh, I mean, they're, they're taking a very Silicon Valley approach where you like make a closed source. You hire like a world-class research team and like pay them a lot of money. Um, and you just kind of go heads down, build a product, kind of in stealth mode, uh, without giving like any consideration to building a community around your project. And like, like if they ever launch, first of all, um, but like assume that they launch, um. Like the question is like, how are they going to build a developer community if they've just been like heads down in stealth mode for so long without kind of evangelizing the platform and getting organic community developers like what Vitalik and Ethereum have been doing.

• 29:03David Hoffman?

  I think it's a really.

• 29:05Speaker 02

  Yeah, I, I wouldn't, I wouldn't rule out Definity. I mean, at some point, you know, this Silicon Valley approach of just heads down and launch something and it, you know, and it works, uh, could happen. It hasn't happened to, to date. It doesn't mean it's not going to happen. I think, you know, the Definity team is a, uh, you know, is a real team. Um, and so to me, it's not one of, I, I wouldn't bucket it as kind of, uh, you know, one of the worst offenders of just a narrative-based thing, but I, I, I generally agree, um, that it is, you know, the, the, the, they haven't taken the community approach that you need to, uh, in crypto.

• 29:46David Hoffman?

  And, and there's something I want to parse apart here and it's really, I think, what is going to be the through line for this whole entire episode is like the, the dichotomy between uh, authenticity, which I think we could also talk about, um, soul in that and, and I'll get it. I'll parse that apart as well. And then the other side of things is data and just like raw facts. And which is something that we're definitely going to get into later in the, in this podcast and something we haven't gotten to yet. And, but to go back to what you guys were talking about, about Polkadot, and I would say, and, and I think I can speak for Ryan here as well, is like, the reason why we don't talk about Polkadot very much is because it doesn't have full blocks, among other reasons.

• 30:24David Hoffman?

  Um, but, uh, I consider myself a full block blockchain maximalist. So if your blockchain has full blocks, I will talk about it, right? Because. You can't fake that. And the reason why you can't fake that is because filling up a block full of transactions is expensive and you can't, no one wants to burn their money just to create a fake narrative, right? And so your blockchain that has full blocks therefore has the community filling those blocks. And I think we, and you guys know, perhaps know more about Definity than I do, but I, we can see like, maybe their intentions are totally correct and they're building some of the sickest technology ever. But when you miss out on the community side of things, you miss out on like this soul side of things.

• 31:07David Hoffman?

  This is a bottom up revolution. And if you don't have a bunch of just randomly dispersed people all over the globe believing in your project and filling up your blockchain with blocks that have good data in it, good transactional volume in it, then you don't have any soul, right? Like you don't have a community, you don't have this like, because this is a populist movement and we need the populace to saturate the blockchain. And so there's this one part, like, we need the data there to verify it. And we also need the technology that's crypto native technology as well.

• 31:40Ryan Sean Adams?

  One cat, one counter I'd say to that, David, is real quick, is what, what Nick in one confirmation told us earlier is that they like to invest in things before they're big, right? So like, so like, the whole point of, you know, polkadot doesn't have full blocks, you know, maybe Nick and Richard, you guys would say, exactly, right? Because we want to capture things before they actually hit their, their peak valuation than after. I don't know what you'd say to that, Nick, but.

• 32:10Speaker 02

  Oh, that's exactly what I was gonna say, right? Ethereum, there was a moment in time when Ethereum didn't have full blocks, right? So yeah, I think it's, it's thinking about kind of what the project is doing to push the space forward as well, right? So I would, to me, one of the reasons why polkadot is really interesting is, at this point, I don't know if you guys would agree, but from my perspective, Ethereum has effectively the same governance as Bitcoin, right? It's rough consensus. You need agreement from the miners, the developers and the users to push things forward. And, you know, Vitalik is the benevolent dictator and in some ways, and that's, you know, that's not a bad thing. That's just, he's got a lot of power in the ecosystem and he's still around and he can

• 32:53Speaker 02

  push things through. So Ethereum has been able to change more than Bitcoin, but it's still relatively slow, right? So I think if. If you're gonna be kind of what comes after Ethereum, having this kind of radical on-chain governance and council system, where the token holders can, you know, can vote to make changes and amend the system at a much faster rate, that is, is interesting to me. And I think there's a community that, that likes that, right? And, and wants to have more power. And so if you think about, you know, blockchains as really empowering in individuals,

• 33:36Speaker 02

  it makes sense. And governance has of course been a big narrative over the past four, five years. But to me, like a system like Polkadot that has this kind of user empowerment in a way that existing chains don't, and you have kind of, you know, interesting tech, that's what, what excites me about Polkadot. So I'm curious what you guys.

• 33:58Ryan Sean Adams?

  My, so my thought on, on Polkadot is I agree with what you're saying about there being some authenticity there. In, in particular with kind of the development team, like they're actually building that new things. And also, it seems to be the case that there's a community there. Also, I would say with some other projects that are, you know, some buckets similarly like Cosmos. I mean, there seems to be a real community in the Cosmos.

• 34:21Speaker 02

  People on Cosmos also, by the way.

• 34:23Ryan Sean Adams?

  Where, so, okay, so like, there's Adam tokens. Where I get tripped up on these other chains is actually not whether these chains have communities or not, or whether they're authentic or not. It's, it's more about value accrual to the underlying token. Right? So if you think about something like, like BitTorrent, for example, massively successful peer-to-peer network, but had no value accrual mechanism, I suppose until Tron bought them, right? But like, so massive amount of value creation, but very little value accrual. And so the way I think about these different crypto assets is through the lens of it's either a capital asset producing cash flows,

• 35:06Ryan Sean Adams?

  it's a commodity, like a transformable good, or it's a store of value money. And I see that. Assets like dots or assets like atoms are very much more capital than the capital assets. So they're going to produce some revenue. They can also be commodities because they go to pay for block space. But because of the things like, because of some of the things like on-chain governance, which, which someone says that's a form of plutocracy. That's how our corporations are managed. So no knock against on-chain governance. But the question is, does it disclude them from that third category of being a store of value money? That Bitcoin certainly fits under and increasingly Ether has started to fit under too.

• 35:51Ryan Sean Adams?

  And if that's the case, then you kind of value these other tokens more like layer twos, more like, you know, they, they, they are layer ones in a sense, but they don't necessarily have that monetary premium attached to them. So they're capital assets essentially discounted cash flows. That's how you can, you can value them growth into the future. That's where I get tripped up around some of these other chains. And then I see the valuations of them and the valuations of some of these things, again with empty blocks right now, you know? It, the valuations are almost as if they're, they're pricing in some sort of long-term monetary premium as a, as a percentage of Bitcoin or percentage of ETH.

• 36:35Ryan Sean Adams?

  And so that's my big question, actually, with these other chains. It's less, do they have real communities? It's more, how does the value accrual of the underlying token work out? And are they going to be long-term crypto collateral monies or not? Maybe you guys don't think about it in that way, but I'd be curious.

• 36:51Speaker 02

  No, I do. I mean, I, yeah, no, I think it's a good point. I think, look, it remains to be seen how these assets are going to be valued in the long run. Right? And there's lots of people that have created their own models to, to do that. And, and yeah, I mean, the, the kind of store value versus capital asset framing, I think is an interesting one. I think, though, at the end of the day, what gives a cryptocurrency value is a community that believes it has value, right? And so I think the truth right now is that every cryptocurrency is a is just kind of being treated as a store of value. And even the DeFi stuff, you know,

• 37:34Speaker 02

  there's cash flows, that's exciting. But nothing in DeFi is really being valued like that right now, right? It's just it's being valued. Everything is just a meme, an idea that a community believes, you know, the thing has value. And I don't think, look, what we know about memes is that most of them are fleeting, right? And I think you need to have some kind of fundamental framing for why it has value over the long term, why people are going to continue to believe it has value. I think for Polkadot in particular, there is kind of this interesting, you know, potential reason, which is you need to own dots to

• 38:19Speaker 02

  connect to, you know, the main chain, right? And that's, you know, there's a good argument right now that, well, will people really want to spend millions of dollars to do that? When, you know, everything's open source and you could, you know, pay much less to get the same technology? We'll see. But, but, yeah, you know, in summary, I think every cryptocurrency is a store of value. And we very much think of like of dots and atoms in this kind of in the same store of value frame that we think of Bitcoin and ETH as.

• 38:57Ryan Sean Adams?

  That's very interesting. Yeah. And, you know, good counterpoints. I want to ask you about another one that has been making waves recently, which is Binance Chain. So is Binance Chain authentic or not? It certainly has users. It has a fair amount of capital. How would you guys put it through its lens?

• 39:16Speaker 03

  Yeah, I can talk about Binance Chain. I mean, well, first of all, I ask a lot of fake users. If you look at like the on-chain transactions, you can see like hundreds of thousands of like fake transactions to PancakeSwap to kind of game the numbers. But I think Binance Chain is

• 39:33Ryan Sean Adams?

  Richard, before you continue on that, can I get your perspective on this question? Do you think that that was, obviously that's intentional. How intentional do you think that is as a result of, direct result of CZ?

• 39:46Speaker 03

  Uh, I, to be honest, don't know, like, how much CZ is like involved behind with that, but and regardless, like my thoughts on Binance Chain. It's like very appealing to traders, like it's kind of going through the DeFi Dgen summer of like 2020. But it's like going through that like much faster where like for Ethereum, it took like three months for Binance Chain is like probably going to take one month. Where like you have all these thousand percent APYs and these like food farms that like all the traders are really excited about. But you know, traders are like looking for like short-term mercenary capital in like, we're VC fund. So we think about projects that are going to be around for five plus years. So you know, it's not

• 40:28Speaker 03

  like authentic in that these projects are going to last for a long time, like the projects on Binance Chain. But like in the short term, it's really appealing to the traders and like people who like to speculate on those things.

• 40:42Ryan Sean Adams?

  It's funny because Binance sort of went through this with initial exchange offerings. It felt like, you know, time is blurring very much for me, but I don't know if that hit its peak in 2018 or 2019. But it was certainly a little bit after the ICO mania phase. But that was shorter and you know, in order of magnitude less, it seems like what you're saying, Richard, is that might play out here on Binance Chain in a similar way.

• 41:09Speaker 03

  Yeah, I think they're kind of just like a fast follower, like you know, how like IEOs was like the fast follower to ICOs. Then remember you had Binance Dex, that was a fast follower to Uniswap. But that only lasted for like a couple of months. And then now I see like Binance Smart Chain, which is kind of a fast follower to like Ethereum D5. So you know, if you're a fast follower and you just kind of copy what's existing, but you don't have an authentic community or really like innovate. Then I think it's just kind of a short-term trade and not really like a long-term backable project.

• 41:42David Hoffman?

  So I want to

• 41:44Speaker 02

  Finance seems to be really good at creating narratives and you know there's and memes and things like that and that's not really a knock I mean that that's a skill set in some ways right but I think it can when you do that in these bubbles it can suck a lot of people in that don't really know what they're getting into and then if things turn they're going to go away right and so I think that's like like you said Ryan you know fast following in terms of IEOs you know they kind of rode that wave after ICOs but then it sucked in a lot of people but then it kind of went away it wasn't sustainable so you're seeing these you know these kind of fast

• 42:29Speaker 02

  following narrative based products that are you know seeming to gain some short-term traction but yeah I think as Richard said but you know I think it pays to think about the long term and and if something is it sustainable or not and the thing about crypto the thing that kind of truthfully just rubs me the wrong way about finance is they are very much aggressively marketing and and capturing a lot of new people and that you know I tend to look at I we think

• 43:09Speaker 02

  about signaling and counter signaling right and when you see someone kind of signaling so much and so aggressive about marketing that can in the long term actually indicate weakness right and so that's what I love about Vitalik right like if you look at Vitalik Vitalik's tweeted maybe three times in the past you know since 2021 started in this bull market right and he's you know he's not signaling the counter signal I think is actually what you want to what you want to identify right so

• 43:43Speaker 03

  And the tweets he's made were just like links to some like esoteric ETH research. Like, I remember he made one for the Chinese New Year, which was interesting.

• 43:53David Hoffman?

  So we're circling around the subject of narratives versus authenticity, narratives versus what's real. And earlier, we made the comments about how, you know, a lot of people just invest based off narratives. And perhaps that's not the best thing because you need the data to back that up. And I want to throw a counter argument in there as well and play devil's advocate. A lot of Ethereum people will, perhaps ETH maxies will criticize Bitcoin for just being like this meme coin. Yet, and yet, I also believe at the same time Bitcoin's meme is one of the strongest in crypto. But I would say, and I would argue that Bitcoin's meme comes from the fundamentals, the data that backs up Bitcoin, right?

• 44:37David Hoffman?

  Like, if Bitcoin is just a meme coin, then go ahead and roll back the chain. Well, you can't because it's Bitcoin, right? You can't confiscate anyone's Bitcoin, you can't change the hard cap. There are all these very real things about Bitcoin. And because of that, because that data is there, in my mental model is the data is there and the memes sit on top of the data. And when you poke at the memes and you question the memes, the memes can cite the data that's there. And there are other projects that are just memes and they actually aren't sitting on top of anything, right? And so there's this relationship between memes and data, narratives and data. And some projects just spin up narratives. And perhaps that's what Binance Smart Chain is doing. They're just like, oh, we're going to kill Ethereum.

• 45:22David Hoffman?

  Meanwhile, there's the state blow of Binance Smart Chain is putting on like 50 gigabytes every single week, right? And the implications of 50 gigabytes a week of state blow is not something that the typical individual might be able to understand in their first foray into crypto. And so this is kind of where I want to turn it to the conversation of How you guys at One Confirmation play with the play, the juxtaposition between data and narrative? And Richard, I know you, I know you really like to use this thing called Dune Analytics, which is a data analytics platform for Ethereum. So maybe we can get that conversation started. How do you guys invest based off narrative and also invest based off of data? And how do you guys balance these two things?

• 46:05Speaker 02

  Yeah, look, we have institutional investors, right? And when we raised the first fund, a lot of them would ask, like, how do you, how are you making decisions in terms of when to sell, for example, right? Are you just timing things based on, you know, what you think, when you think something's overbought or technical analysis or things like that? And, you know, we had to think deeply about analyzing all of our investments from a fundamentals perspective. And so for every investment we make, you know, we're thinking about asymmetric risk reward, right? We want, you know, investments that can be 20x if they work. And if they don't work, they could be zero.

• 46:49Speaker 02

  And then we kind of, you know, evaluate the fundamentals on a quarterly basis. And for every project that we invest in, we have kind of KPIs that we're, you know, we're looking at. And so, you know, you mentioned Bitcoin, and I think your point about Bitcoin was a good one. But what we look at for first, all of our store and value investments, right, is how many addresses on chain have over a couple hundred dollars worth of cryptocurrency, right? As a proxy for how many people actually believe in this thing as a store of value?

• 47:23David Hoffman?

  And so Because Nick, they believe in it enough to hold it on chain.

• 47:28Speaker 02

  Exactly. So the, like, the on-chain data, you know, doesn't lie, right? And that's when we look a lot, after we, you know, make our initial investments and bets on teams, we're analyzing the on-chain data to see what's real and what's just narrative, right? And so if you look at Bitcoin, for example, you know, the Bitcoin, the number of addresses with over a couple hundred dollars worth of Bitcoin. Has increased, you know, pretty significantly over the past year. And so that's real data that supports that. Yes, this belief of Bitcoin as a store of value is growing. Now, one of the interesting things about ETH, and I know you guys are kind of ETH is money, sort of value. The the the number of addresses with a couple hundred dollars worth of of ETH

• 48:13Speaker 02

  is increasing at a faster rate right now, right? So we kind of, we believe that ETH is becoming kind of this store of value for the people and Bitcoin is becoming this store of value for institutions. Right? So we like looking at data like that, get, you know, allows us to kind of assess, you know, our conviction and, you know, our conviction on ETH as a store of value is actually increasing based on this data.

• 48:36Ryan Sean Adams?

  Wow. Okay. Store of value for the people versus store of value for the institutions. And what you're saying is this is not just meme narrative following. What you're saying is you you're able to back this through on chain data and real world metrics.

• 48:56Speaker 02

  Yes.

• 48:58Ryan Sean Adams?

  That is super cool. Um, I'm curious, before we leave the store of value category, because I think we want to get to some other categories where you're doing this. What else is in the store of value category for you besides Bitcoin and Ether?

• 49:12Speaker 02

  Dots, atoms, and I think that's it. Richard, am I missing anything?

• 49:18Speaker 03

  I think maybe KSM as like a light

• 49:21Speaker 02

  KSM.

• 49:22Speaker 03

  Very light two dots, basically like layer one chains like have the upside of becoming store of value.

• 49:29Ryan Sean Adams?

  Super fascinating. Okay, cool. All right, guys, we're gonna have to take a quick break in the action. There is so much left in this podcast. After we get back from the break, we talk about what metrics Richard looks at to check for verifiable authenticity on chain directly on the Ethereum blockchain. And we also continue the conversation about fundamentals versus narrative. And when when do fundamentals come into favor versus when narratives come into favor? And then we also finish up with a conversation that because Ethereum is completely transparent, this

• 50:00David Hoffman?

  informational advantage is gone and it's replaced by having skills to be able to interpret and digest the data versus having political connections and friends and relationships that offer access to information that other people don't have. We ask how Richard and Nick think this will change the future of DeFi investing. Really a fantastic conversation. Don't go anywhere because we have to take a moment to talk about some of these fantastic sponsors that make this show possible. Gemini is the world's most trusted cryptocurrency exchange. I've been a customer of Gemini since I first got back into crypto back in 2017 and it has been my main exchange of choice to make my crypto buys and sells. Gemini is available in all 50 states

• 50:43David Hoffman?

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• 51:27David Hoffman?

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• 52:10David Hoffman?

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• 52:51Ryan Sean Adams?

  Let's talk about some other things then, um, maybe, maybe in the DeFi sector. I know you guys have some investments there, what KPIs you look for and how you find that verifiable authenticity on chain.

• 53:06Speaker 03

  Sure. I mean, one that comes to mind is like Nexus Mutual, which is like a DeFi insurance project. And like the very obvious KPI is active cover amount, which is basically how many, what's like the total amount of cover policies that are currently active right now. Um, like it just hit a billion dollars like a couple of weeks ago. Um, and like it's had incredible growth. Uh, I think it's like over a hundred X in the last year. This is like one where, um, like a lot of people for Nexus like to look at, you know, the capital pool and the token price as like their KPIs. Uh, but I think the more important thing is the active covering launch.

• 53:46Speaker 03

  Uh, because like while it's not directly tied to like the token, um, if like the fundamental KPIs of the project are increasing, eventually there's going to be some sort of margin of safety, um, such that the token price is going to catch up to its fundamentals. And like, that's kind of how I feel with Nexus right now.

• 54:05Ryan Sean Adams?

  Richard, for, for the, for the benefit of those watching on YouTube, you actually put together a dashboard on this. Would you be able to send that to me so I could display that?

• 54:12Speaker 03

  Sure. Uh, the, the URL is nexustracker.io.

• 54:16Speaker 02

  And Richard, yeah, Richard built that. I mean, Richard's kind of being humble here, but Richard built that and I, you know, it's become a really important resource for the the Nexus community. So yeah, anyone that's interested in Nexus should check out Nexus Tracker and there's a lot of good data for what's happening on chain there.

• 54:34Speaker 03

  So yeah, this was before doing analytics existed.

• 54:39Speaker 03

  Yeah, I had to do all the hard work of parsing all the data, but like fortunately now it's way either to spin up a Dune dashboard than to build a your own custom site.

• 54:48Ryan Sean Adams?

  Oh, we'll definitely get to Dune. I, you know, I remember including, you know, images of Nexus Tracker in in Bankless newsletters previously. It's it's fantastic that you're the one who created this the whole time. All right. So what were the metrics that you were just talking about that you look like? I imagine they're on this dashboard.

• 55:03Speaker 03

  Yeah, yeah. I mean, the top ones, active cover amount, annualized premiums enforced, that that's like a really fancy way of saying annualized revenue, but kind of in insurance lingo. So like at the current rate, you're making close to like $20 million a year in revenue. Just from just from covers, like there's other revenue sources like business sales spread and also investment gains.

• 55:25Ryan Sean Adams?

  So we could think of that 20 million per year as their annualized projected revenue, basically, if we were to compare this to some other capital asset like equity.

• 55:34Speaker 03

  Yeah.

• 55:35David Hoffman?

  And so one of the conversations that it's important to have about Nexus Mutual is that the token has not perhaps followed the revenue metric, which is something that we might have expected if in more efficient markets, right? And that's the gist that I'm getting out of this conversation. So we have the data because of, you know, thank God for Ethereum is this inside out platform. We can consume all the data we want. Yet the token price is doing things that are different from what we would expect the data to to show. So is that where the narrative aspect comes in? And so like, what's the relationship between the Nexus Mutual and the NXM token price and then the the Nexus Mutual revenue? Like, explain that relationship to me.

• 56:13Speaker 03

  Yeah, I think one thing that's very different between Nexus and like NXM and all these DeFi coins is that the NXM token is constrained by a formula, the the bonding curve. So it's like directly tied To the capital pool size versus other coins like say Chainring, where it can just like trade up like based on narratives like for NXM price to increase, you actually have to deposit more money into the capital pool. And like there's a formula that ties the capital pool amount to the token price, which is good and bad. It's good in the sense that like it's tied to like some sort of underlying fundamental. And you can think of it as like a leverage fed on ETH based on like how much the project grows relative to ETH.

• 56:57Speaker 03

  It's bad in the sense that you can't get these like speculative like 10, 20x bubbles. That are really exciting that you can with like other new DeFi coins.

• 57:08Ryan Sean Adams?

  Richard, I remember a VC once telling me, this is you know, pre crypto, that the most interesting companies were always the pre-revenue companies. Those were the ones who had the big valuations because investors could kind of like imagine what future revenues were. And once you start actually generating revenues and they can see that and they can measure your growth rate. Well, valuation tends to kind of collapse because I suppose it's less narrative driven, less people imagining the possibilities in the future. It's more grounded in the real world. Seems to be what you're saying is is kind of happening here. Some tokens with no revenue fundamentals are just absolutely going on monster tariffs due to narrative. And but once you get revenue and fundamentals in your token, that can kind of constrain your narrative power.

• 57:53Speaker 03

  Yeah, that's correct. I also like to say that like for Nexus, like for a brief period of time, the NXM, the WNXM token, which is like a wrapped version of Nexus that's freely tradable on exchanges. It was trading below book value, which like is like, as like honestly, I don't think that's ever happened before in like any DeFi project. So like basically what that means is the the the amount of ETH in the capital pool is worth more than the total market cap of NXM. So basically, if all of the NXM token holders decided tomorrow that we're just going to return money back to token holders, you would end up having more ETH than what you paid to buy that token.

• 58:34Speaker 03

  And like that's just, that was just an incredible like undervalued asset that a lot of smart investors, like fundamental focus investors decided to buy, that was a good time to buy NXM.

• 58:46David Hoffman?

  That's absolutely crazy because to me that tells me that the power of the narrative side of investment can just dwarf this side of fundamentals based investment and that kind of tells me that the ratio between narratives to fundamentals in this space is like 90 10 or something something crazy juxtaposition like that where like the narrative is actually so how do you guys think that this skews investments when the returns on investments is theoretically so much narrative based rather than fundamentals based how does that skew capital allocation in this industry?

• 59:22Speaker 02

  Well, I think that's short term though, right? Like our bet, we're making long term five to 10 year bets and our view is that yeah narratives work in the short term but when it's just narrative, the narrative runs out and and then there's nothing, right? So, you know, we want to be investing in, I think narrative is important. It's I'm not dismissing it. We want to be investing in projects that have good narratives but underlying fundamentals as well, right? So I think what you don't want to be doing is investing in just narratives because there's some people that there's a lot of ways to make money. So that I'm not saying that people you can't do well by this, but I just it's not the game we're playing.

• 1:00:05Speaker 02

  We're playing kind of long term investing in strong fundamentals also backed by good narratives, right? I think you really need both to, you know, to have 20x kind of upside potential in the long run, which is what what we're doing. But I like because these are public, I think it's a lot. What I always say is like you need to approach crypto investing like venture investing, right? Where it is kind of a long term perspective and you're not making decisions based on 50% moves, you know, one way or the other, right? It's easier said than done because you know, these are publicly traded and you know, it is alluring

• 1:00:46Speaker 02

  to, you know, focus on what's hot on Twitter and what's hot and on price and things like

• 1:00:52Ryan Sean Adams?

  Well, it's one thing we say on on bankless is you have to decide what type of investor you're going to be in crypto. It's either one of three, your fundamentals investor, which means you're doing the hard work that Richard's doing here. Or you're a narrative investor, which means you're looking at, you know, three to six month timelines. And you're just you're just going on the next narrative, trying to front run that. Or you're a trader and you have to really pick it. It's hard to do all three things at once. Well, and the bankless program, this is one of your first time listening. So you'll find that we skew towards the first, which is fundamentals, long term, hold. You know, and and not the the other two. But what what you just said, Nick, I think is so important is because as smart people start digging into this data.

• 1:01:37Ryan Sean Adams?

  Ideally, the market gets smarter in general in terms of its its capital allocation. Right? So the more Richards we have going through Dune Analytics and parsing through this this data. The more rationalization we can make behind the valuation of the assets in this space. And the the the market levels up together. Now, I personally, I was hoping to see a bit more of that in the 2021 bull run. I still feel like there's a lot of garbage in the top 100 coin market cap. Yep. That that is just narrative driven and not driven by fundamentals. But do you think that the market is getting a little bit smarter? Maybe, Nick, your thoughts?

• 1:02:17Speaker 02

  Not really.

• 1:02:21Ryan Sean Adams?

  Okay.

• 1:02:23Speaker 02

  And I, yeah, I think I think memes are like, I'm not dismissive of memes by any means. Right? Like, I think NFTs would be a good example to look at. Right? There's no fundamentals underlying NFTs other than like a community that believes in this NFT. And that believes it has value, right? And NFTs are going crazy right now. There's certainly some type of bubble in NFTs and, you know, a lot of people, artists and things like that coming to the space for cash grabs. But I also believe in crypto art as a category, for example, which I think has a chance to completely displace the traditional art world, right? In terms of of of value and what people believe has value.

• 1:03:08Speaker 02

  There's not. Uh, fundamentals there really, it's just kind of belief. And so I'm, I think fundamentals are great. We definitely want to invest in like products that have good fundamentals, but I'm also not dismissive of memes. I think, um, and I think NFTs in particular are kind of revealing truth about the crypto space in general, that maybe a lot of people don't want to recognize, which is that, you know, there is, memes are a big part of, of everything that's happening. And I don't think that's going to change.

• 1:03:45David Hoffman?

  Richard, you want to add anything?

• 1:03:46Speaker 03

  Yeah, I think that's right. Um, I think like related to NFTs, uh, there's also like some fundamentals that you can look at is like kind of, you know, trading volume. Uh, so like maybe like the assets themselves are memes, but like you can invest in like the picks and travels, the infrastructure that's like powering like the NFT economy and like that's, uh, was, was the impetus for investing in OpenSea in 2018 and SuperRare in 2020. Um, SuperRare was like actually a really interesting case study. Uh, so like we made the investment like around DeFi summer when DeFi was like really hot, but like NFTs were still like largely under radar and like a lot of DeFi maximalists like dismissed, uh, NFTs.

• 1:04:26Speaker 03

  But if you look at the Dune Analytics dashboards, um, the, like the monthly volume for NFTs was growing about 55% uh, month over month. And like at that time, like the absolute numbers were still like very small. So like, you know, 55% month over month grow like growth didn't seem like a lot. Uh, but you know, if you do the math with a compound interest, like eventually that gets, that gets to like an extremely large absolute numbering. Like as you can see here in the graph, um, like in February, it's just like completely exploded. So that, that's like a good source of alpha for like finding, like these underrated gems, uh, that are going to explode in a few months.

• 1:05:06David Hoffman?

  I do want to get your guys' opinions on the cyclicality of this whole narrative versus data debate, where my gut take is that in bull markets, things are primarily narrative, and in bear markets, data and fundamentals take over. And Ryan earlier mentioned our bear market DeFi founder series, where we interviewed Kane from Synthetix, Donnie from Ave. And in bear markets, those projects weren't narratives, because there was no narrative in the bear market, things were dead. There was only fundamentals, there was only reality. So how do you guys think that on these market cycles, how do you think the cycles of narratives versus fundamentals follow the market cycle? Can you guys explain that relationship?

• 1:05:52Speaker 02

  Well, I think in terms of narrative, like, I think dismissing narrative-based coins completely is wrong, right? Like, I think what you want to invest in is narratives that more people are going to believe over time, right? And so Bitcoin, as an example, is an authentic narrative that, you know, just more and more people are believing, and that's what allows it to capture value. So we certainly are investing in narratives that we believe are just going to grow over time.

• 1:06:31Speaker 02

  I think certainly having fundamentals that underlie it in some way is important, and that's a good indication of, kind of, you know, a narrative that's going to last over time, if the fundamentals, you know, exist through, kind of, bull markets and bear markets. But, yeah, I think, you know, fundamentals are certainly good, but we're not saying that we're just investing in fundamentals at all. I think narrative is, and the meme, is an important, critical component of any cryptocurrency.

• 1:07:11Ryan Sean Adams?

  It's interesting because it's kind of almost a semantic thing, right? Because what you're saying is that narratives can have fundamentals and that narratives can be authentic. And you can see that authenticity like on chain in all sorts of various ways. So it's not, not that you're not investing in narratives, but you're investing in narratives with some fundamentals behind them.

• 1:07:37Speaker 02

  But let's use the example of people, right? Have you guys seen?

• 1:07:41Ryan Sean Adams?

  Yeah, for sure.

• 1:07:42Speaker 02

  Artwork and how it's going crazy in value right now?

• 1:07:45Ryan Sean Adams?

  Yes.

• 1:07:47Speaker 02

  And would you say there's any fundamentals underlying that?

• 1:07:51Ryan Sean Adams?

  Yeah, they're, they're hard to quantify, right? So I would, I would say it's, it's fundamentals in the way that the store of value narrative has fundamentals. It's, it's cultural expression and it's more people believing that people's art is awesome and wanting more of his, his art. And that's a, that's a fundamental in itself, but, but I agree. It's also partial, part, part of this meme socially constructed narrative.

• 1:08:14David Hoffman?

  Right. The, the only fundamentals that I would say are behind Beeple's art is the fact that humans have liked art for forever. But that doesn't even mean that necessarily Beeple's art is what's going to be enjoyable. But clearly it is because people paid millions of dollars for it.

• 1:08:29Speaker 02

  Yeah. So we, I mean, we bought a Beeple piece for the fund. And so, you know, people listening might say, well, you guys were talking about fundamentals, but like, what's the fundamentals of a Beeple artwork? Right? And it kind of that, I think that solidifies kind of my point that I think a, a narrative, a meme is, could be a good investment. If that meme just grows and grows over time, right? And so like buying a Beeple is a bet on the artist, right? We think that Beeple is a really compelling artist that engages with a community incredibly well online as well.

• 1:09:08Speaker 02

  And there's a chance that, you know, Beeple is our generation's Warhol or something like that, right? And the belief in this kind of crypto native, digital native artist just grows over time, right? And so that's just an example of this, a meme based investment that we, you know, that we think has a lot of upside.

• 1:09:31Ryan Sean Adams?

  I think that's a great articulation of it because I do think that the traditional finance world draws things too narratively when they when they use terms like fundamentals. They mean that the thing must have cash flows associated with it and you must be able to do a discounted cash flow analysis and analyze it in the way you analyze a stock, right? And so they draw far too narrow of a like framing around things that can be valuable. And you're saying, look, things can be valuable and have fundamentals outside of of cash flows, right?

• 1:10:05Speaker 02

  It's just belief. What I've been saying is like, look, there's this, there's an institutional narrative that is created for how you value something. But I think what we're seeing in 2021 is like, the people on the internet are saying, fuck this, like, we we're investing in what we believe has value, right? And I think GameStop is obviously a stock market example of that, but it's also happening in crypto and in NFTs. So it's just belief.

• 1:10:31Ryan Sean Adams?

  All right. Well, let's talk. This is such a good conversation. It's so many good points here. Richard, I want to come back to another point that we we kind of touched on a little bit, and that is this, you know, Dune Analytics dashboard that you put together. And this is just an example. So you were talking about monthly crypto art volume and being able to see all of this on chain. I think the macro picture here is what you're doing, it appears to me, is like, like, the type of work they do on Wall Street for stocks where they're combing through quarterly earnings reports, basically, and coming up with projections and trying to to to project out the future of these things. The difference is, you have the the superpower of crypto and the blockchain in that you don't have to wait for quarterly

• 1:11:16Ryan Sean Adams?

  earnings reports. All of this data is available on chain. And if you know how to crunch it, and if you know the model behind the the project and kind of the growth sector, then you can put together some extremely compelling analysis on the verifiable authenticity of what's really happening in in these projects. And you could do this for NFTs, you could do it for DeFi, you could do it for anything that's on chain. That's really what you're doing here, right?

• 1:11:43Speaker 03

  Yeah, yeah, for sure. I in Dune like published a manifesto, actually, like I think a month ago. It was like titled something like the future of finance will be like read real time. And basically kind of outline what you said, like now we don't have to wait for like quarterly reports, annual reports. We don't have to worry that's like some end runs gonna happen where like they kind of they cook the books and like fudge the numbers. Uh, because like the blockchain isn't lie, you can uh get all this data on chain uh in real time. Um, and like, you know, it's like authentic. Um, and it it's a it's a really good source of output like for like new projects that launch in like, you know, aren't big enough uh to like really have. Like like any like semblance of like quarterly reports.

• 1:12:26Speaker 03

  Uh, but you can like look at their numbers and see if they're growing like fifty percent month over month. Uh, then it's like something worth looking at, something worth talking to the founder, maybe even investing.

• 1:12:37Ryan Sean Adams?

  Richard, why do you publish this open source? Uh, I'm curious, you know, in traditional financial, a a lot of these funds will will take this information, keep it secret, so they keep the alpha internally. Why do you guys just publish it on Dune?

• 1:12:48Speaker 03

  Oh, there's actually a lot of stuff that I keep private on Dune.

• 1:12:53Speaker 03

  Backstory, uh, so I I was using the Dune uh like the free tier for a while. Uh, and then like DeFi somewhere uh started and like it was like all these farming projects I was doing, uh, but like people were stalking me on Dune, like asking me. Projects I was farming is like, oh, I I gotta like pay for a pro version to like make this private, so. Like the the the the trading alpha is private, but like these like long term like KPIs I think are really important for like community to see like how a project is doing like. Like this stuff is public.

• 1:13:23Ryan Sean Adams?

  Yeah.

• 1:13:23Speaker 02

  So all our fund investments, right, are are obviously long term investments. We're um, you know, the largest investor in super rare and. Um, you know, we want people to recognize that super rare is uh is killing this market right now, right? And I think the uh an interesting thing too about the on chain is that in, you know, in in Silicon Valley, when founders raise money too. It's often all about narrative, right? It's about a founder that get can get in a room uh with VCs and pitch a big vision. And.

• 1:13:55Speaker 02

  There are a lot of bullshit founders like that in Silicon Valley, right? I think Richard mentioned earlier, we kind of, we like investing in founders that may not pitch great, you know, in a room in Silicon Valley, right? But are building something very useful. And, and I think the Dune boards kind of help separate that. And still, like a lot of, like, most investors, I don't think are looking at these. But that's, you know, that's important for us to both, you know, evaluate new projects, but also, well, you know, for our investments, we want people to recognize that, like, look, this, you know, SuperRare is the dominant player in the crypto art market despite, you

• 1:14:40Speaker 02

  know, a narrative from, you know, certain people that might suggest otherwise, right?

• 1:14:46David Hoffman?

  So with this availability of data that public blockchains offer, and specifically with applications like Dune, where you, is, Dune is really a way to consume data easier. It's revolutionary that all of this data is equally available to everyone. And historically, in, in previous, in legacy finance, accessing data that other people don't have is a fantastic way to gain edge, right? Getting, getting your hands on information and data that other people don't have, and you can use that information to place investments. That's not true in public permissionless systems, because everyone has the data. But the difference is that not everyone can consume the data in the same way, and not everyone can interpret the data in the same way.

• 1:15:30David Hoffman?

  So it's, it's a new game. Everyone has all of the same information, but now that the advantage is not in like personal connections or political relationships, so you can get your hands on data that other people have, now it's about how well can you consume the data and how well can you interpret the data? Maybe talk about that transition and how that's going to change the game of investing moving forward, if, if we do live in this new futuristic Ethereum-based world or public permissionless blockchain-based world.

• 1:16:01Speaker 03

  Yeah, I mean, um, like one big difference with like data on the blockchain and like traditional world is like it's it's all free and like publicly, uh, public to access, um, like for NFTs and like art, for example, um, I I I also built cryptoart.io, which is like a website to track like total art market cap in like kind of a rankings of like all the artists uh, by like each individual art, like artist market cap. Um, and like you can do the same, you can kind of do the same in the traditional art world. Um, there's a website called artnet.com, but uh, it costs like thirty thousand dollars a year, uh, to get a subscription to that. And like the thing is also incomplete. Uh, so, um, I mean, I thi- I think it just like revolutionizes the game where

• 1:16:44Speaker 03

  like now, if you want to be an art investor, uh, all the data is in front of you. Uh, you can see like how much like other people have paid for a particular artist works like historically. Um, and then kind of do like a regression and see like how this artist is like trending over time in like popularity, like are there artwork prices increasing over time? Uh, whereas like in the traditional art world, um, like the art dealers like have a ace of, have ace of impactful information in that like they know like what the previous uh, uh, like what the previous price the artwork was sold for, um, and like that's kept secret, uh, to like the new buyers, um, and like that's completely changed the game in art investing.

• 1:17:27Speaker 02

  For sure. Yeah. Tr- I mean, to me transparency is one of the core features of blockchains, right? And the fact that anyone can see this data about artwork, um, is really powerful and you don't have to be a rich person who can afford paying a couple hundred dollars a month for art net or or whatever. You could just anyone can go to crypto art and see, see what's happening, right? So that's that's one of the core features of blockchains that we really, uh, Richard in particular, who, you know, fantastic at data, we want to uh, take it, bring that to light more and and and allow more people to recognize that.

• 1:18:03Ryan Sean Adams?

  I think I'm falling in love with this, uh, this eth boy portrait of Vitalik. He looks like, uh, what's it? Vitalik takes the role of Picasso's son. It's amazing. Too bad it just sold for almost half a million dollars. So that might be out of my, uh, my price range, but this is, this is phenomenal stuff. Richard, you know, one thing, uh, David and I often talk about on Bankless is the, the tremendous, I guess, white space of opportunities that are available for people who learn this space and learn it early. Like just a rough analogy is it's kind of like learning HTML, you know, right before the internet, right? You're just on the cusp of something. You have skills that are in demand that other people will want.

• 1:18:44Ryan Sean Adams?

  It seems like Wall Street is gonna have to level up. Like the Wall Street analyst game, that it's, it's no longer going to work in this new open permissionless, crypto economy. But I'm curious how, how somebody would get started doing some of this stuff, doing some of the stuff that, that you're doing. If they're interested in becoming a, you know, crypto financial analyst, what kind of skills do they need and how do they get started?

• 1:19:12Speaker 03

  And I think like having like computer science skills or like at least like basic abilities of code is like becoming like more important than ever. And like, for example, with June, like all of it is in SQL, which I guess you, you don't need a CS degree to like know how to use SQL. And there's like plenty of tutorials out there to do that. Whereas, you know, like with traditional finance analysts, they're probably just combing through PDFs and like, uh, decks, uh, to like put together the numbers. Whereas for this, um, if you, I just a couple of line of code, like can get you like the same amount of information, just like much faster and much easier. Um, I, I also think like, I know, understanding solidity and like at least being able to like, read and like parse through smart contracts was like really a value, like underrated skill, especially in DeFi.

• 1:19:57Speaker 03

  I think, you know, during like the DeFi summer, uh, where there are like all these new projects coming up, like if you, uh, and like a lot of them were un-audited, like if you knew your way around solidity and could like at least like do a sanity check or like a GIP check of like the smart contract versus like the synthetics mentor contract that they, uh, borrowed from, uh, you can see like what's actually going on in these projects and not just, you know, invest, uh, money into a new project just because like it's a good meme.

• 1:20:26Ryan Sean Adams?

  And to be clear, there's upside in doing this, guys. I think what Richard is saying is learn to code. You know, learn at least some of the basics, but there's some upside in doing this because what you've been saying the whole time is you found treasure this way. Right. You found treasure with with Nexus Mutual. You found treasure in NFTs before they were a big deal. You were able to predict things using this on-chain data and front-run opportunities that way. Is that right?

• 1:20:51Speaker 03

  Yeah, yeah, that's about it.

• 1:20:54Ryan Sean Adams?

  I want to ask you the question of what's next, of what you're seeing now that, you know, will be the kind of the next big thing. You have any thoughts on that? Do you have any, I guess, ideas for us or places to look? Are you going to keep that alpha internally for one confirmation?

• 1:21:13Speaker 03

  Nick, do you want to answer that?

• 1:21:15Speaker 02

  Um, well, I mean, there are some obvious things, right? I think most people recognize the gas fees, right, on Ethereum right now are not viable for most people. And, you know, I think there's a narrative that, you know, Ethereum is becoming a DeFi and NFT platform for rich people. And there's, you know, could be an opportunity either for, obviously, there's a lot of exciting stuff happening on Ethereum to change that. Or for, you know, other platforms, right? So we're thinking a lot, we're looking at the on-chain data right now.

• 1:21:54Speaker 02

  Take SuperRare. SuperRare NFTs are working really well for these high-dollar value, low-throughput transactions, right? So SuperRare, if you want to plug SuperRare Bot, which Richard also built, which is a really cool Twitter bot. And if you want to see in real time who's buying crypto art and the artists that are selling it and monitoring that. I enjoy taking a peek in the morning. It's really, it's really just a good way to start the morning. But if you see, if you look at that, you'll see that there's every transaction, every purchase is, you know, $500 minimum. And then, you know, hundreds of thousands of dollars maximum, right?

• 1:22:36Speaker 02

  So, and that makes, it works for Ethereum because, you know, fees are anywhere between $20 and $40 right now. Last time I checked, maybe, maybe lower today. I'm not sure, but. You know, looking at that data and looking at, you know, NFTs, for example, and seeing that it's mostly high dollar value, you kind of can recognize that, um, you know, in the future, there's a need for a platform that supports kind of low dollar value, high throughput NFTs. And that's like one example of a big opportunity that we believe in that, uh, you know, that we're not really seeing, uh, yet. And we're thinking a lot about.

• 1:23:17David Hoffman?

  Richard, do you want to follow up?

• 1:23:18Speaker 03

  Yeah, I mean, high gas prices are just like pricing out a lot of like a new, interesting use cases, uh, like kind of the, the gaming NFT, like use case, like kind of died because of the high gas prices. Um, so, you know, I'm optimistic, you know, about, uh, like layer two stuff. Uh, we, we also invested in a project called a HOP protocol, which is, uh, providing a really good UX to bridge between layer one Ethereum in layer twos and also between layer twos and layer twos. Um, like a really good UX for that, uh, without like, uh, having to deal with like the withdrawal period and like waiting, uh, to get your money there. Um, so I thi- I think a lot of like picks and shovels and like layer two scalability stuff. Um, that, that stuff is really exciting in the next few years.

• 1:24:02David Hoffman?

  I want to ask you guys about the changing landscape of investment into, into Ethereum, into DeFi and into the greater world of crypto. Because, uh, the, the last, you know, $50 billion of investments into the space is not going to come from the same people or the same, you know, investor dispositions as the next $50 billion, especially what we see coming down the pipeline in this bull market. How do you guys think that the people that are looking into crypto now, um, are, how, how will that change the landscape of, uh, you know, memes and narrative versus fundamentals? Or how, how will just the, what will shift because of these new players coming into, uh, into crypto and investing in crypto?

• 1:24:45Speaker 02

  Well, I think on the institutional front, it's still all Bitcoin, right? So Bitcoin is just a very simple story that institutions understand, right? Which is digital gold. And so I think that is going to be a big driver on the institutional front. Institutions are not yet buying ETH. I think it's likely that they, it's very likely that they will. But right now, the narrative is still too confusing. And, you know, there's, you know, the ETH two economic improvements haven't happened yet.

• 1:25:25Speaker 02

  And I think, I think there's certainly a chance that in the future ETH has the economic story that Bitcoin has, plus it's most widely used, and that becomes something that institutions get on board with, but we're not there yet. So I think on the institutional front, it's Bitcoin for the next, you know, year, probably it's kind of Bitcoin, and then institutions will allocate to, you know, funds and things like that, that are investing in other cryptocurrencies. And on the individual side, again, it goes back to kind of Bitcoin is a cryptocurrency for the people. And I think ETH is, sorry, Bitcoin is the cryptocurrency for institutions and ETH is increasingly the cryptocurrency for the people.

• 1:26:08Speaker 02

  I think if you look at the use cases that are bringing people in right now, it's all Ethereum, right? So I think there's a really strong story that that is going to continue. And, you know, there's also other chains that I think are doing interesting things. I mean, obviously, Top Shots is an example of a project that is bringing in new people. I think we're likely to see more of those as well, is kind of a view that I have. I think. Up until now, we've been mostly focused on these crypto native and that's what we that's what we love. That's what we mostly invest in, but we're we're closer than ever to

• 1:26:49Speaker 02

  just products like Top Shots that aren't really crypto native at all, but you know, bringing our interesting products that bring in new people. So that's that's a, I guess, a general view of how I see, you know, the new people coming in over the next couple

• 1:27:07Ryan Sean Adams?

  Just a quick follow up on that, Nick, and then I'd love to hear Richard's, Richard's thoughts on this too. But what do you make of some of the NFTs being priced and denominated in ETH right now? Is that part of the story value for the people narrative? Or do you think that's just a passing thing that, you know, NFTs won't always be denominated in ETH? They just are right now?

• 1:27:28Speaker 02

  No, I think they probably, they will. I mean, our, our whole thesis on crypto art in particular was like, just like the rich people like traditional art, crypto rich people like crypto art, right? And so I think, I, I, I, I think ETH is kind of the on-ramp and you know, you can buy NFTs on, for USD on Nifty and things like that, but we're most excited about kind of the on-chain stuff like OpenSea and like SuperRare. And certainly, I think more, more and more people that I'm hearing from and talking to, especially new people. I mean, I heard from a friend today that's really gotten excited about crypto

• 1:28:08Speaker 02

  and he's asking me, what should my NFT allocation be? And so his, you know, he, he recognizes that ETH is kind of, you know, should be the biggest and Bitcoin as well, but they're, they're, they're kind of thinking within that allocation, should it be 5% NFT? Should it be 20% NFT? So I definitely think It's first Bitcoin and ETH and cryptocurrencies and then NFTs for most people and most people will continue to think about NFTs in ETH terms.

• 1:28:38David Hoffman?

  Fascinating that ETH is being used. Oh, sorry. I was just gonna say fascinating that ETH is being used as money in the NFT scene. Go ahead, Richard.

• 1:28:47Speaker 03

  Yeah, yeah. I also have the data to back that up, that like people are thinking about NFTs in terms of ETH. So like, if you look at like my SuperRare Dune dashboard, you can see like the average artwork price over time and like there's like a USD graph and an ETH graph. So like a commonly asked question is like, well, these prices are just going up because ETH is pumping. So like in dollar terms, they're also like pumping, but you can see from the graph that ETH has like relatively kept its value as like the dollar price of ETH increases. So that means people, collectors generally think of artworks in terms of ETH rather than USD and like the stuff isn't getting more expensive in dollar terms.

• 1:29:32David Hoffman?

  Wait, so I want to unpack that just a little bit. So Yuler Beats, let's use Yuler Beats as an example. Only price in ETH, you can only buy it with ETH price. And so if ETH, if the ETH price 2X is, are you saying that that does not mean that the Yuler Beats NFTs are also 2Xing or are they 2Xing?

• 1:29:53Speaker 03

  2X in terms of dollars or?

• 1:29:55David Hoffman?

  In terms of dollars, yeah. Wait, so Ether price goes from a thousand to $2,000 and because Yuler Beat NFTs are only purchasable by ETH, how does that impact the valuation of a Yuler Beats NFT?

• 1:30:07Speaker 03

  Oh, I see. And then the graph, like in like the dollar terms would double, but the ETH would stay flat. And like, what you want to see is that the ETH graph, ignore the dollar graph, just look at the ETH graph and make sure that it stays flat or goes up and doesn't go down as like the ETH price, ETH USD ratio increases.

• 1:30:27David Hoffman?

  So this just adds more narrative behind the meme of digital art is priced in ETH.

• 1:30:34Speaker 02

  Yeah.

• 1:30:36Speaker 02

  One interesting thing, I think it still remains to be seen how collectors think about. About like ETH appreciation. So an example is in January, when you know ETH price was mooning, there were some collectors on SuperRare that felt underexposed to ETH and and wanted to sell their NFTs to to get more ETH because ETH is way more liquid, right? So there's like, there's the kind of liquidity discount that comes with NFTs. And so I think most NFT holders, and even the artists that are, I think people underestimate how many new artists are coming into crypto.

• 1:31:20Speaker 02

  And Ethereum is there on ramp and how they're getting paid. And and they're, sure, some of them are going to Coinbase and cashing for cashing out for dollars, but a lot of them kind of recognize ETH as this kind of valuable store of value and and are holding it. And I think it's a really awesome way to bring in new people to crypto.

• 1:31:46Ryan Sean Adams?

  That's fascinating. That is such a new development that's come with NFTs. And it's so exciting to see, you know, some people in the crypto sphere have have thought about ETH in money terms. And certainly, like, you know, we talk about bankless denominating your wealth in in units like ETH and Bitcoin. But for art collectors to come from non-crypto worlds and start being exposed to that natively, and for artists themselves and creators themselves, that really is new. That does feel like a new on-ramp to the stuff as money. Maybe, maybe, Richard, you know, it's kind of the same question to you of, do you think anything's going to be different during this cycle as a result of of all of these new entrants? Any additional thoughts they're adding to what Nick said?

• 1:32:31Speaker 03

  I mean, like, During this cycle, like, we're bridging mainstream like more so than like any other cycle. Uh, like, you know, in 2017 ICOs, like, sure, there were like a couple of, uh, like, s- smart, sophisticated people who knew how to like flip these ICOs, but like now in 2021 with NFTs, uh, you just have to be a fan of the NBA or like, uh, or like are interested in art, uh, to like participate in NFTs. And I think that's like really like appealing to a lot of people because like finally like Ethereum, you know, it's not just about, uh, money and like financial use cases. It can also be about culture and entertainment and like that's relatable to everyone.

• 1:33:14Ryan Sean Adams?

  All right, guys, um, this has been so insightful. I think David and I want to conclude with, uh, just getting your sense on some predictions for, for this bull run. Um, the first question I have is, are there any current narratives that you think are going to die by the end of this bull run? I felt like in 2017, one narrative that died, uh, a withering death maybe was the ICO narrative and the utility token narrative. Do you think anything, any narratives in vogue right now that, that seem really popular will die by the end of this bull cycle?

• 1:33:48Speaker 02

  It's a good question. Um,

• 1:33:53Speaker 02

  nothing comes to mind.

• 1:33:54Speaker 03

  A lot of the thousand percent APYs, uh, that's less of a narrative, but it's like a short-term trade.

• 1:34:03Speaker 02

  Yeah, that's a good point. I mean, the yield farming stuff, I don't think the yield farming is gonna die like ICOs, but there's been a lot of, you know, sketchy yield farming opportunities that people have done well on. And it, it, it feels like in some ways that is fizzled out to some degree. Richard, I don't know if you agree.

• 1:34:22Speaker 03

  It's, it's moved over to Binance.

• 1:34:25Speaker 02

  Oh, yeah? There's yield farming on Binance now? I didn't even.

• 1:34:28Speaker 03

  Yeah, yeah, Binance marketing.

• 1:34:30Ryan Sean Adams?

  Well, in, in theory, the yield farming APYs should just like kind of collapse down into just earning yield on Ethereum, right?

• 1:34:36Speaker 03

  No, 10%, like, that's still high compared to the original world, but like, that's normal in crypto world.

• 1:34:43Speaker 02

  Yeah. One, I mean, one kind of idea here that I'm not sure about, I think, I, I don't feel strongly one way or the other, but this idea of governance tokens on Ethereum, um, that's.

• 1:34:57Speaker 02

  I don't think that's gonna die, but it may look different. Like, I think the reality is most governance governance token has been like a regulatory arbitrage in some ways, a way to launch a token without it being a security. And I'm not sure how that's gonna play out long term, but most of the governance tokens, there's not real governance happening.

• 1:35:23Speaker 02

  And I don't know, I'm unsure of how that's gonna play out.

• 1:35:29Ryan Sean Adams?

  And Nick, many of the governance tokens do not have fee revenue attached to them. They just have the possibility of future fee revenue attached to them.

• 1:35:37Speaker 02

  And and and value the valuations are implying that that, you know, the the fees will be passed to token holders, right? But if, you know, these, if you really believe in kind of governance minimization and like it being really hard to change things, then can that is that actually going to be changed? I'm not sure. So we'll see. I mean, I think, obviously, I like, I mentioned Polkadot earlier, I like kind of this idea of having councils. You know, to make decisions and it's certainly it's you. You made the point that, oh, maybe that that looks exactly like a company.

• 1:36:17Speaker 02

  I think it's somewhere in between, right? It's not exactly a company. Users do have some power and but it but it's kind of more centralized and can can create, you know, faster decision making and improvements than, you know, a rough consensus type governance. So.

• 1:36:38Ryan Sean Adams?

  Interesting. All right, guys. Any any other predictions for for 2021 then? Anything around NFTs, DeFi? How big this cycle is going to get? How long it will last?

• 1:36:48David Hoffman?

  Yeah, that's what I want to know. How long do you guys think this cycle is going to go for?

• 1:36:52Speaker 02

  I don't make predictions like that. I don't have a good feel. Other than I would say, I think NFTs are going to be, it's going to continue longer and it's going to be bigger than a lot of people think. And I think the important thing to recognize about NFTs is that they're unregulated investable assets. Right? So these are clearly not securities. There's a very strong legal argument that that's the case. And I've been waiting since, you know, I don't know if you guys, some listeners may remember Etherbot. Etherbots was one of the first Ethereum projects that did a pre-sale of digital goods and they sold a million dollars worth of,

• 1:37:38Speaker 02

  you know, of NFTs for some, you know, robot-based game. And I thought back then there was just going to be an explosion of these pre-sales and the numbers were going to get really big. And I don't know why it didn't really happen, but it just never did. And I think there's a chance that that could happen in a really big way this time around, right? So we saw Blau, you know, last weekend do, I think something like 11 million in, you know, in sales of his,

• 1:38:12Speaker 02

  you know, NFTs for his album. And I think this could get really big and we start seeing a lot of mainstream people. And there's going to be cash grabs. There's going to be, you know, people that are thinking about it long-term and do it authentically. But I think, you know, NFTs is unregulated, you know, investable assets is, you know, is important and it could get really big.

• 1:38:39Ryan Sean Adams?

  Richard, what about you? Hit us with some predictions.

• 1:38:42Speaker 03

  Predictions. I actually wrote a blog post beginning of 2020 about like three, under the radar predictions for 2020. Sorry, beginning of 2021 for three under the radar predictions for 2021. So the three were one, crypto art, which I guess that came through like way sooner than I expected, like literally just a month.

• 1:39:00Ryan Sean Adams?

  Congratulations on that.

• 1:39:03Speaker 03

  Prediction markets, which yeah, they had Polly market in particular had like, I think they had like close to 30 million in volume like up until like the Biden inauguration. I mean, the third was a D5 driven, it's like that. We're going to see more like complex structured products, options like it's kind of the logical next step for D5, uh, which, you know, that's still, uh, to be determined, uh, with all these new D5 projects that are launching.

• 1:39:31David Hoffman?

  That's, uh, this has been a fantastic interview, guys, and, and I've really enjoyed being able to parse the power, uh, parse apart narrative versus data. I think it's, this conversation is, I think, something that the crypto world is really pioneering. Because I think when you really go down to the bottom level of it, you actually can take this all the way back to legacy financial markets and just all markets ever are always one part data and one part narrative. And I really see you guys as pioneers of dancing this dance inside of this new, this new paradigm that is crypto. So thank you for coming on the show and, and sharing us, uh, you know, what you guys have found out.

• 1:40:08Speaker 02

  Thanks for having us, guys. It was a lot of fun. We love what you guys are doing. So keep up the great work.

• 1:40:13Ryan Sean Adams?

  Well, thanks, Nick. We try to keep it authentic on bankless, and that's one word I hope you take away from this conversation. Investing in authentic things, whether that's authentic fundamentals or authentic narratives. That was certainly my takeaway. Some action items for you. We've got some hot analytics on DeFi NFTs and Dune Analytics. We'll include resources, uh, for those in the show notes. You could start looking at these protocols like Richard Chen does. Uh, also, we've included his three underrated predictions article in the show notes that was just referenced near the end. Third thing, David, it's a bull market. We need some bull market five star reviews on iTunes. How are we doing with that?

• 1:40:56David Hoffman?

  Always want to do better. We are just under 200 five-star reviews. And so if enough listeners of this podcast give us those five-star reviews, we might break over 200. And that helps us get Bankless to the tops of the iTunes investing and business charts, which is where we think Bankless belongs. There's a lot of good information coming out of this podcast, at least I think. And if you guys think that more people should hear that, please give us those five-star reviews wherever you listen to podcasts.

• 1:41:23Ryan Sean Adams?

  And if you're watching on YouTube, make sure you like and subscribe. Our recent Mark Cuban interview is over 200K views. David, that's our biggest one yet. Really exciting about that. Awesome, guys. Well, risks and disclaimers, of course, the assets we talked about are risky. Ether is risky. Bitcoin is risky. Crypto is risky. You could lose what you put in, but we are headed west. This is the frontier. It's not for everyone, but thanks for joining us on the Bankless Podcast.

• 1:41:50David Hoffman?

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

• 1:42:34David Hoffman?

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