#237 Alex Pack - Partner at Dragonfly Capital on Why ETH is Money

Alex Pack is a Managing Partner at Dragonfly Capital Partners, an asset management firm focused on investing in and supporting the most promising opportunities in the cryptoasset class. In this conversation, Alex and Anthony discuss his views of the Asian crypto markets, why the Dragonfly team is focused on investing in infrastructure, how he sees certain market narratives playing out, whether Ethereum (ETH) is money, and where Alex will be focused on investing in the coming 3-5 years. BLOCKFI-----BlockFi allows you to keep your crypto, put it up as collateral, and receive a USD loan funded directly to your bank account. They do loans ranging from $2,000 to $10,000,000, and they're perfect for helping you reach your financial goals of all sizes. Visit BlockFi.com/Pomp to learn more about putting your crypto to work without having to sell it. UNSTOPPABLE DOMAINS-----Make your crypto currency payments simple and build censorship resistant websites. Visit unstoppabledomains.com and purchase your blockchain domains today!

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

• 0:00Anthony Pompliano?

  What's up everyone, this is Anthony Pompliano. Most of you know me as Pomp. You're listening to Off the Chain, simply the best podcast in crypto. Let's kick this thing off.

• 0:10Anthony Pompliano?

  Alex Pak is a managing partner at Dragonfly Capital Partners, an asset management firm focused on investing in and supporting the most promising opportunities in the crypto asset class. In this conversation, we discussed his views of the Asian crypto markets, why the Dragonfly team is focused on investing in infrastructure, how he sees certain market narratives playing out, whether ETH is money, and where Alex will be focused on investing in the coming three to five years. I found Alex to be incredibly entertaining and informative, so I highly suggest watching this episode. Also, though, let's talk about the advertisers who made this episode possible before we get into it. The first is BlockFi. You guys know I'm a huge believer in what they're doing. I'm a user

• 0:53Anthony Pompliano?

  and an investor. They basically have three products today. They will give you a US dollar loan against your crypto. They will also pay you interest on your crypto deposits, and then they have a cryptocurrency exchange where you can buy and sell crypto. BlockFi recently announced to users that they're going to launch a credit card this year that pays rewards in Bitcoin rather than cash or loyalty points as well. So, anything that you want to do with your crypto, BlockFi can help you. They basically are rebuilding many of the financial services or wealth management services that are available in the legacy world, but all around the new digital assets. So head on over to blockfi.com/pomp, again, blockfi.com/pomp, and check them out. I'm a huge fan, investor,

• 1:38Anthony Pompliano?

  and user. Blockfi.com/pomp. Now, the second sponsor is Unstoppable Domains. These guys are doing really incredible work. The decentralized world is coming, we already know that. Whether you want censorship resistance, or you just want the ability to access information that you otherwise couldn't, Unstoppable Domains is working to make that possible. They basically have two core things that you can do. The first, you can go get a domain name. So you can go buy a .crypto domain from unstoppabledomains.com, and you can use that to set up a website or use it as a wallet address to have people pay you. So dot crypto domains, kind of think of that as the domain system for a decentralized web. Unstoppable domains.com is where you can buy those.

• 2:23Anthony Pompliano?

  The other thing they've built is they've built a browser to help people access the decentralized web. You no longer have to be super technical to be able to do it. You can go to unstoppable domains.com slash browser. Again, unstoppable domains.com slash browser and you can start using it today. It's kind of a portal into this decentralized world that's super cool, very user friendly and dumb easy to use. So go check them out. BlockFi.com slash pop and unstoppable domains.com slash browser. Now let's get into the episode with Alex. I really enjoyed this one.

• 2:56Speaker 01

  Anthony Pompliano is a partner at Morgan Creek Digital. All opinions expressed by Pomp or his guests on this podcast are solely their opinions and do not reflect the opinions of Morgan Creek Digital or Morgan Creek Capital Management. You should not treat any opinion expressed by Pomp as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his opinion. This podcast is for informational purposes only.

• 3:22Anthony Pompliano?

  All right, guys. Bang, bang. I'm here with Alex. Thanks so much for coming to do this, man.

• 3:27Speaker 02

  Thank you. Real pleasure.

• 3:28Anthony Pompliano?

  You've got a real unique view of the world, I think, because you spend about half the time looking at US-based companies and then the other half the time looking in Asia and China specifically. So we've got a lot to talk about.

• 3:41Speaker 02

  Yeah, big world.

• 3:42Anthony Pompliano?

  Let's start with just your background. Kind of what did you do before you were investing in crypto?

• 3:47Speaker 02

  Yeah, so I am. I'm the managing and founding partner of Dragonfly Capital. We're a global crypto venture firm. I'm based in San Francisco. My partners are based in Beijing and we try to cover the world. So before that, I've been a VC for about five or six years. I got started at a fintech fund in Hong Kong around 2014. Before that, I was actually a college professor in Hong Kong. And basically I, this was early days for crypto. And Hong Kong has a very sleepy startup ecosystem. But at the time, quite a huge Bitcoin ecosystem. Wasn't crypto then, it was just Bitcoin ecosystem. Lot of libertarians and finance people like that in Hong Kong.

• 4:32Speaker 02

  So I sort of got into the ecosystem there and I became the crypto guy. Then I moved to Angelus, which is where we first met each other, actually. And I was a partner there. Then I joined Bain Capital Ventures, which is the venture arm of the 100 billion AUM asset management firm. And I did a lot of seed investing and specifically sort of kickstarted their crypto investing program. And left that two years ago, started Dragonfly and we've been rocking and rolling ever since.

• 5:00Anthony Pompliano?

  Awesome. And then what's the mandate with Dragonfly?

• 5:04Speaker 02

  Yeah, we're a generalist crypto fund. I think it's tough. A lot of our LPs, they just want sort of single exposure to crypto, right? And they don't know whether it's tokens, whether it's equity. And even for us, whether it's US-based or Asia-based, because our main thesis really with our fund is that a crypto very unique amongst all asset classes and even all tech trends is truly global from day one. So we sort of give them that diversified exposure around the world. Maybe about half of our investments end up being in tokens. Could be liquid, it could be illiquid, things like SaaS. We do a ton of DeFi protocols and smart contract platforms and money protocols. And then about half of the investments are in infrastructure, venture, very traditional venture investments.

• 5:47Speaker 02

  Many of those tend to be in Asia, in fact.

• 5:50Anthony Pompliano?

  Got it. And so maybe give us a breakdown of like, what are some of those companies that you've actually invested in? And then I want to get into kind of a spirited debate about DeFi, ETH as money, etc.

• 6:02Speaker 02

  Totally. I love talking to more... Do you call yourself a Bitcoin maximalist at this point?

• 6:07Anthony Pompliano?

  Not at all.

• 6:08Speaker 02

  Really?

• 6:08Anthony Pompliano?

  Not at all.

• 6:08Speaker 02

  Okay.

• 6:09Anthony Pompliano?

  Not at all.

• 6:09Speaker 02

  Okay, great. This will be good then. Yeah, so some of our bigger investments are... We led Maker DAO's last round, which is the largest DeFi project and the largest decentralized stablecoin. And we specifically helped them with their go-to-market in Asia. And then we've invested in... A whole bunch of other DeFi protocols like Compound Finance, DYDX, these are like money markets and decentralized derivative exchanges. We're investors in Ethereum and Bitcoin too, of course, as well as on the infrastructure side, we're in deals like a lot of US infrastructure like Arisex and Togomi and Anchorage and

• 6:50Speaker 02

  a lot of their sort of equivalents in Asia, like a brokerage called Amber AI, which is growing like crazy. Whole lot of exchanges, just the entire sort of market infrastructure stack that's growing in Asia.

• 7:04Anthony Pompliano?

  And why the focus on Asia, kind of give us an understanding of like what's actually going on there for the US-based investor or Western world? Like what do we not understand or what should we understand about that market?

• 7:14Speaker 02

  Yeah, so one of the biggest misconceptions about crypto is that it's happening in the US to any extent, really, which is totally different. I understand why, because it's totally different from the internet and even biotech and SaaS. Basically, if you're an internet company, you don't think about China, you don't think about Asia at all because the US market is so large, you have so many users here, that you really don't have to have a China strategy until you're at a 10 billion plus, you know, market cap. There's plenty of room to grow. In crypto, that's not true. Crypto, and this actually is sort of my origin story, when I was in the US, I really didn't like Bitcoin. I'm not sort of like an anti-fed guy.

• 7:53Speaker 02

  I think the US dollar is one of the greatest sort of technological and institutional inventions of all time. It creates stability and so forth. And so compared to that, compared to sort of the US financial system, Bitcoin and the crypto financial system is not very great. So if you're an American, really the main use case of crypto today is just sort of like the Robin Hood use case, it's just speculation, where he's a...

• 8:22Speaker 02

  Or as you know, when I went to Asia and was a fintech investor, I saw that these were real users of crypto that desperately need it. The financial system is completely significantly lacking compared to the sort of the Western financial system. There's, you know, the largest groups of underbanked and unbanked are in Asia, you know, China and India. But even people like middle-class people and so forth, and people that have smartphones, there's no credit system. It's very hard if you're an SMB to get credit. It's very hard for individuals to get credit. Of course, all of these currencies, they're often under capital controls, and they're much more volatile than the US dollar. So crypto is a great use case for them, and this is empirically true too.

• 9:05Speaker 02

  If you look, we pulled the numbers, basically, there's 16 crypto unicorns, like venture and companies, and 12 of them are based in Asia. So 75% of all the crypto unicorns are in Asia. And, I mean, they have like 5 billion plus revenues, multi-billion dollars in profits, all coming from this region.

• 9:27Anthony Pompliano?

  It's crazy how large it is. Is this institutions? Is this retail? Like, where is that actually coming from? Right, I hear you on, hey, the people need this, but those numbers are just so large. Can it be all retail?

• 9:45Speaker 02

  I think it's primarily retail. Generally, in China, institutions as a concept of invest, as a class of investor, are more of a Western phenomenon. Because you kind of have to, it's sort of from endowments, it's from like 100-plus year, like families make their money in, you know, the Gilded Age, and they pass it on, and there's institutions. Whereas in China, and most of Asia, the money is more recent. So, like, you know, most institutional money is just family offices, it's just like public companies that are run by specific families. But yeah, generally, most of the activity in crypto in Asia is retail. Yeah, it's, I mean, there's grannies, you know, that are buying EOS and are buying Bitcoin.

• 10:31Speaker 02

  There is actually a significant amount of the mining industry is probably institutions because it's a little harder to buy significant amounts of crypto, like 10 million plus amounts of Bitcoin in most Asian countries than in the US. So, you know, one reason why the hash rate is so large in China, it's like 65% of the entire hash rate is in China. It's actually not because energy costs are so low, it's because it's a way for institutions to get really significant amounts of coin and sort of virgin coins in one go.

• 11:00Anthony Pompliano?

  Got it. And so as you guys have started to invest, the teams that you're backing in the Asian market, are these kind of teams that are native to the Asian market? Do you see teams from other parts of the world kind of moving there to service this need? Kind of talk to me about the teams and what you found as you've started to invest more and more in the region.

• 11:22Speaker 02

  Yeah, usually it's people who at least grew up in these countries. It's very, very, I mean, look at Uber or Facebook, it's very, very hard for Westerners to penetrate China, less so India, but India is actually just, they just had a major Supreme Court ruling in India just yesterday. So it was sort of banned before that. But the other trend that's driving a lot of innovation to Asia is regulatory flexibility. The countries there are just much more flexible with what you can do with crypto. They sort of take a wait and see approach and sandbox approach as opposed to US regulators. And so what we've been seeing, the main trend we've been seeing is that typically everyone flocks to Silicon Valley, like YC is like the new American dream, like, you know, over

• 12:07Speaker 02

  half of the YC class is international and it's people from India and China and Singapore and so forth. And that's, that's stopped happening in crypto, really. So what we're seeing now is like, it used to be that everyone, everyone, everyone in tech like wants to do a tech startup would immigrate to the US. Now they're just sort of staying home or they're immigrating to Asia instead. I think maybe if the regulatory disparity continues to grow, we will start to see an actual migration of Americans moving to like Singapore, Hong Kong. That, that would be, that would be pretty unprecedented, to be honest, but we'll see.

• 12:41Anthony Pompliano?

  Yeah. And so then walk me through, kind of, you guys have a big focus on DeFi. Where, like, what's the thesis there and kind of why are you guys so focused on that specific part of crypto?

• 12:56Speaker 02

  Yeah, I think DeFi is a great encapsulation of, I mean, it's a great example of why, of this story of like, why so much of the adoption is in Asia. Broadly, I think, sort of my thesis on crypto is that the very early use case, it's a, you know, it's a protocol for value. And the very simplest, like, least computationally heavy form of value is just money, like Bitcoin, right? It's just a, like, a line in a database. Very simple, you don't need massive scalability to make it happen. And then, and then the other major applications of like Internet of Value is the entire financial system. So, once you have money, you can make programmable money, and you can make sort of smart contract platforms.

• 13:39Speaker 02

  And once you have smart contract platforms, you can do all sorts of things with value. You can do ICOs, which is sort of like fundraising. And you can do decentralized lending, which is like MakerDAO. And you can do decentralized lending that collateral, you could use assets as collateral to basically create an entire financial ecosystem. Because, you know, today, the major actually innovation of the, like, financial innovation of the 19th and 18th century, which tried to catalyze the Industrial Revolution, was this switch to basically turning property into capital. So, before, in like the 15th century, if you owned a house, you couldn't do anything with that house. It was just idle capital just sitting there.

• 14:21Speaker 02

  And then you had property systems, you had municipal record-keeping, you had this banking industry that allowed you to mortgage your house. And so it was easier to buy a house, and you could take, you know, take loans on it, and you could use that to start a business, or whatever you like. And so, capital that's just sitting idle under your bed, very little of the money in the world is just sitting idle. Most of it has to be used to create a financial system of derivatives and lending that's, you know, 100 to 1,000 times larger than the actual base money supply, or gold, you know, whatever, collateral supply. And so I think that's what's happening with DeFi. DeFi is basically that happening in a fully decentralized way. So you have decentralized lending, and it has all the, well, most of the benefits, it's, you know, still early, but has most of the benefits of cryptocurrencies, which is

• 15:06Speaker 02

  You know, permissionless, censorship resistant, things like that. Anyone around the world can use it, global from day one. And that's big. That's big. Again, it's not big for Americans because pretty much everyone in America can just get a credit card. And it's probably too easy, to be honest, to get like a personal loan in America, but very hard in the rest of the world. So, so the ability just instantly without knowing who you are, get a loan with putting in ETH as collateral today is really powerful in many parts of the world.

• 15:35Anthony Pompliano?

  And so if we are able to onboard all of these, you know, quote unquote, new users to a financial system, it happens to be this new financial system. To me, the most interesting part is the tertiary effects of that, right? If all of a sudden now people have access to credit, they have access to all sorts of different financial services that have previously been available in the developed world, but not in many other regions, you can really kind of propel forward human production and human development to some degree.

• 16:06Anthony Pompliano?

  And I just don't think we've seen anything like this before at this scale this quickly. Do you agree or disagree with that?

• 16:12Speaker 02

  Yeah, I mean, it's, it's remarkable. You can read a book of, of financial history over the last 5,000 years. And you can trace like every thousand years was a major, major financial innovation. Like, you know, 4,000 years ago, we invented debt and then we invented gold and other precious, I mean, not invented, but you know, we, we sort of did. We invented gold as a precious metal that became like a financial asset. And then we invented sort of a payment system that is on top of gold. And then in the 15th century, we invest, invented like joint stock corporations and a way to, you know, sort of organize organizations and fundraise for them. And then we had stock exchanges and then we had massive derivatives markets and this, it takes 4,000 years.

• 16:56Speaker 02

  And, and in crypto, we've literally built that in 10 years. So it's, it's just like this hyper fast growth of a totally parallel decentralized at this point, financial stack. Yeah, technology is great. I mean, the leverage afforded to everything being open source, everything being, you know, open APIs and so forth in crypto, the fact that it's all software leads to just tremendously fast innovation. And I think we're getting to the point in a few years where it's going to be totally new. You know, right now, we're like rebuilding existing institutions. Maker Dow is kind of like a decentralized central bank in one way. In another way, it's kind of like a decentralized pawn shop. But, you know, the most exciting things in a new technology innovation are when you get like totally

• 17:39Speaker 02

  new use cases that are not even sort of mirror images of, of, you know, it's when you get cars instead of just horse and buggies or whatever that are a little faster, you know?

• 17:50Anthony Pompliano?

  Yeah. Let's go right at it. ETH is money. This is a meme that has become very popular, especially in the Ethereum DeFi community. And really, the way that I've analyzed this or kind of, you know, evaluated is basically what ETH is money is saying is ETH is good money, right? Because if we don't say ETH is good money, then I could say rocks are money, you know, Cheetos are money, etc. But ETH is good money is really going at this idea of kind of what you talked about like collateral, right? And in these DeFi systems,

• 18:27Anthony Pompliano?

  we're seeing Ether specifically being used for certain mechanisms or, you know, products and features, etc. Let's just start with agree or disagree ETH is money?

• 18:44Speaker 02

  Well, I would say I think the sort of meme on Twitter is that ETH would like to be money. I don't think anything in crypto is money yet. I don't think Bitcoin is money. And in fact, I think Maker Dow, DAI, the stablecoin is probably the closest thing to money in anything in crypto. But I do think-

• 18:58Anthony Pompliano?

  But the market would disagree with that. Meaning that Bitcoin, from a transaction standpoint, the on-chain adjusted transaction volume of Bitcoin last year was just under a trillion dollars, right?

• 19:10Speaker 02

  Yeah, totally.

• 19:11Anthony Pompliano?

  And so Maker, I don't know what DAI specifically is. It's not zero. It's definitely popular. It's like 60%, I think of the value locked in DeFi is DAI. And so-

• 19:23Anthony Pompliano?

  That's a real amount, right? That's not anything to kind of thumb your nose at. But at the same time, we're talking about, I think there's a billion dollars locked in DeFi, right? So let's call it somewhere in the hundreds of millions of dollars versus hundreds of billions of dollars for Bitcoin. I don't think anything's even close to Bitcoin. But I will say that I've got a strong opinion that's loosely held. So hopefully, for your sake, you can convince me differently. But that's just kind of the way I think about it. It's like the market almost doesn't care about our opinions. And if you look at the data, the market's determined Bitcoin to be more of money than anything else. What do you think about that? Agree? Disagree?

• 20:02Speaker 02

  Well, I think, you know, they're all striving to be monetary assets, right? And so

• 20:07Anthony Pompliano?

  The cryptocurrencies, not anything else, just the ones that want to be currencies. That's what they're striving to be.

• 20:11Speaker 02

  Pretty much all of them. I would, I think everything in crypto is locked in a battle to be a monetary asset. With the exception of maybe some of these, like buy and burn sort of dividend kind of tokens, like MakerDAO, it's that Maker has a token that basically accrues value from DAI going up. It's called MKR and they have DAI. So maybe MKR isn't trying to be money, but DAI is trying to be money. ETH is trying to be money. Tron is trying to be money. And they're all on a spectrum.

• 20:39Anthony Pompliano?

  Tron?

• 20:40Speaker 02

  Everything. All right, go ahead. Shoot your shot, you know? Do your thing.

• 20:45Anthony Pompliano?

  Shoot your shot.

• 20:46Speaker 02

  Everyone's shooting to be money. I mean, that's the innovation, right? Like this is the cool thing about crypto, which is why it's so exciting. You know, we came from the internet. My partner too, he's a very famous VC in China, who was one of the first VCs in the internet. The thing that's exciting about crypto is that it's permissionless innovation. And it used to be like no one could create their own TV network. That was just unbelievably, like nobody thought that was possible. Look at us now today, right? Look, Ma, we did it. It used to be, you think nobody could create your own money. It's insane. It's the province of 200 governments, even really more like 20. Now anyone can create their own money. Good luck. It's not that easy. But certainly ETH is trying to be money. Bitcoin is trying to be money. They're still very far away from it.

• 21:31Speaker 02

  I think the market cap is just a sign that like it's the most valued digital asset, right? But an asset is different than money. I mean, it's not used every day as a means of exchange and so forth. Nothing really is. We shouldn't kid ourselves about that. If anything, Tether is probably the most used as a medium of exchange asset in all of crypto. I don't know if it's a strong store of value as Bitcoin. The amount of turnover in Tether is incredibly high. But like, you know, so from the way economists think about it, the three things of, you know, aspects of money. In one sense Bitcoin is much higher as a store of value. In another sense, Dye and Tether actually might be higher as a medium of exchange today.

• 22:09Anthony Pompliano?

  So my big argument this week was that ETH is no different than a fiat currency.

• 22:18Speaker 02

  Yeah.

• 22:18Anthony Pompliano?

  Now.

• 22:19Speaker 02

  That was controversial.

• 22:22Anthony Pompliano?

  And that's fine, right? I have no problem having different thoughts than people. But the one thing to clarify here is I'm going to guess 50% of people who are yelling and screaming on the internet didn't read the article, which is like a problem in society in general. That's not a crypto thing. That's just like politics, social, you know, culture, all this kind of stuff. But what I said in the article was the monetary policy of ETH makes it no different than a fiat currency, right? Meaning that there's essentially groups of people who make decisions on the monetary policy of the asset periodically.

• 23:01Anthony Pompliano?

  Now, what I will say is a positive for the ETH is money crowd is that every time that they have made the decision, they have made it in what many people would consider the quote unquote right direction, right? Meaning that they have decreased the supply of money. And so that is good in the sense of they're not going the opposite direction like a true fiat currency would. But structurally, the fact that this group of people can make that decision and it could go up or down, it's not kind of pre-programmatically decided. In my opinion, makes it no different than a fiat currency. Agree, disagree, think I'm an idiot.

• 23:42Speaker 02

  Yeah, disagree.

• 23:43Anthony Pompliano?

  Disagree, alright.

• 23:44Speaker 02

  The reason is because...

• 23:45Anthony Pompliano?

  Well, at least you didn't think I was an idiot, so that's a start.

• 23:46Speaker 02

  I read the article too. I did read it, and I didn't trash talk you on Twitter. Yeah, no. So, uh, disagree because I think, you know, certainly Bitcoin is ahead in that it has the most decentralized and sort of stable social consensus around its monetary policy. That's amazing. That's the best thing about Bitcoin today, probably, by far. You know, it's not leading in like technology or scalability or privacy, but it's got maybe arguably the most important thing, which is sort of this inbuilt scarcity. It's hard to fork that out. The problem with that, though, is, uh, and this becomes a bigger problem with, with sort of new consensus protocols and so forth, is, um, ultimately, these networks have to be secure.

• 24:29Speaker 02

  Right? And the monetary policy is the security of the network. Right? And there's the biggest, uh, way that Bitcoin could fail today is, um, if the, when the, uh... Basically Bitcoin, Bitcoin is secured by two sort of cash flows, um, uh, the, the security of it by mining. So the first is by block rewards, and the second is by a small fee that everyone pays to miners when they make a transaction. And a lot of the sort of simulations today of what happens if there are no block rewards, if it's zero, and if it's all just transaction fees, is that there will be serious, uh, security risks, and it'll be much easier to attack the network and it'll be less stable. So...

• 25:11Anthony Pompliano?

  Well, just, just interrupt for a second. To be clear, that's expectations or predictions of what's gonna happen in 100 years, 120 years, right? 2140.

• 25:21Speaker 02

  There's more like 20 or 30.

• 25:22Anthony Pompliano?

  Uh, 2140.

• 25:22Speaker 02

  As the way the halving is going.

• 25:24Anthony Pompliano?

  2140 is when the last Bitcoin will be mined, right? Give or take.

• 25:29Speaker 02

  Yeah, but it gets progressively, I mean, as you get down to 3%, 2%, 1%, where are we now? Two and a half or something?

• 25:36Anthony Pompliano?

  I don't know, yeah, something.

• 25:37Speaker 02

  I mean, the lower it goes, the sort of exponentially more difficult it gets. And in fact, we wrote, my colleagues, we have like a fairly large research arm. We did an analysis of, uh, of how this relates to DeFi. And in fact, if, uh, you have this issue... Where if the lending rate, if basically the risk-free rate of lending out Bitcoin or Ethereum becomes significantly greater than the mining rate, this is actually a much bigger issue for proof of stake because you don't have to buy mining equipment and it's just a decision of whether you stake your asset or you lend your asset out. It leads to disastrous consequences because people won't stake and they'll mine and they'll lend it out instead. So that's not as applicable to Bitcoin, but it is applicable to Ethereum

• 26:22Speaker 02

  and any other proof-of-stake asset. So I understand why Ethereum is doing this. They have to understand that, and they do understand that, especially if they move to proof-of-stake and new alternative mechanisms, the monetary policy has to be flexible for security reasons. I mean, what's going to happen if Bitcoin, even 20, 30 years from now, is insecure and it's easy to attack? Will the social consensus of scarcity and the fixed monetary policy kill it? I don't know. I mean, that'll be a major decision for the Bitcoin community.

• 26:58Anthony Pompliano?

  For sure. So going back to the idea that ETH is money, and it's no different than a fiat currency, why do you believe it is different than the fiat currency? And really, my thought process was when you outline, how is the monetary policy decisions and structure of a fiat currency decided? ETH looks very, very similar to me.

• 27:23Speaker 02

  Yeah, I think we're all on a spectrum with fiat currencies because we're all creating our own central banks here. The main innovation in crypto, where anyone can create their central bank, is crypto is all about incentives. So the problem of central banking, the fundamental problem, is there's two target goals that the Fed and all Feds tried to hit. One, reduce inflation to create a stable currency. That increases economic output and so forth. But two, reduce unemployment. And those two things, and then also the third is that's sort of secret, but is also important. And it's sort of tied to the second is you get access to seniorage.

• 28:07Speaker 02

  And you get to basically like you get an unlimited amount of spending if you're the government. You could sort of print your way to freedom, at least for a few years in the short term. And these trade offs.

• 28:17Anthony Pompliano?

  Don't tell, don't tell them that.

• 28:19Speaker 02

  They know, you know, look at, look at Trump's tweets, look at how Powell is reacting to Trump's like Powell was much more conservative. Before he became the Fed chair than after.

• 28:29Speaker 02

  It's sort of inevitable, like we try to create these mechanisms of church and state to separate the central bank from the government. And often they work for a few decades, but no currency has remained stable for more than a hundred years.

• 28:42Speaker 02

  So these basically, this is an incentive problem, like these three things conflict with each other all the time. And there's governments have every incentive to sacrifice inflation for to juice unemployment or to spend more money, especially in election years. Right?

• 28:59Speaker 02

  But Bitcoin and Ethereum don't have that. Okay, there's no like concept of unemployment rates that need to, you know, if like your monetary policy goes up and down. And it's miners that get the seniorage and the miners today don't really have much influence or say in the in the sort of social consensus of making these monetary policies. So in that sense, ETH is a great improvement. Really, the only thing ETH today is sort of the only lever, the decision that is affecting their monetary policy. Is one, everyone wants to be lower. And then two is security. And that's cool. I think the trade off between, you know, we're incentive to increase security of the network in this cryptographic way. That's a much cooler trade off than we're incentivized to juice the economy whenever it's an election year.

• 29:42Speaker 02

  That's still a quantum leap ahead of all other fiat currencies.

• 29:46Anthony Pompliano?

  Yeah, so just so people understand Ethereum is the, obviously the network, there's Ether, the asset. And the monetary policy of Ether is something called a minimum issuance. And the minimum issuance is basically, is it every year? How often is the decision made?

• 30:07Anthony Pompliano?

  I don't know. Okay, so periodically, they basically make a decision as to the rate of issuance that will occur until the next decision. And so, again, kind of a positive argument for ETH is that they have decreased that every time. So it has acted similar to Bitcoin in that the Bitcoin halving. Yeah. The two fundamental issues that I have is so fiat currencies, I basically outlined three things. So there's no fixed supply, there's an inflationary supply schedule, and the monetary policy decisions are divided, are decided by a group of people. Right? So no fixed supply, inflationary monetary schedule, and the decision as to that rate is decided by a group of people.

• 30:47Anthony Pompliano?

  If you look at ETH, there's no fixed supply, it has an inflationary monetary supply or a schedule, and it is decided by a group of people. Now, when you use that framework, which is a framework that, you know, in full transparency, I made up, right? It's pretty good, I like it. Then you can apply it to ETH and fiat, and they look exactly the same. In comparison, if you were to put Bitcoin into that, you would say that Bitcoin has a fixed supply, so it doesn't meet that first criteria. Now, it has a disinflationary supply schedule, meaning that there is an additional increase in supply every year, every day, etc. It is programmatically declining in time.

• 31:31Anthony Pompliano?

  Ethereum has done the exact same thing, so it's been disinflationary over time, but the difference is that Bitcoin is programmed to continue to be disinflationary, Ethereum could step in and say, hey, there's security concerns, and so therefore we are actually going to increase the rate rather than decrease it. And then the third is that the monetary policy decisions are decided by a small group of individuals. A big difference between Bitcoin and Ethereum, for example, is that there is a preset monetary policy with Bitcoin that is programmatic, and there is the possibility that people could come together with majority and change that monetary policy, right? That's kind of the social consensus you're talking about, etc. The difference is with Ethereum, that is not a preset programmatic monetary policy,

• 32:16Anthony Pompliano?

  right? And so there's kind of these periodic decisions that need to be made. Now...

• 32:21Anthony Pompliano?

  One, am I absolutely crazy for kind of evaluating it this way and using that framework? Or how do you kind of think through that framework as what's good, what's bad? And kind of what did I miss?

• 32:34Speaker 02

  No, I think it's good. I think the thing you're missing a little bit is that it's all a spectrum. There are, it's like, there are people at the end of everything. It's turtles all the way down.

• 32:46Speaker 02

  So Bitcoin is clearly optimizing for being as little controlled by people as possible. This is like Nick Sabo, sort of inventor of smart contracts, has this concept of like, there's dry and like wet code, you know? And wet code is messy and involves people and lawyers and so forth. Dry code is automated. And automation of like, of decision making is the, it's like the bedrock of capitalism and our industrial engine. So it's great if you sort of automate away the decision making about how you change the monetary policy. If that's what you're optimizing for, if that's what you think is the best thing that creates the best money supply or the best store of value. I think that's possibly the case, probably.

• 33:33Speaker 02

  But Ethereum is optimizing for other things, which is that Ethereum is fast moving relatively. I mean, it's taken a long time for ETH 2.0 to come, but it's fast moving. It's dynamic. It's more, it's like, it's up, the other things that make something a good digital asset, money supply, like having built in privacy or having scalability, whether at the layer one or layer two, having programmability, like being able to allow a decentralized financial ecosystem to exist natively in a trustless way, tied to your currency and in your ecosystem is very powerful. It's why, you know, almost all of the collateral behind decentralized finance is ETH. It's not Bitcoin yet because it's hard to do in a trustless way.

• 34:17Speaker 02

  So those things could make something a better money in a way. And having your monetary policy be decided by a group of people and be more flexible.

• 34:28Speaker 02

  Is a requirement if you want to optimize for that fast, you know, for moving fast and and being dynamic. So it's trade offs, right? Clearly, the market today values that the Bitcoin trade off is the best. But actually, like you and I, we're pretty sure like the crypto ecosystem will be in the trillions in the next 10, whatever, how long it takes. So actually, the market is really telling us that the real solution has not been found. Like, there's something missing, you know, like, there's a, you could kind of think of it like 5 trillion is like at max capacity, maybe, right? Like, when when crypto becomes a true store of value. So Bitcoin is what 200 billion? So it's like a 4% chance, or no, sorry, 40. Yeah, 40% chance, wait, yeah,

• 35:12Speaker 02

  4% chance that it becomes big, that the Bitcoin of today is the store of value of the future, right? That leaves a lot of room to open.

• 35:20Anthony Pompliano?

  But you could also flip that and say Bitcoin's dominance is at 60, 65%, and therefore, the market determines there's a 65% chance that Bitcoin is the winner. Right? Out of all of the options today, there's a 65% chance that Bitcoin is the winner versus everybody else.

• 35:37Speaker 02

  Yeah, but I mean, that's not the real, it's like, the real market size of crypto isn't what crypto is today. It's cool. Like, most people still think it's gold, right?

• 35:46Anthony Pompliano?

  Okay.

• 35:47Speaker 02

  Yeah, you know, like 90% of the people still think it's gold.

• 35:49Anthony Pompliano?

  Yep. So it's called 7 trillion or so.

• 35:53Speaker 02

  Yeah, yeah, right. So, uh, but yeah, Bitcoin is in the lead, clearly. The market determines these things.

• 35:59Anthony Pompliano?

  So here's my other argument is that, and to be very clear with folks, I am actually a fan of what Ethereum empowers people to do. There's a lot of innovation that's going on, a lot of experimentation. I think that stuff is super important to kind of the health of an entire ecosystem, right? I am not, and when you ask about the maximalism, I am not of the belief that Bitcoin is the only thing that will ever be valuable, you know, period in this entire world, mainly because I come at it from the sense of the entire financial system is going to get rebuilt in parallel, and therefore, it would be like saying, You know, the US dollar is the only thing in the financials. No, there's credit, there, you know, there's all assets, there's all kinds of other stuff that goes on.

• 36:43Speaker 02

  And they're mutually reinforcing.

• 36:45Anthony Pompliano?

  Yeah, exactly. And but yeah, they make the dollar more important, more valuable, etc., right?

• 36:49Speaker 02

  Yeah, because we have such an advanced financial system.

• 36:51Anthony Pompliano?

  So if you think of the dollar as that base unit of account, I believe personally that Bitcoin will be the base unit of account of this future world. There'll be all kinds of other stuff that are built, but Bitcoin, because it's that base unit of account as money, it ends up being the most important, right? Because it's kind of the foundation. But there's a bunch of other stuff that is important that gets built. Ethereum today is helping to empower some of that to be built. And let's take the DeFi sector, for example. When you have decentralized financial products, you need to have some form of money, right, that is used in these products. The difference here is that while some people are using ETH, the most popular one in the Ethereum ecosystem is not ETH, it's actually

• 37:32Anthony Pompliano?

  DAI, right? And DAI is ERC20 token, and you get through the whole thing, but it is fundamentally different. On top of that, what you're seeing is teams work to bring Bitcoin and its monetary policy properties to Ethereum with TBTC, etc. And so, again, I go back, like, my opinion doesn't matter, your opinion doesn't matter, frankly, the market's opinion is what matters. And the market is determining that in even just the DeFi world, there is something better than ETH as money, right, meaning DAI. And also, there are teams that are going out to search, how do we bring the monetary policies of Bitcoin to this ecosystem?

• 38:12Speaker 02

  Totally.

• 38:13Anthony Pompliano?

  Let's stop there for a second. Agree, disagree? Is that the right way to look at it? Do you look at it a different way? Just walk me through that type of the analysis.

• 38:22Speaker 02

  No, totally. It's, um, I would, I think, like, I would re-fame DAI as money, not ETH as money. ETH is collateral, ETH is gold. Gold is not money, you know? It's been many years since anyone's used gold as money. So, which is fine, like the monetary-

• 38:36Anthony Pompliano?

  Don't tell Peter Schiff.

• 38:38Speaker 02

  But again, like, I like, I like the dollar, I like stability. Uh, I think the greatest crypto is about financial access, really. And, uh, the most wanted financial asset around the world is the dollar. I mean, you have these stats where like 90% or like some massive percent of all hundred dollar bills or all bills in general is outside the US. Like, it's just so many percentage of countries are fully dollarized at this point. So just bringing the dollar to the world and bringing sort of the, the Fed's central banking policies to the world, that I think is where the next stage of growth in, in, in crypto is happening. Absolutely, you know? I don't think there's any doubt about that in my mind. So I'm sort of a stablecoin maximalist in a way, when it comes to what is money. I think stablecoins will be money, at least for the next few decades.

• 39:22Anthony Pompliano?

  Stablecoin maximalist, I haven't heard that before.

• 39:25Speaker 02

  Heard it here first. No, I don't, I haven't, I didn't invent it, but, uh, and so what that means is, uh, the asset that collateralizes the stablecoin is gonna be very valuable too, through a sort of weird chicken and egg loop, though. And it's just like gold is very valuable because it's the largest, you know, it's one of the largest stores in, uh, in central banks, you know, on balance sheets.

• 39:48Speaker 02

  So, uh, you know, the, the problem with Bitcoin and DeFi is that it's not programmable, so you can't have DeFi on Bitcoin. You just, I mean, there's a few initiatives with sidechains.

• 40:01Anthony Pompliano?

  I disagree, but go ahead.

• 40:02Speaker 02

  Well, I mean, clearly that's true today.

• 40:04Anthony Pompliano?

  We'll talk, I disagree, but go ahead.

• 40:06Speaker 02

  All right, sure. But today, okay, I mean, it's very, it'd be so impossible to remake MakerDAO or Compound or something on Bitcoin natively.

• 40:17Speaker 02

  There's no trustless way to put Bitcoin, port Bitcoin onto, uh, the DeFi ecosystem. There's trusted ways to do it. Uh, there's wrapped Bitcoin, where some trusted entity, right? BitGo has one, um, some other exchanges are thinking about doing one in the next few months. Uh, they basically just put Bitcoin in, on chain and they show proof of reserves and they issue, um, like a synthetic Bitcoin that's back, but just like Tether or something, really. Uh, or USDC, and, uh, they have like no traction at all. Uh, it's like a couple million dollars is, look, is in the, is in those assets. So clearly, I, I didn't, like, a priori, I wasn't sure that would be the case. It seemed like, why would people use Tether? Why wouldn't they want to use a centralized wrapped Bitcoin?

• 41:04Speaker 02

  But this is the market's decided at this point. So we're waiting for trustless Bitcoin. That's really, really hard. I've invested in a bunch of technology projects that will enable that, like Cosmos and you have Polkadot interoperability chains. You have what Keep is doing, which is fantastic, but there's trade offs. None of them are technically proven to be technically secure yet. They're costly, like they're not very capital efficient. You have to like lock up. I don't know what the latest is, but you have to sort of over collateralize and keep your uh with both Bitcoin and ETH. So that's kind of weird. Like, why would you want to, if you're using, if you want to get a synthetic Bitcoin, that probably means you don't really want to hold ETH, but you have to hold both for security reasons anyway. There's a cost to that. So clearly today, that's sort of the ETH game, which

• 41:48Speaker 02

  is can you be collateral for a financial system that is literally like a thousand to 10,000 times bigger than the base financial system. We know that from just looking at the, you know, the ratio goal to derivative market cap or something like that. And that's ETH's big play.

• 42:03Anthony Pompliano?

  So there's this framework that I had and we will, I'll describe it for those that are just listening or watching at home. So basically, on the left side, you have Bitcoin, on the right side, you have Ethereum, right? And around both Bitcoin and Ethereum is the infrastructure for those ecosystems. And so the way I think about it is Bitcoin is sound money, right? And the principles that are around that. But all of the infrastructure historically has been centralized infrastructure. So this is when you see the Coinbase, the BlockFi's, etc. of the world, right? So kind of sound money surrounded by centralized infrastructure. When you go to the Ethereum side, what you get is decentralized infrastructure

• 42:48Anthony Pompliano?

  with an asset that has, is unproven to be sound money today, right? So kind of think of, I think the ideal world here is how do we have sound money with decentralized infrastructure, right? And so you had these two different worlds. Each piece has a part of that like utopia, and we've got to bring them together. Now, that brings the debate of, do you bring Bitcoin to Ethereum, which you kind of just described with TBTC, etc. and these wrapped, etc. Or can you actually bring decentralized infrastructure to Bitcoin? Right? I can't yet announce the name of the company, but I'm sure you've actually seen the company. We invested in a business that is essentially going to bring the lending capabilities of DeFi to Bitcoin. Right?

• 43:31Anthony Pompliano?

  There's other teams that are working on other aspects of it. Do you think that the obstacles today to having sound money in Bitcoin with truly decentralized infrastructure around it? Are those technical challenges that can't be solved? Are those what I call time and attention? Meaning that we haven't had enough teams working on them yet. It just hasn't for long enough to actually get these solutions? Or is there something else that has prevented us from having that kind of full stack integration with sound money and decentralized infrastructure?

• 44:03Speaker 02

  Yeah, I mean, this is

• 44:05Anthony Pompliano?

  This is like the trillion dollar question.

• 44:07Speaker 02

  This is also the thing that makes most maximalists very uncomfortable to talk about, which is Bitcoin has not innovated in a decade. And

• 44:15Anthony Pompliano?

  Is that a bad thing?

• 44:16Speaker 02

  Depends what your perspective is. It's certainly a bad thing for developers and for app makers. Like, imagine if I mean, developing in the 1980s was way harder than being a developer now. The languages were way more difficult to learn. They were like, assembly code. The developer toolkit was way more difficult. It was so imaginably more like, more difficult to create software and product, you know, software products in the early days of the, of the internet when there was less tooling and libraries and so forth. And that's where we are with Bitcoin and we haven't moved.

• 44:55Speaker 02

  So now it's way easier to do it on Ethereum. It will always be continually, continuously way easier. And in fact, the spread will probably increase. So you're, you kind of have to like, I mean, yes, it's technically possible, I think, to do scalability and to create a pretty good, okay, programming environment that can maybe do like lending in Bitcoin. Maybe, you know, the project you backed is, is the one that's going to crack it. But ETH is flexible. It's moving, so it's always getting better and better. It's creating JavaScript when, you know, Bitcoin is still trying to get. I don't, what's that old?

• 45:29Anthony Pompliano?

  But here

• 45:30Speaker 02

  C sharp.

• 45:30Anthony Pompliano?

  But I think this is one of the key, the key things, right? Is, and this is where the Bitcoin crowd heavily, heavily disagrees with kind of the Ethereum crowd, I think.

• 45:42Anthony Pompliano?

  The Bitcoin crowd would argue all of that development and speed and experimentation, etc., are actually flaws, not advantages, around one specific perspective.

• 45:57Anthony Pompliano?

  Money, you get one shot. And so on a spectrum between like what I call like sexy innovation, etc., and confidence level of sustainable store value medium of exchange on that spectrum, Bitcoin is as far to the confidence side as you can get. So it's very slow. It's very intentional. It's very much thinking through, we have $200 billion, give or take, in this asset. We can't fuck this up. All of the innovation, experimentation, etc., that's all great, but it can't happen at the expense of screwing up that core base unit of account. Now, I think Ethereum, what ends up

• 46:39Anthony Pompliano?

  happening is the speed, the innovation, etc., that crowd actually looks at that as an advantage, right? So they say, look, you've got to move, you've got to innovate, you've got to do all this kind of stuff. They're optimizing for two different things. And I think what ends up happening is if you wanted to compare ETH as money to Bitcoin as money, right? I think most people would argue the Bitcoin argument in that specific perspective is probably much stronger than the ETH one. Now, when you go to the infrastructure side, the innovation, the sexiness, all the shiny stuff, etc., the speed, innovation, experimentation, all that is a much better way to look at infrastructure, right, than the actual base unit of account.

• 47:19Anthony Pompliano?

  And so that's where I actually think it makes sense to me, at least, and again, I'm hyper biased in all of this, that the developers would run into Ethereum where there was the possibility and empowerment to do all of that innovation around infrastructure, etc., leave Bitcoin to be built slow, methodically, intentionally, etc., how it's been built, and then eventually you'll see those developers migrate over and build that same infrastructure that they did all the testing and experimentation in Ethereum to build that around what ends up being the sound money. It's almost like the sound money is a magnet for the infrastructure, but all of the experimentation is empowered on Ethereum. It just eventually, like the things at work come to Bitcoin.

• 48:00Speaker 02

  Yeah.

• 48:00Anthony Pompliano?

  And I know all this is hyper, hyper, hyper controversial. People will literally be freaking out that saying I'm an idiot, etc. That's just my perspective.

• 48:08Speaker 02

  I mean, these are complex systems and we're sort of like, you've made like six assumptions, you know, that we just don't know. It'll take a few years to figure out, like, technical risk, what, uh, but yeah, look, I think, I think it's possible, but clearly today, you know, the other story, let alone Bitcoin, uh, DeFi hasn't moved to any other ecosystem. It hasn't moved to EOS, it hasn't moved to Tezos or Algorand or anything like that. ETH is just controlling the narrative and controlling the, uh, like almost every good DeFi project we back. Good team, or even team that we look at is building on Ethereum. It'd be sort of nonsensical to not at this point in time, from a business perspective. So you have network effects there. Um, so you have to think, are the network effects

• 48:51Speaker 02

  and developer community and so forth, strong enough that you can sort of bootstrap ETH into a stable store of value? Um, stable is a rough word in all of crypto.

• 49:00Anthony Pompliano?

  So you're talking about almost like inversing it, whereas the Bitcoin argument would be, you start with sound money, then you build all the infrastructure, the derivatives, other layers, etc.

• 49:07Speaker 02

  But you have to, you start with sound money, but your infrastructure is always going to be significantly worse. I mean, at least 10 years behind, maybe more. Today, it's 10 years behind, or five, I guess, since DeFi's sort of five years old.

• 49:20Anthony Pompliano?

  Hold on, though. Here's the difference, though. The infrastructure around Bitcoin is 1,000 times minimum more popular and more robust than ETH. The difference is that the ETH infrastructure is decentralized. Like, if you compare decentralized infrastructure on ETH to decentralized infrastructure on Bitcoin, you're correct. If you compare just infrastructure, Bitcoin has a head start and won't get caught, right? Because all of the Ethereum infrastructure, the Ethereum specific infrastructure, is specifically going after this decentralized opportunity. But like Coinbase

• 49:52Speaker 02

  Yeah.

• 49:53Anthony Pompliano?

  is originally Bitcoin infrastructure, right? BitGo is Bitcoin infrastructure, right?

• 49:59Speaker 02

  But by the way, they've been co-opted by, I mean,

• 50:02Anthony Pompliano?

  They expand, absolutely.

• 50:03Speaker 02

  The purest, the Bitcoin only, I mean, the ego system you're talking about, exchanges, custodians, market infrastructure on all ramps. That's, there's almost none of those that are just for Bitcoin, yet. Now Bitcoin has much more liquidity, of course, much more pairs. But actually ETH is doing a pretty good job, even X.

• 50:19Anthony Pompliano?

  They're not at zero.

• 50:20Speaker 02

  Doing a pretty good job.

• 50:20Anthony Pompliano?

  Yeah, I'm not, again, I'm not a maximalist in the sense of like, they're just one.

• 50:25Speaker 02

  Like Zappo and the original companies that were only Bitcoin, they've lost in the market. Coin, I mean Coinbase got a lot of flack for when it launched a bunch of additional coins, but they're the market leader and they're the monopolist at this point. That's the way to do it. So actually, a lot of that infrastructure is there, obviously more infrastructure is there for Bitcoin, of course.

• 50:43Speaker 02

  But my point is that you need to be decentralized, right? Because if you just, just because you have a decentralized store of value, doesn't mean, like, if you then give it to a lender or whatever, if you then lend it out in a centralized way, you lose 95% of the benefits of it, you know? You lose a decentralized, you lose a lot of the privacy, you lose a lot of the censorship resistance. And that's important. I think that's important, up the stack, just like it is at the base.

• 51:08Anthony Pompliano?

  So from a theoretical perspective, I agree with you.

• 51:11Speaker 02

  Yeah, yeah.

• 51:12Anthony Pompliano?

  Right?

• 51:14Anthony Pompliano?

  There's two points that come into play now. Do we go from a centralized infrastructure around Bitcoin and those companies can decentralize over time? Maybe. I don't think we know that answer yet, right? And there's plenty of people who will pontificate on whether that's true or not. The bigger thing, though, is how much of the DeFi infrastructure do you actually think is decentralized?

• 51:35Speaker 02

  Yeah, it's a good question.

• 51:36Anthony Pompliano?

  I don't know, I don't know the answer, and I actually don't even know if the answer's bad answer for the DeFi community. I just, like, how do you even figure that out?

• 51:43Speaker 02

  Yeah.

• 51:43Anthony Pompliano?

  Right? Because it can't be 100%, but it's also not 0%.

• 51:47Speaker 02

  Yeah, absolutely not. No, it needs to become more decentralized. There's a lot of sort of.

• 51:53Speaker 02

  Governance decentralization infrastructure that has to happen on the Ethereum community in DeFi right now. Like, how do you make a DAO, decentralized autonomous organization, work at scale?

• 52:04Anthony Pompliano?

  Which will, which if those work-

• 52:05Speaker 02

  How do you make oracles work in a decentralized way? That's very difficult.

• 52:07Anthony Pompliano?

  Yeah.

• 52:08Speaker 02

  Those are big challenges. They're technical risks.

• 52:09Anthony Pompliano?

  Like, something like a DAO, to me, if you can make it work in a secure, predictable way that people have confidence in, it would be massive. It would be incredible. It's just, we got a lot of work to do to get there. And I think that you're saying the same thing, right? Of just like, this stuff is really, really hard.

• 52:26Speaker 02

  Totally.

• 52:27Anthony Pompliano?

  It's not gonna happen overnight. And so, that's why we need as many people working on it as we possibly can.

• 52:32Speaker 02

  Totally. But I do think there is benefits to centralization at the beginning. Significant. And I think most-

• 52:37Anthony Pompliano?

  Okay, explain that.

• 52:39Speaker 02

  So you're building complex software. And the more complex it is, the more you need, like, you know, a corporation is the most authoritarian and centralized. Democracy, or like a republic, form of government for a corporation would be nonsensical. Like, you need to have an authoritarian, top-down structure that's at least somewhat hierarchical. And, you know, Silicon Valley is less hierarchical, whatever. But it needs to be pretty hierarchical in order to ship fast and have secure code and respond to customer demand and so forth. So, I think, you know, we've seen this trend where most of the DeFi projects, they start pretty centralized. And they're equity investments. And, you know, they have corporations or foundations

• 53:24Speaker 02

  that have sort of hierarchical, they're built, they build software the way that Microsoft built software. And that's good, because Microsoft builds good software. But over time, they will decentralize. So Compound actually just released its token, or announced it released its token a few weeks ago. It's just to existing shareholders like us. Compound is the second biggest or so. It's one of the biggest decentralized finance projects. It's basically a money market on Ethereum. It's actually one of the most sophisticated, probably, working DApps today.

• 53:53Speaker 02

  And yeah, they just released a token. And so they're moving gradually towards decentralization. I think that's great. I mean, there might be a period where the company dissolves. There might be a period where the CEO is no longer involved with it. I think that's possible. It's hard, of course, but this is a community of decentralization. And like all things start, I mean, most things start centralized and decentralized over time. Like Satoshi, very centralized at the beginning, of course. And then, I mean, even, I like to, like, look at George Washington. You have to have a moment where George Washington leaves and sort of like gives it up to other people. But it's fine if it takes eight years to get there, right? Actually, that's probably the golden number. If you look historically of like how democracies form, which is a form of political decentralization.

• 54:35Speaker 02

  Usually you have a ruler that rules for like 10, 20 years, sometimes less. Like George Washington, the first one is this guy Solon of Athens. We don't have to talk about that. They all like institute democracies and they rule for 10 years to make sure things go okay. And complex systems get adapted and institutionalized. Then they peace, you know, they leave, they travel the world, they go anonymous like Satoshi. I think that's probably a good model. It's like a 4,000 year old model of decentralization. It probably applies here.

• 55:03Anthony Pompliano?

  I've never heard anyone describe it that way. I love that.

• 55:05Speaker 02

  Yeah.

• 55:05Anthony Pompliano?

  What, um, what are other areas that you guys are excited about and looking for investments? And think are going to be big over the next kind of three to five years?

• 55:14Speaker 02

  I think outside of DeFi, which is, it's, it's kind of cool now. We were in it before it was cool. You know, we've been doing it for five years. It's great that like, there's a, when you see like people on LinkedIn have in their bios like DeFi influencer or like, then you, it's kind of like, it's a good, it's like, okay, this is a thing now. Which is starting to happen. But it doesn't matter. It's still very early, I think, when you think about the market size of like store value and so forth. Other things, we love looking at the Asia centralized infrastructure. I think that's fascinating too. You touched on this point that actually maybe the centralized infrastructure can become decentralized. You're seeing amazing business model innovation around that happening in like Greater China, Asia,

• 55:59Speaker 02

  with, for instance, the things Binance is doing with Binance Chain. Binance Dex, Binance Token. Now the other, the other big exchanges like OK and Huobi also have their tokens and their chains as well. That is very cool. That you're starting from the most centralized thing. I mean, an exchange, it's a company, right? It's the most centralized thing possible in the, in the crypto ecosystem. And they're trying to decentralize over time. And that is a very cool pro. I think it'll take years and years. But watching that happen is fantastic sort of application level innovation. And the coolest, I mean, a lot of what we do here is very infrastructure, you know? But it's, this is the coolest like application level infrastructure or application level innovation happening in crypto right now.

• 56:40Anthony Pompliano?

  How have you historically split dollars between Asia and non Asia? And then will that, those percentages change, you think, over the next couple of years?

• 56:50Speaker 02

  Yeah, the way we think about it is less Asia versus non Asia. We think crypto is global, global from day one. Global user base. The big trend is the tech, best technology, sort of tech infrastructure is in the West by far. And then the best business model innovation, the best centralized infrastructure, at least by fastest growing. And I think sort of qualitative factors like most innovative designs and so forth. And the best business model innovation is in the East. This is broadly true outside of crypto too, by the way. I mean, all the AI and sort of like semiconductors and low level technology, they're all, you know, they're all happening in the US. There's a push for that to change, of course, a lot of, a lot of China, Chinese dollars going towards changing that.

• 57:34Speaker 02

  But they almost all start in the US or, you know, Israel, other like sort of very tech hubs. But the best business model innovation happens in Asia. Like WeChat is vastly superior as a messaging and sort of social media and like all purpose app than the American app. Just blows it out of the water. And, and so, yeah, and even like, you even see this in, in other like.

• 57:58Speaker 02

  Like in the O2O industry, marketplace businesses, you know, Uber and Lyft, they still have not figured out unit economics. They lose billions of dollars. The only profitable at scale marketplace business, this is like a $250 billion, it's the size of crypto, you know, industry, is Metooon, which is like an 80 billion dollar company and they're, they're very profitable. They're suited to do food sharing and, and ride sharing in Asia. So it just, it just blows it away. Anyway, so I got a little diverted, but, but generally that's kind of how we think about it. Like a lot of the, almost all of our venture investments at this point are in Asia, backing these sort of centralized companies. And most of our technology investments and core protocols are in the West.

• 58:40Anthony Pompliano?

  Yeah, it's fascinating to kind of hear you break down not by geography, but also by what type of investment per geography. What is an area that you think people are excited about right now that they are actually shouldn't be or they're missing the boat? Like, like, like there's something that's driving attention, capital, excitement, but maybe isn't as, there's, there's not as much meat there as, as people want there to be.

• 59:05Speaker 02

  Yeah, the big thing, I don't know how popular this is anymore, but I know you liked it a lot, so I'm going to say it, is security tokens. I think are sort of missed the mark. I think we're sort of starting to see that. I'm curious what you think, but, um, you know, the idea of tokenizing everything is something that I actually do agree with. I think synthetic assets will be, like I said, I said, you know, the biggest impact of crypto over the next decade, the next group of crypto users will be people that are using it to get access to the dollar. So that is a synthetic asset, stablecoins. But, um, but I think security tokens, doing it in a centralized way, um, doing it for real estate and, you know, even for dollars.

• 59:46Speaker 02

  I mean, stablecoins is that there's like, there are security tokens which are centralized and they're fully backed reserves and they're centralized custody. And then there's decentralized stablecoins like DAI. And I think the latter group will blow the former group out. And, um, and so, yeah, does that count? That's my big, I'm pretty negative on security tokens.

• 1:00:04Anthony Pompliano?

  I would argue that, um, I would argue that some forms of security tokens are bigger than all of DeFi combined already. So like, take Figure, right, which company that we've invested a bunch of capital on the board of. They've done over a billion dollars in digital, uh, Helocs.

• 1:00:26Speaker 02

  What is HELOCs?

• 1:00:27Anthony Pompliano?

  A home equity line of credit.

• 1:00:28Speaker 02

  Okay, oh yeah.

• 1:00:29Anthony Pompliano?

  Then they've moved into student loan refinancing, mortgage refinancing, et cetera. They don't use the name, security tokens, right? They don't talk about blockchain this or blockchain that that often. But what they've essentially done is they've digitized or tokenized a mortgage, right? And then with the, in order to transact those assets with other parties on Wall Street, they had to basically rebuild the settlement layer, right? So DTCC settles traditional assets in kind of legacy world. They rebuilt DTCC on a blockchain they call provenance. And now they take these digitized or tokenized assets and they sell them through this new blockchain-based settlement system.

• 1:01:12Anthony Pompliano?

  They've actually done more HELOCs than all the value locked in DeFi today. Right? So here's the, the difference. I agree with you on the people who run around and kind of pound the table and say like, we're a security token company. That's going to be really hard business, right? Doesn't mean that they can't be successful, but it's just going to be really hard business. The people who instead say, I'm going to help you buy the same asset from the same counterparty in a digital format, much easier business and much more likely to be successful. And so where I've come out on this is I believe that every asset, every stock bond currency commodity will be digitized in the future or tokenized. The difference is, one is not going to happen overnight, obviously.

• 1:01:56Anthony Pompliano?

  But two is, we're not going to talk about them as tokens, like crypto tokens, et cetera, because the social ramifications of doing that in conversation with the legacy world, they just, that they're like, uh, was it repealed, right? They just like, they just shudder the second that they hear tokens. If you go to a Wall Street bank, et cetera. So instead now what you're seeing is people just describe them as something else, you know, digital HELOCs, digital mortgages, et cetera. And that's actually really, really big and getting bigger. And so to me, like, that's where we end up. But it's the same end game of every stock bond currency and commodities digitized. Your point about stablecoin is just the digitization or tokenization of cash, right? Is a good example.

• 1:02:40Anthony Pompliano?

  And I think we're going to see that across real estate and everything else.

• 1:02:43Speaker 02

  Yeah, I think.

• 1:02:46Speaker 02

  We should step back a little bit and say, what are blockchains useful in the early days? And I think there's some uses where generally, I also, so let me, this reminded me, I would also add, the entire category of enterprise blockchain are things that totally overhyped and don't make any sense for the next 10 years or so. And the reason I say this is because generally with new technologies, they're not very scalable. I mean, crypto is where, like pre DSL, pre modem era, levels of scalability. So they're not very scalable. They don't work very well. They're not very secure. And so generally, they work best when they enable new use cases as opposed to when they enable

• 1:03:29Speaker 02

  operational efficiencies. Like you look, just yesterday, Atrium went, you know, closed up. Atrium was, they raised $75 million from all the best VCs to, and their thesis was, let's use software to make a law firm much more efficient.

• 1:03:47Anthony Pompliano?

  Based on tech, tech-first law.

• 1:03:48Speaker 02

  Yeah, yeah. And you said that was a bad idea. Turns out actually,

• 1:03:55Speaker 02

  even where like 30 years after like soft, whatever, software revolution started, we're still not at the point where a tech-first law firm is that, like unlocks that much more operational efficiencies than just a normal law firm that has a bunch of old people that are using like 20-year-old Microsoft Word or whatever. So that's 30 years in, right? So I think the idea that.

• 1:04:21Anthony Pompliano?

  But let me just clarify one thing. Those law firms only exist still today because they do use technology. They do use that software. Now, they may not do it in the Silicon Valley, like hyper, hyper cutting-edge way, but they still use computers. They still use all sorts of different software. They still have SaaS licenses of different technologies, et cetera. So it's not that it's binary, like they don't use technology, they do use technology. I agree with you that it's not what you and I would consider like the latest and greatest technology, but they might be 10 years behind, five years behind.

• 1:04:58Speaker 02

  I don't know. I would guess the zero to one wasn't that important either. I mean, when I like. Do you hear?

• 1:05:04Anthony Pompliano?

  None of them exist, though.

• 1:05:06Speaker 02

  No.

• 1:05:06Anthony Pompliano?

  The ones who didn't make the leap don't exist.

• 1:05:08Speaker 02

  Eventually. But do you hear, did you hear stories about in the 90s or 80s, all these law firms that just refused to adapt to tech? They refused to buy computers going out of business like?

• 1:05:19Anthony Pompliano?

  Yeah.

• 1:05:19Speaker 02

  You know, the ones.

• 1:05:20Anthony Pompliano?

  Services businesses are a little bit different than kind of.

• 1:05:23Speaker 02

  Maybe.

• 1:05:23Anthony Pompliano?

  Other businesses.

• 1:05:24Speaker 02

  I mean, it's an extremity to prove a point, you know? Um, uh, but still 30 years, long time. Uh, so I think that the operational benefits to using blockchain is sort of like to smooth back office solutions and so forth are just so minute. Like, I think they might be negative, actually, depending on regulatory compliance. Like, some people tell me that you would know more because I don't invest in this category, but that actually custoding tokenized assets sometimes is more expensive because there's, there's like this regulatory uncertainty and ambiguity, and so you have to cover.

• 1:05:54Anthony Pompliano?

  We've.

• 1:05:55Speaker 02

  Yeah.

• 1:05:55Anthony Pompliano?

  Haven't invested there, yes.

• 1:05:57Speaker 02

  Yeah.

• 1:05:57Anthony Pompliano?

  I agree with you.

• 1:05:58Speaker 02

  So that, so in some ways it's actually worse. And, and even if it's like one or 2% better, which I think is probably the best case scenario, I'm willing to bet, I don't know much about Figure's business. I'm willing to bet that the fact that they're doing so well probably has more to do with the fact that they have a rock star founder who's like a legend in his industry and has created an amazing team. Whether or not they were really using that much blockchain technology. There's a little bit of confounding of variables here.

• 1:06:24Anthony Pompliano?

  So the only thing that I will say is.

• 1:06:27Speaker 02

  And the other, by the way, the other comparison would be like, do you think companies that had intranets in the 90s? That's probably the closest comp, actually, more than the law firm. Like, did the first companies that developed intranets, did they do significantly better than the companies that didn't have intranets? I don't think so. I mean, most companies don't even use intranets today.

• 1:06:44Anthony Pompliano?

  Yeah, the place where we've come out on this, uh, it's like Figur and Providence is a perfect example. If a company wants to use the blockchain internally to like do the operational efficiency stuff of their own operations, not very exciting, I agree with you there. Where we see the application, uh, being super valuable, and this is what Figure's doing, is they've built a blockchain that is going to replace the infrastructure of a marketplace. So it's a bunch of people in an industry all have to go to one location to trade. So for. Then take HELOCs, for example, kind of asset-backed securities, et cetera. Two to three day transaction settlement times, right? You get high cost. And then the rating agencies, a lot of people don't realize the rating agencies are overly conservative because they have latency of information. They only get reports every 30, 60, 90 days.

• 1:07:29Anthony Pompliano?

  So when Provenant steps in and all of a sudden says, hey, look, you can transact here. Same asset, same counterparties, but it's just in a digital format. Same day settlement. If you think about it as a counterparty on that trade, my capital is actually at risk for a shorter period of time. Right? I can drive some cost efficiency, which again, happens, but isn't the sexy part of it. And then even if you look at like the rating agencies, all of a sudden they start saying, wait a minute. We have better access to information. Therefore, we can more accurately rate these securities. And therefore it is likely that we'll get an actual increase in rating, not because we're changing the rating rubric, but it's just that we have better access to information. Now those marketplaces, you know, asset-backed securities, for example. DTCC last year did $2 quadrillion worth of trades. Which fucking, like, I don't even know how to write that number, right?

• 1:08:13Anthony Pompliano?

  It's just an incredible number.

• 1:08:15Speaker 02

  If only they had the fees of Coinbase. Taking 2% on each.

• 1:08:20Anthony Pompliano?

  Exactly.

• 1:08:21Speaker 02

  You have a trillion dollar.

• 1:08:22Anthony Pompliano?

  The reason why I talk about this is if somebody was like, hey, I'm going to use the blockchain internally or just with one other customer, etc. I agree with you, like the operational efficiencies there don't matter. Where it does become interesting, at least to me, is when you say, here's probably one of the largest markets in the world. We're going to replace the market infrastructure with a better way of doing that. It all goes back to this theory that I have. So the whole value chain of what's going to get created here goes back to one single innovation that no one ever talks about in the space, which is triple entry accounting. So if you go back to 1400s, right? Double entry accounting gets created. And there's a whole wild story about how that happened where literally Leonardo da Vinci is responsible for like driving

• 1:09:06Anthony Pompliano?

  the adoption of double entry accounting, simply because he was friends with the Medici's. But. In 1989, triple entry accounting is invented by this Japanese researcher. Then you end up getting, um, 2005, somebody writes a white paper about how do we do triple entry accounting with digital receipts in a cryptographic way.

• 1:09:24Speaker 02

  Sorry, what year was that?

• 1:09:25Anthony Pompliano?

  2005.

• 1:09:26Speaker 02

  Took a while, okay.

• 1:09:27Anthony Pompliano?

  So 1989 to 2005, but again, nobody really cared about 1989, the, the original white paper around this or the second one, 2005, because they're all academic, theoretical, what the hell is triple entry accounting, etc. 2009 comes around, Satoshi Nakamoto releases a white paper, but also releases an application of triple entry accounting. Right. And all of a sudden, what happens is we get Bitcoin grows into this, you know, 150, 200 billion dollar asset. If you take triple entry accounting and you look at how are we going to apply that to every single financial service? I think that will create more value than anything else. And what you're talking about around decentralized finance, that's what it is. It's taking triple entry accounting and it's providing connectivity to balance sheets, assets, etc.

• 1:10:11Anthony Pompliano?

  The same way that the internet connected humans and devices so that we could communicate. Now you're just applying that to value, financial assets, etc. The day that I realized that framework, it completely changed the way that I looked at a lot of this stuff. And it really came down to forget quote, unquote blockchain. Where is an automated application of triple entry accounting going to create value? Cause ultimately that's what a blockchain is, right? It's just an automated version of triple entry accounting. And to me, that's super, super exciting and very, very disruptive, but we're not going to understand that for a long time. Like it's going to be one of those things, you know, 20 years from now, people are like, oh, that triple entry accounting thing was really important. Right?

• 1:10:51Speaker 02

  Yeah.

• 1:10:54Anthony Pompliano?

  You're thinking really hard.

• 1:10:56Speaker 02

  No, I, I, I think it's possible that's the case. I just, I generally like.

• 1:11:03Speaker 02

  This is taking our investor hat on for a moment. I mean, you know, there's important things outside of what makes what makes us money. But generally, when you have a new technology, there's sort of it comes in. This is a Chris Dixon talked about this from Andreessen recently. There are strong forms and there's weak forms of technology. And Internet was a classic case. Strong form was the Internet. Intranet was the weak form. Similar enabling technology, like similar protocols that went underneath both of them. One was totally global and open. One was just for corporations and for productivity gains. And, you know, there's probably some pretty good Intranet companies. They do fine. But they're a little more incremental. Quite a bit more incremental. And I think that's the case with a lot of

• 1:11:45Speaker 02

  the stuff in security token enterprise blockchain land. It's just concerning to me that many pipe many, I mean, I started in crypto in 2014. And that was when Goldman and Citi and all these banks NASDAQ were getting started with these programs. So it's like, why has it taken five years for them to develop? And to show many significant gains? My thinking is just also as well as a strong and weak form framework is also a question of timing. Like, there will be more operational efficiencies of blockchains, like of blockchains as the technology matures. And there will be more enterprise use cases over the next few decades. But I think we're still super, super early, you know. And so for me, I like looking at the, you know, we hit, we try to chase super unicorns, you know, we try

• 1:12:30Speaker 02

  to think the thing that will be trillion dollar protocols, hundred billion dollar companies. And that's what we're seeing in this sort of crypt, you know, the crypto native financial system is spawning this.

• 1:12:40Anthony Pompliano?

  Do you think that there's a world where regulators ever allow, let's say, equities, for example, to trade on an open permissionless decentralized protocol where they have no ability to step in?

• 1:12:52Speaker 02

  I don't think they really have a choice. If the D5 movement keeps going, I mean, the next thing will be synthetic assets.

• 1:12:59Anthony Pompliano?

  Well, they absolutely can, right? Because they can just tell the companies you can't list your asset there.

• 1:13:03Speaker 02

  Uh, on DEXs though, I mean, DEXs are just code, you know, the founders might leave. So, uh, you know, the technology behind Maker Dow is fairly trivial to add S and P 500, you know, over collateralized by ETH, et cetera, the same escrow system, collateralization system, smart contracts, oracles that support creating a stable US dollar allows you to create a stable Tesla stock, Apple stock, and give that to the entire world. There's many people around the world that just cannot access those stocks. They can't access them on leverage either, of course, but they just can't buy Tesla stock for various capital control or unbanked reasons.

• 1:13:37Anthony Pompliano?

  Yeah, but the point being that those people who are doing that, they have to go buy the Apple stock, right?

• 1:13:43Speaker 02

  Well, they'll buy a synthetic, no, I mean, they buy a synthetic Apple stock.

• 1:13:45Anthony Pompliano?

  Whoever's creating that, though, there's somebody has to get the Apple stock to put under as the collateral.

• 1:13:52Speaker 02

  Uh, you could have, it could be cash settled, so to speak.

• 1:13:54Anthony Pompliano?

  I explained that.

• 1:13:55Speaker 02

  Like, you could have an oracle that tracks the price of Apple stock and, um, and as long as you have, uh, like 150% of, of the value of Ethereum of that Apple, you know, locked up, then that's like a cash-settled derivatives contract, physically settled one, right? So you have the, they're truly synthetic assets, right?

• 1:14:18Anthony Pompliano?

  So you're basically saying you don't even, you're seeing a world where you don't even have to go buy the Apple stock. It's just like a price tracker.

• 1:14:25Speaker 02

  Yeah, you just, I mean, one person is locking up a sufficient amount of Ethereum or Bitcoin worth of Apple stock, and that simulate Apple's just a price, right? As long as the price is very obvious and clear and there's an oracle that can track it, you're good to go. Now, I mean, there are some, there are some, like, if you really want to be market neutral, you need a market maker who sort of hedges their Apple stock.

• 1:14:47Anthony Pompliano?

  Do you actually want to own the asset or just have the price exposure to the asset?

• 1:14:50Speaker 02

  Short if someone's long, so maybe you have to access Apple, but that's great. I mean, that's like what the internet is, that's what the internet is all about. Like, some people have access, allowing it to people that don't have access. I mean, the really, one thing, um, that's sort of surprising about the internet is if you look like on a market cap and revenue perspective, the really, the greatest benefit from a consumer surplus is, uh, is basically

• 1:15:14Speaker 02

  It used to be that if you were a upper-middle-class New Yorker, you had access to all this stuff that you could buy, and the rest of the world didn't. And the internet allows anyone around the world to have access to that, the same stuff. But not for the financial system, right? If you're here, if you're a New York-based hedge fund, or you have a brokerage account, you have access to all these sophisticated financial products that most of the rest of the world doesn't have. And once that's unlocked, I think the sky is the limit.

• 1:15:42Anthony Pompliano?

  Where can people go find out more if they want to learn about this stuff? Where do you suggest they go? Read, whether it's books, blogs, information sources, etc.?

• 1:15:53Speaker 02

  Yeah, I like the old histories of how the financial system developed. I mean, they're not going to talk about Bitcoin. The writers are sometimes dead, or they're old professors. But they're fascinating to get this sort of 4,000-year history, and then sort of compare and contrast. So Graber's book called Debt: The First 5,000 Years. It's like a classic. It's the book that most of the early, like Wences, and most of the early sort of crypto-influencers who got everyone else into it, read and got them into it. Same with me. There's a book called Money Changes Everything, which is by a Yale professor, which is great. For the modern-day stuff, we have a research. We have a Dragonfly, Dragonfly Research. It's our Medium page where we blog and write articles about a lot of this stuff. That'd be a great resource.

• 1:16:38Speaker 02

  It's a little techie, but we have some stuff that's more general.

• 1:16:41Anthony Pompliano?

  Dragonfly Research on Medium?

• 1:16:43Speaker 02

  Yeah, yeah.

• 1:16:44Anthony Pompliano?

  All right. Before we wrap up, most important book you've ever read?

• 1:16:53Speaker 02

  I studied social theory in college. No finance or anything like that, or CS. And I loved like, just sort of the early canon, like Foucault, like the works of Foucault. He's a postmodernist French philosopher. Very profound impact on me. It makes me think, I mean, he has all sorts of politics. But the most important sort of impact of what he says is like, you need to question institutions very closely. And sort of layers of trust are everywhere. Like implicit trust in like, the psychology, like in academics and credentials, and in the media, and of course, in the government, but we all know that.

• 1:17:36Speaker 02

  But there's like layers of trust in institutions everywhere. And it's sort of how the system works, and it's how the system fails.

• 1:17:44Anthony Pompliano?

  Aliens, believer, non-believer?

• 1:17:46Speaker 02

  Yeah, I studied up on this one.

• 1:17:50Speaker 02

  I think, obviously, how many knows do you get? You know, like a-

• 1:17:53Anthony Pompliano?

  I've gotten- Just two or three. The all-time is still Joshua. I'm bringing Josh Brown actually back. We're gonna figure this out, cuz he claims that ghosts are more real than aliens. Which, just, I was like, that, you're just going for the hot take.

• 1:18:06Speaker 02

  Love the science behind that one. Law of large numbers. My biggest thing, I used to be very, like, I love sci-fi, love VT. I used to be very, like, hell yeah, we're gonna see some aliens, it's gonna be cool, new adventure for mankind, Star Trek. Now, I recently read The Three-Body Problem, this three-part, huge, science-fiction novel. It's like, the most famous one in China. And it is a much darker take on aliens. Have you read it?

• 1:18:32Anthony Pompliano?

  I have not.

• 1:18:32Speaker 02

  You, I mean, if you're-

• 1:18:33Anthony Pompliano?

  You're the second person to tell me this, I gotta go read it.

• 1:18:35Speaker 02

  Wow, only number two. It's, uh, basically, it's sort of this logical, um, it, it does a thought exercise of what happens if we actually contact aliens. And in fact, the most likely outcome is these aliens will kill us. Uh, because they have significantly greater technology than we do, so they'll view us like ants, or people on a farm. And probably, they'll be super predators, just like us.

• 1:18:59Anthony Pompliano?

  Spray some water, just spray some water on the ants, right?

• 1:19:01Speaker 02

  Yeah, yeah, or put a few-

• 1:19:02Anthony Pompliano?

  Wash them away.

• 1:19:02Speaker 02

  Put a few in a zoo, whatever. Or, the second problem, and this is actually the real, like, you never know, they might be nice, they might be not nice, flip the coin. The real problem, though, is sort of like, it's called Dark Forest Theory, which is that, uh, they won't know much about us. And it's possible that, like, their rate of technology will grow less fast, uh, slower than ours. Like, you never know. Uh, like, there's periods in time where our tech developed, like, millions of years, where we developed faster and slower. And in sort of race to, race to being able to, like- I don't know, kill other species, right? So they just can't take the risk that even if we're like weaker than them, that will become stronger than them over time.

• 1:19:45Speaker 02

  And yeah, it's a great game theory application of aliens and it makes me feel very sad now because I think if we do encounter aliens, it will probably be very bad. But yeah, they're they've got to be there somewhere.

• 1:19:59Anthony Pompliano?

  I generally agree that if we come in contact in a material way, we probably have a much more positive view of them than we than we should.

• 1:20:08Speaker 02

  Yeah, yeah, judging at least from humans, you know, we have a pretty bad track record.

• 1:20:13Anthony Pompliano?

  What um, what's the one question you got for me to finish up?

• 1:20:16Speaker 02

  Oh, I didn't have a question.

• 1:20:18Anthony Pompliano?

  I know.

• 1:20:18Speaker 02

  I don't know.

• 1:20:19Anthony Pompliano?

  It's even better.

• 1:20:19Speaker 02

  How's it? How's it going? Are you uh?

• 1:20:22Anthony Pompliano?

  No, no, no, no.

• 1:20:22Speaker 02

  Is coronavirus hitting you yet in New York?

• 1:20:24Anthony Pompliano?

  You gotta have a real question.

• 1:20:25Speaker 02

  That's my big thing. I I uh, my my half my team was in China. They've been quarantined the last month or two.

• 1:20:32Anthony Pompliano?

  What is that like?

• 1:20:33Speaker 02

  Uh, it's there's never, nothing has happened like this in all of history. Basically, a billion people or more are quarantined. And what it means to be quarantined is you can't leave your house. There's a intricate system of government oversight where there's basically like neighborhood watches in most Chinese cities. And the neighborhood watches are empowered. They give you like a hall pass. You get one hall pass per family per day. And that's it. You get like an hour period where you can leave your house to go buy groceries. It's terr- I mean, there's one, there's situations where like a husband and wife, the husband chokes, you know, on something, has just a totally or breaks their leg. And how they have to go ask their neighbor to.

• 1:21:19Anthony Pompliano?

  Oh, what do we? Joe's pulled up a meme of the different plagues. And it's plague, plague, plague from 1720, 1820, 1920, 2020 coronavirus.

• 1:21:29Speaker 02

  Yeah, yeah, the Corona plague. So it's a, it amazes me actually how little people are paying attention to it in in the US. Because China is our number one trade partner, whatever. It's one of our largest trade partners. Even the place where it started in Wuhan. There's study abroad programs there. It's like, it's this manufacturing hub of the world. So.

• 1:21:54Speaker 02

  You know, it's very, very weird times there. And, uh, yeah, it doesn't seem to be affecting New York yet, yet, though.

• 1:22:01Anthony Pompliano?

  Uh, the joke that I, um, I heard is, uh, Polina, one of her friends, um, was texting her and, uh, she's going on an international trip and Polina was like, you're gonna wear a mask on the flight. And she said, quote, "I'm gonna free face it." And, uh, when Polina asked her why, she said, "I ride the J train every day. What are you talking about? There's all kinds of weird shit down there." And I think that's the, you know, while, while she was saying it in gen-

• 1:22:27Speaker 02

  Yeah, that's, that's more of an indictment about the J train, though, than-

• 1:22:30Anthony Pompliano?

  Yeah, oh, for sure, for sure.

• 1:22:31Speaker 02

  Like, but you're right. It's very rational, actually, for, for people to not take the subway as much, undoubtedly, or to take Uber as less, or not to go to, I don't know why people are still going to sports games and massive crap. That's the other thing. The first thing that happened in China, I mean, now people are in their homes. But the first thing is, no public events, no, all concerts, all, like, restaurants even are closed throughout China. You know, China, you could say what you want about them, they're pretty rational, you know?

• 1:22:56Anthony Pompliano?

  And do you feel like that's where we're gonna get to in the US?

• 1:22:59Speaker 02

  Yeah, certainly. I mean, at least, I don't know about quarantines, you never know. It's, again, it's, it was unprecedented in China, too. That's never happened in a, in a made, in a modern country before. But, uh, yeah, I advise, I tell my girlfriend and my employees and my family, don't go to a major sporting event. Don't go to a, I mean, the odds, it's very hard to account for exponential growth, um, and viral growth in the human head. It's very non-humanist. So, for instance, you can have a couple hundred cases in an entire state. And, uh, and that means that if there's an event over 10,000 people, the odds are there's gonna be at least one person with the virus there. And these things also are not linear. One person often can infect 70, 200, you know, 200 people, right?

• 1:23:44Anthony Pompliano?

  Do, do we know if you get it and you don't die after, like, two or three weeks? Are you then, like, immune to it? In, in the sense of, uh, you're kind of a carrier, but you're not contagious anymore? And also, uh, you're gonna be fine?

• 1:24:01Speaker 02

  Um, probably, I think.

• 1:24:03Anthony Pompliano?

  I would think, but I don't know for sure.

• 1:24:04Speaker 02

  Well, here's the, here's the issues, which is, um, uh, any virus like this mutates very often. Actually, there are some cases where they test you and your symptoms have gone away and then it reoccurs.

• 1:24:17Anthony Pompliano?

  Okay.

• 1:24:17Speaker 02

  I think there's some debate between whether you actually caught it again, or it was just the sort of pattern of the virus is such that it ebbs and flows. Um, it's hard to say. Uh, but, um, uh, yeah, the thing is, you know, the most likely outcome is this will be just one of, there's four or five strains of flu every year that we get vaccinated for. And they just reoccur every, every year or two, or, you know, um, and, uh, uh, frequently. So.

• 1:24:46Anthony Pompliano?

  This will just be another strain.

• 1:24:47Speaker 02

  Yeah. I mean, you can get the flu two years in a row, even if you get the vaccine, right? Uh, because of how quickly they mutate. It's unlikely, like it's more likely that it'll take a few years. But if that's the case, if we're not able to eliminate it, then.

• 1:24:58Anthony Pompliano?

  Yeah.

• 1:24:59Speaker 02

  Yeah. Every few years, maybe, which brave new world.

• 1:25:04Anthony Pompliano?

  It's fucking crazy, man.

• 1:25:05Speaker 02

  Yeah. Yeah.

• 1:25:06Anthony Pompliano?

  All right. Well, where can people find you, uh, you on the internet?

• 1:25:10Speaker 02

  Uh, we, I'm on Twitter. It's, uh, I actually always have to look this up. It's like alpaca, P A L P A C K A P, like a llama, or actually like a, like alpaca. Um, but, uh, but really you should dragonfly, uh, research and dragonfly capital. If you go, it's like D C P dot capitals, our website, and we have a medium page. That's where most of my more thought provoking comments are supposed to on Twitter. I'm not as, I'm not as, uh, as Twitter native as you are, unfortunately.

• 1:25:38Anthony Pompliano?

  I, uh, I love Twitter just because I just let it flow, man. Whatever ideas I got, they're good. You're going to know what I'm thinking because I'm, I'm posting them.

• 1:25:47Speaker 02

  Yeah. The post Trump world. Yeah.

• 1:25:49Anthony Pompliano?

  Yeah.

• 1:25:50Speaker 02

  Let it go.

• 1:25:51Anthony Pompliano?

  Yeah. And part of it is, um, it's a filter, right? Like I, there's people who I followed for years. And I know whether I agree with them or not, whether I like their thought process or not, et cetera. And I think that people just enjoy the authenticity of it versus, um, if I was more of a person that just like. Hey, I'm gonna write one blog post a month. I would never write. I just would procrastinate, right? So instead, it's like, hey, I'm a tweet every day. I'm gonna write morning a letter, but like, it's just that repetition and consistency actually forces me to do it versus the opposite, which would just be like, eh, I'll get to it tomorrow. Eh, I'll get to it the next day.

• 1:26:30Speaker 02

  Totally.

• 1:26:31Anthony Pompliano?

  Then next you know, it's six months later, you haven't done anything.

• 1:26:33Speaker 02

  And from the other perspective, more me, like the information junkie perspective, you know, we're in the venture industry. We love being on top of new things. Twitter, lot of misinformation, obviously. That's we don't talk about that, of course, fake news and so forth. But the other fascinating thing about Twitter is like the citizen journalism aspect of it, because there's this like framework, Bology talks about it, and he's big on, he's on coronavirus. He's killing it right now on, he's a VC, but he was a, he started a biotech company and he's a PhD as well. And he's just been going on about coronavirus lately. And, you know, there's this concept of, there's like, pre, there always has to be pre-news and post-news. And because that's where journalists, journalists

• 1:27:17Speaker 02

  get it from somewhere, right? And they find sources, and that's their specialty. But now sources are online, you know, and it's, you know, journalists, in theory, are better at finding, like, you know, and evaluating sources.

• 1:27:29Anthony Pompliano?

  They're trained, and they can tell the story by stitching them together, etc.

• 1:27:32Speaker 02

  Yeah. But there's a delay, clearly. Coronavirus was probably weeks delayed for how long it took the media to figure it out, for government reasons, all sorts of reasons, you know, how many people does the New York Times or CNN have in Wuhan, right? So you get to sort of be-

• 1:27:47Anthony Pompliano?

  Well, now, probably a ton.

• 1:27:49Speaker 02

  They, I mean, those, those are some brave journalists. Yeah. I mean, going into a quarantine where the entire health care industry has collapsed, they're gun, I'm sure they're gunning for Pulitzer's. I don't mean that in a negative way. I hope they get it.

• 1:28:03Anthony Pompliano?

  I know a Bloomberg reporter who moved to Beijing.

• 1:28:10Anthony Pompliano?

  I don't know, maybe a year, year and a half ago, maybe even two years ago. I don't know. But like relatively recently.

• 1:28:17Anthony Pompliano?

  And I've seen her post a bunch online about like life in Beijing with the coronavirus. And I'm just like, holy shit. Like what, you know, do you leave? Do you stay? I mean, there's just, what do you do? Right? So it's, uh, it's pretty interesting.

• 1:28:32Speaker 02

  A lot of tough choices.

• 1:28:33Anthony Pompliano?

  All right, man. Thank you so much for coming to do this. This is awesome. We're gonna have to do this again. And, uh, you know, we'll, we'll see how all these different narratives play out. But, uh, I appreciate you just being thoughtful and, uh, taking time to share it with us.

• 1:28:44Speaker 02

  Absolutely. Thanks so much.

• 1:28:46Anthony Pompliano?

  Hey everyone, Pop here. If you like this episode of Off the Chain and want to help us take crypto to the top of the apple, Spotify and other podcast charts, please do us a favor and rate, review and subscribe. To review, simply go to the Off the Chain homepage, scroll down until you see the five blank stars. Taking 15 seconds to fill those stars in and leave a quick review goes a long way in helping us take the entire crypto ecosystem to the top of the charts. I appreciate you listening and see you next time on Off the Chain.