#738 The 2022 Crypto Thesis Report w/ Ryan Selkis

Ryan Selkis is the Founder and CEO of Messari. In this conversation, we dissect his 2022 Crypto Thesis Report. It's a monster of a report that provides you with the information you need entering into the next year of Crypto. Its a must read report and this podcast will help break it all down. ======================= LMAX Digital - the market-leading solution for institutional crypto trading & custodial services - offers clients a regulated, transparent and secure trading environment, together with the deepest pool of crypto liquidity. LMAX Digital is also a primary price discovery venue, streaming real-time market data to the industry’s leading analytics platforms. LMAX Digital - secure, liquid, trusted. Learn more at LMAXdigital.com/pomp ======================= Compass Mining is the world's first online marketplace for bitcoin mining hardware and hosting. Compass was founded with the goal of making it easy for everyone to mine bitcoin. Visit compassmining.io to start mining bitcoin today! ======================= Do you want a new job in the bitcoin and crypto industry? You should go apply for hundreds of open roles at http://www.pompcryptojobs.com or sign up for our training program at http://www.pompscryptocourse.com =======================

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

• 0:02Anthony Pompliano?

  What's up everyone, this is Anthony Pompliano. Most of you know me as Pomp. You're listening to the Pomp Podcast, simply the best podcast out there. Now let's kick this thing off. Ryan Selkis is the founder and CEO of Messari. He's been around the industry for a very long time, and every year lately, he's been writing an absolute monster of a report with his crypto thesis for the following year. The new 2022 crypto thesis report is out now, and that's all we talk about throughout this entire conversation. So I hope you enjoy. I always enjoy talking to Ryan, and I hope that you enjoy this conversation. Before we get into the episode, let's talk about our sponsors. First up is LMAX Digital. LMAX Digital is the number one institutional crypto exchange. They offer clients the deepest pool of crypto liquidity on the planet, all underscored by

• 0:47Anthony Pompliano?

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• 1:32Anthony Pompliano?

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• 2:10Anthony Pompliano?

  Last but not least, many of you constantly DM me, email me, yell out to me on the street. How do I get a job in Bitcoin or crypto? Well, I've got some solutions for you. We started a new product. It is called Pomp Crypto Jobs. It's a marketplace where you can go and apply for hundreds of open roles at the at the industry's leading companies. Everyone from Coinbase to Gemini, Kraken, BlockFi, Strike, BTC, Inc., and many, many others have open roles listed there. All you do is you go to pompcryptojobs.com and you start applying. It's completely free to apply for those roles. So go to pompcryptojobs.com if you got a job that you don't like and you want a new one in Bitcoin or crypto. There's nothing better than focusing full time on Bitcoin or crypto. So go to pompcryptojobs.com.

• 2:55Anthony Pompliano?

  And if you feel like you're not prepared yet to actually apply and get the job, we have a training program that you can also go ahead and check out. If you go to pomp'scryptocourse.com, pomp with an S, cryptocourse.com, you can go there. It's a three week intensive course. We teach you everything you need to know about the industry and then we hand you off to the HR teams at various leading companies. We've worked hand in hand with those leading companies to create the curriculum. So we know this works. People have been hired at everywhere from Coinbase, Gemini, BlockFi, Kraken, Anchorage, BTC, Inc., Strike, and many, many others. So if you want an open job, go to pompcryptojobs.com. But if you want to go through the training program, go to pomp'scryptocourse.com and we'll see you there. All right, let's get in the episode with Jamison and Pete. I hope you guys enjoy this one.

• 3:38Speaker 01

  Anthony Pompliano runs Pomp Investments. All views of him and the guests on his podcast are solely their opinions and do not reflect the opinions of Pomp Investments. You should not treat any opinion expressed by Pomp or his guests as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his personal opinion. This podcast is for informational purposes only.

• 4:01Anthony Pompliano?

  All right, guys. Bang, bang. I've got Ryan here. I feel like every year, right about this time, everyone knows what's up is Masari's going to drop their 2022 annual report of their theses, do a little bit of looking back over the last year and also what they expect to happen in the coming year. We did this last year and just ran through a bunch of the themes that you outlaid in it. This year, very long document, very thorough, probably one of the best ones saying when drops. Do we have a expectation in terms of how long it will take somebody to read this document to start with?

• 4:34Speaker 02

  I mean, it depends on if you're a speed reader. It depends on whether you actually, you know, bother absorbing all of my garbage. You know, it like this annual report is a good exercise for me to just collect my thoughts and create a mental map for what is a rapidly evolving ecosystem on like five different axes. So I think it's it's helpful for me as a way to process information, get the lay of the land in broad strokes and almost like an index, right? You know, you obviously want to handicap how your predictions and kind of how what your priors look like, what was right, what was wrong, you know, why were you right? Why were

• 5:15Speaker 02

  you wrong? Kind of looking backwards. So I do that every year as well. And at the end of the day, this can be like a Bible that like even I go back to if I'm trying to make a quick like navigation to a different sector or a different theme. What did I write about this? What were some of the other kind of sources that I relied on or some of the other long reads that are actually worth reading? But obviously, I wasn't just going to staple together, you know, 120 different 30-page treatises that that other smarter people have written. So it's just a synopsis of what I think other smart people, including our own analysts, have thought throughout the year and where we're going.

• 5:57Anthony Pompliano?

  All right. The first topic we're going to talk about is the collapse in institutional trust, which I think for people inside of Bitcoin, crypto, kind of the decentralized world, individual sovereignty, they're interested in those ideas. This is like duh, right? Of course, there's a collapse of institutional trust. People who maybe are just new to this stuff or are listening to this for the first time, this may actually be shocking to them. So walk me through how you think about that falling amount of trust. And is there like a quantifiable metric that you look at? Or is it more so just sentiment and kind of anecdotal

• 6:32Speaker 02

  Well, I think this is obviously subjective, but A16Z, Andreessen Horowitz, put together a Web3 policy team that's been doing a lot of work in DC trying to educate policymakers on what crypto is, broadly what Web3 is. There's been a little bit of an attempt to rebrand crypto as Web3 because it's a little bit more friendly of the term, it's less scary, and it's, I think, more reflective of the fact that we are trying to rebuild the entire internet, not just cryptocurrencies. But in their education document and presentation to policymakers, they have this really amazing

• 7:12Speaker 02

  graphic that is a chart on two axes based on competence and trust. So, low trust, high trust, high competence, low competence. And this was based on survey results from Edelman, big market research firm, that basically showed no moderate institution is seen as both high trust and high competence. So NGOs, nonprofits, were considered high trust, but not necessarily high competence. Businesses were considered high competence, but lower on the trust axis. And then you had the mainstream media and the government. So basically, the three branches,

• 7:57Speaker 02

  the government, and then the fourth, the state, the media, as ranking very negatively in both competence and trust. And when you're living in an environment like that, and you see everything that we've seen over the last couple of years, that folks in your audience, I'm sure, have heard relentlessly, 40% of dollars printed in the last 18 months, we've mismanaged COVID, the Afghanistan exit was a disaster, you're seeing progressively more censorship, platforming. There's just, I think, this bottling sentiment that a system that we've built are slowly disintegrating, and really, there's kind of an absence of leadership.

• 8:40Speaker 02

  And I think it took a while even for me because I got into Bitcoin back in 2013. And even back then, it kind of felt like a pessimistic bet on the future. But over the last few years, you started to realize that Bitcoin and crypto-powered networks might actually be the only "institution" that could fit in that upper right-hand quadrant that's both high trust, thanks to encryption, and high competence, because you have the best, most talented people in the world that are flooding into this space at an alarming rate and building things that people are actually using now. So I think the framing is, you're not going to be excited about crypto if your life is perfect and you think that everything is going just swimmingly and you're one of the

• 9:25Speaker 02

  11% of people that think Congress is doing a good job. But for everybody else, there's kind of this simmering unrest for the last several years that really got thrown into high gear thanks to COVID. And it's kind of brought a lot of the problems with our existing institutions into focus. The question now is, which ones do we slowly replace with decentralized math-based systems using crypto versus which ones are actually going to maintain credibility and survive this transformation?

• 10:00Anthony Pompliano?

  So in the document, you explicitly call out the difference between mercenaries and missionaries. And you basically say, whether you're here as a missionary or a mercenary, you'll find that one of the primary unifying forces behind this movement is the belief that decentralized technologies with embedded financial incentives offer a compelling, often lucrative, alternative to our decaying legacy institutions, which first of all, is just like a pro-level sentence that you put together there. But this idea of both mercenary and missionary both finding a home or value in this, can you talk a little bit about the difference between those two groups of people coming together around one common set of technologies?

• 10:35Speaker 02

  You know, I'll paraphrase a number of smart people that have said this, but...

• 10:43Speaker 02

  Crypto is a new tech paradigm dressed as a Ponzi scheme, right? Something along those lines. And the reason that Bitcoin and these other systems have taken off is because they've been bootstrapped into existence by speculators. Folks who believe in this vision of the future that ultimately are going to be rewarded for their early faith, even if it does take a while for mainstream adoption to take root, right? So a perfect example is Bitcoin. Until the infamous Bitcoin pizza transaction, which in hindsight is hundreds of millions of dollars worth of Bitcoin, right?

• 11:23Speaker 02

  Without that transaction, you don't have the first proof of concept that you could actually buy something real with Bitcoin, right? It's, I think, the same with many of these other emerging assets. Without the first ICOs on Ethereum, you couldn't prove that Ether would be a reserve currency for all types of decentralized finance applications. Without the CryptoPunks airdrop in some of these games that have emerged as far back as 2017, you wouldn't have been able to prove that non-fungible tokens or NFTs could be these really interesting scarce digital objects with different storable attributes.

• 12:09Speaker 02

  So I think the missionaries are the ones that see this, get excited, and then build and stick around for the long term, whether it's a bear market where they're kind of in the trenches building for the next cycle. Or the mercenaries that, quite frankly, are just at worst necessary evils. But at best, they're the backstops of the entire new financial system, right? Without the speculators, without these deep-pocketed individuals, you don't have liquid markets and you certainly don't have the market cap that we have today that can attract the type of new inflows that we're seeing that's going to fund new applications and new infrastructure and kind of continue the upward momentum of the rest of the industry. So I think.

• 12:53Speaker 02

  It's crazy with crypto, how compressed these pipe cycles are. If you think about like the classic, you know, peak of inflated expectations and then the long trough of disillusionment and then, you know, kind of the gradual up slope in the installation phase. We've seen like six or seventies in crypto over the last decade. And I think all along that curve, you've got different personas that are playing a role in the build out of the C K system.

• 13:24Anthony Pompliano?

  When you think about the inevitability, the second topic that you guys cover in the piece is crypto, web three are inevitable. Describe how you think about, you know, we know what the problem is. It's very obvious, both anecdotally and I would even argue quantifiably as well in terms of some of these sentiment surveys, et cetera. Is it just that the problem's so bad that of course this works? Or are there other things that you look at that signal why this is inevitable?

• 13:52Speaker 02

  I think with some of the early applications that are taking root and getting a lot of traction, they are in order of magnitude or more better in, you know, depending on which attributes you're looking at or you're comparing these against to the legacy system, for instance. So, you know, in DeFi, you're going to be able to earn five, 10, 15, even 20% returns, depending on the protocol that you're participating in versus, you know, half percent in like a CD with a bank. The rates are structurally higher. There is greater risk and you're paying for that, you know, greater risk, but you're also generating higher returns in the process.

• 14:35Speaker 02

  And a lot of investors are, you know, trying to find assets that are going to yield in a zero or negative interest rate environment. Right? So that's DeFi. With with some of these new web three marketplaces that are trying to replace things like Medium, so Mirror is a good example, the the content creator or some of these gaming platforms might even be an even better example. In in gaming or in publishing, typically the take rate of the platform is 100%, right? Facebook makes 100% of the ad dollars. The big five gaming platforms, they'll sell these virtual goods, but they're not necessarily

• 15:16Speaker 02

  portable, and they control all the rules, the economies within their systems. You're basically like living on rented land. And with crypto, whether you're talking about a platform like Mirror, which is ultimately rewarding creators that are publishing on the system versus Medium, or you're talking about a web three game like Axie Infinity, or some of these other emerging year one play to earn games, the take rate for the centralized platform is in the single digits or the low double digits percentage points

• 15:54Speaker 02

  instead of 100% or 80% or even 50%. I think YouTube is maybe the most generous web two company in terms of creator splits, and it's 50/50. You're talking about a new economy where the creators will earn 80% to 90% or more of the revenue that they help bring to the platform. But then there's an additional sweetener, which is if you're early and you actually help solve the zero to one problem with these networks, you'll essentially get what's equivalent to stock options in these new systems. So tokens that are either airdropped to you, or become incentives for different actions that you might perform on a given

• 16:39Speaker 02

  platform, every post that you write, every battle that you fight in, if it's a game, every like, every follower, those can be quantified, and your value as an individual contributor to that platform can actually be studied and rewarded and the earlier you are, the greater economic incentives you'll perceive to capture some of that future growth of the network. So the best way to think about, you know, why this is inevitable is to just consider that basically every modern marketplace and every, you know, existing, you know, real world company or web two company that can be not just decentralized, but user owned will end up looking more like

• 17:24Speaker 02

  a cooperative, right? So Facebook's early users become the largest stockholders. The, you know, Epic Games is going to experience an innovator's dilemma right now. Do they open up their, their virtual goods universe and do they make these assets interoperable? And do they open up their marketplace that it's, you know, free and competitive? Or do you have similar quality, what three gaming companies come in, offer these far superior user rewards and returns and, and basically eat their lunch and disrupt who were previously the disruptors? I think that's, it's inevitable. Once you get a taste

• 18:08Speaker 02

  of it as a creator and as a user, because the first thing that you'll think about with any new service is, you know, where's my cut? I'm helping you build this platform. I'm helping you build all this value. How is this ultimately going to flow back to me?

• 18:24Anthony Pompliano?

  So we've seen companies in the legacy kind of web two market, right? We saw Uber try to give drivers equity when they were going public. We saw Airbnb try to give equity to host. We've seen a number of other companies try to figure out things to do. We see, for example, content creators that will do massive giveaways, you know, Mr. Beast, the Nelk Boys, et cetera. Like this is not a quote unquote new idea in terms of having some sort of economic reward for those that participate. It seems like there's one regulatory burden in terms of the ability for like Uber to give their drivers equity or Airbnb. There's a whole bunch of kind of back and forth with lawyers of how to do that.

• 19:07Anthony Pompliano?

  The second thing, there's a technology barrier, right? Like, how would you actually do it? Are we going to get every Uber driver to sign up for like a traditional brokerage account? And like just shovel, you know, Charles Schwab account holders? Maybe, but that seems pretty difficult to do. And then the third thing is what I'll call like consumer behavior, right, which is they're not used to working for equity. They're used to working for cash. And so maybe professional athletes are like the best proxy for this. Historically, they always took cash deals. And then there was, you know, Magic Johnson, there was Michael Jordan, now LeBron James. They have these examples where people started to take cash and equity. The equity worked out and they're like, oh, wow, maybe I should be getting paid in equity, not just cash. And so they just started changing their behavior. When you look at this new iteration of this idea,

• 19:52Anthony Pompliano?

  how much of it is solving the technology component versus is addressing regulation and like consumer behavior, right? Is it just if you solve the tech, the other two follow? Or do you think that there has to be a holistic approach? Regulatory kind of education in terms of changing the consumer behavior? And also this tech obviously has to change in order to make it work as well.

• 20:15Speaker 02

  Yeah, so I think that the middle one, the user behavior change, that's where the dollar incentives come in, right? And kind of the fat tail of distributions go into the early adopters and the folks that really helped bootstrap these new products and new environments. That kind of leads into like the tech find it all as well. One of the reasons that those early users get these outsized rewards is because they are actually helping stress test the early tech and, you know, give feedback on the user experience and workflows of these emerging systems. And because they're power users, they're ultimately, you know,

• 20:56Speaker 02

  they're the early product testers and co-designers almost of these networks, especially because in return, they're getting tokens and then they have some say in how the governance of the system, whether you're talking about the underlying economics, some of the key technical changes that might be incorporated. These users are going to have some say in that process and how the ecosystem and protocol develops going forward. Then there's the regulatory component, which I agree with you.

• 21:25Speaker 02

  There's hypothetically no reason that you can't do this with equity or stock options like Uber wanted to and Airbnb wanted to. And you know what? I think that's just, that's an indictment of our current securities laws and the fact that they haven't been updated in 90 years. So, you know, The securities legislation that the SEC is working off of and this heavy-handed approach and guidance that they've given to the crypto community, this is the result of legislation that was passed in 1933, at the beginning of the Great Depression, 1940,

• 22:04Speaker 02

  right before we entered World War II, and a Supreme Court ruling called Howey, which I believe was like 1946, somewhere in there, the mid 40s. And there's a lot that's happened since then. So the world has gotten more connected, the economy is globalized, and we have not only modern computing and the internet and mobile, but back when the Howey decision came down, we barely even had like modern cryptography, right? A lot of people think that modern cryptography was basically born in the 1940s.

• 22:44Speaker 02

  So I think at the end of the day, these tokens do capitalize on regulatory arbitrage between like this outdated legacy system that will basically try to classify anything with volatility as a security, if there's some kind of user interest and user incentive associated with it. And really, you're trying to match that with, I think, where the rest of the world already is, which is recognizing that a lot of these new assets look and feel different than securities. So there needs to be either a light-touch approach to regulation or an emphasis on mitigated

• 23:29Speaker 02

  fraud, right? So one way to kind of solve for that is, is how do you basically abide by the spirit of all these old securities laws and how do you retrofit them to apply to tokens so these tokens can actually be useful? Because there's plenty of examples of teams that actually made their tokens and their ecosystems worse than they had to be and designed them poorly because they didn't want to enable some functionality that might trip over these outdated securities laws and ultimately get them into trouble or even shut down the project.

• 24:05Speaker 02

  I think you hit the nail on the head, but really when we go into 2022, it's not necessarily user education that's a challenge because there are folks that are working on that. It's not necessarily the technology that's a challenge. Again, teams are working on that. It's not perfect, but that's why the returns are structurally higher because the ecosystem is immature and you're basically getting paid the premium as a user in order to experiment with with some of these new systems. It really comes down to regulation and just how fierce is this battle going to be, particularly in the West and the US in particular with the SEC.

• 24:47Anthony Pompliano?

  And so when you start to think about how this plays out, we then get into like the geography conversation and kind of regulatory regime conversation. There are certain jurisdictions that pride themselves on having the strictest rules, the kind of fairest rules and the most oversight, the most safety, if you will, right? I'll kind of put that in air quotes, if you will. And then there's other jurisdictions that pride themselves on like it's a free for all, do whatever you want. And actually, the the feature, not the bug, is that there are no rules or there's very few rules. Is there a healthy tension from like a competitive standpoint between various jurisdictions where ultimately they are going to have to compete

• 25:29Anthony Pompliano?

  for entrepreneurs, for businesses and for investors? Or is there going to have to be, let's say in America, for example, that I think falls in the former category of like, hey, we have really strict rules, a internal push that most people are actually not willing to leave the US, but they do want better rules. And so that internal push has to create better rules, but not force people to leave. Like, how much, I guess, is like the, I don't call it a threat, but like the promise of an exit really, you know, kind of affecting rule creation versus it sounds good, but 90% of people aren't leaving?

• 26:05Speaker 02

  I do think that it's already happening to a certain extent in a couple of different ways, right? So there are certain countries that are attracting crypto developers and entrepreneurs, Portugal, Singapore, Dubai. These are areas of the world where they're being very open and proactive about courting innovators in some respects because they know that this is the future. And in others, they're just being opportunistic because they see how much potential economic development in the short and medium term can be brought to their jurisdiction if they just kind of welcome these groups with open arms. And I think there's a misconception that the

• 26:50Speaker 02

  choice is between like the regulated US and the unregulated everywhere else, right? Because at the end of the day, the

• 27:03Speaker 02

  Sorry, I just had another call come through. Can you still hear me?

• 27:06Anthony Pompliano?

  Yep.

• 27:08Speaker 02

  Okay, we can edit this. I think at the end of the day, the US has 38% of the financial services or exchange market share in the world for a reason, right? Because we do have the rule of law, we have a very strong history of property rights, we've got the world's most efficient markets. And I think people want to tap that and investors have confidence that someone is keeping watch over the markets, which is why they feel comfortable deploying capital here. That's not really the issue with crypto. The issue with crypto is that the SEC is basically

• 27:49Speaker 02

  attempting to jerry-rig old securities laws to fit onto tokens, and they technically don't work. They will literally break these protocols. I'll give you the perfect shining example, and this is in the report, of how dysfunctional our system is. You have Coinlist, a company that is now a unicorn, that was spun out of AngelList, one of the crowdfunding platforms that actually helped author the Jobs Act, which led to something called Reg A+, an easier way for startups to raise capital without going through a full registration process. Coinlist facilitates token sales, compliant token sales where the customers are known, they've got all these disclosures,

• 28:30Speaker 02

  they're pre-vetted, you know, it's almost like an IPO platform for token communities. Every single one of the crowd sales that they've done has produced a positive return in dollar terms, and most of them have wildly outperformed the S and P and even the benchmark assets in crypto like Bitcoin and Ethereum since they were actually launched. The only one that has underperformed is a token that failed because they went through the SEC's Reg A+ process, and they realized that registering as a security broke the usability of the token, because every single time they wanted to make a technical upgrade, they would have

• 29:14Speaker 02

  had to make filing or get pre-approval with the SEC to do it. It's just not how tech works, right? And it would be no different than saying for a company like Facebook that's gone public, every single time you make a tweak to your algorithms, you need to file an SEC filing and kind of an updated prospectus to account for these new changes that you made and how they're going to impact investors. It's ridiculous, right? And I think anyone that you kind of show that evidence to will look at this as an absurd position that we've gotten ourselves into. The SEC will say, "Well, we're just interpreting existing securities law and case law, and we have broad jurisdiction, so someone has to kind of step in and make sure that

• 29:59Speaker 02

  we catch the bad guys or make sure that we meet out fraud." And it's Congress's job to update that letter of the law. And that's true to a certain extent. But the other problem is, there is not a whole lot of creativity in policymaking circles. And in the SEC in particular, in their case, they have one commissioner that's actually very forward-thinking, Hesha Purse, who has proposed a safe harbor that would solve a lot of these problems and kind of allow for a cooling off period while proper legislation can be formed and while the regulatory outlook for tokens can be really fleshed out with her colleagues and other regulators in the US. And it's gone nowhere.

• 30:39Speaker 02

  The other commissioners have not only ignored it, but they've shot it down since a couple of lawmakers have proposed actually making this statutory and assigning a regulator to the crypto economy and to oversee tokens in particular with an emphasis on the safe harbor. So there's a lot that's broken in the US regulatory scene and DC's relationship with tech more generally. But I think the difference this time around is, with a company like Facebook, you can call Mark Zuckerberg up and yell at him in front of Congress.

• 31:21Speaker 02

  You can't do that as effectively with these crypto developers and these new protocols because they will just spill overseas. And the development will defect, and it is actually easier than trying to migrate and import an entire software-as-a-service legacy business from San Francisco to Portugal or San Francisco to Singapore because these are protocols that are being developed in a remote-first global environment from day one.

• 31:49Anthony Pompliano?

  So this brings me to the idea of these decentralized autonomous organizations, or DAOs.

• 31:56Anthony Pompliano?

  I'm going to explain what my view of kind of Bitcoin and the regulatory environment it is. You can tell me that I'm right or wrong, probably you can tell me I'm wrong. But you know, kind of feel free to edit this at all.

• 32:10Anthony Pompliano?

  Bitcoin is probably the only asset that across all of the regulatory bodies in the United States has either gotten the official thumbs up, you know, this is not a security. Or somebody in the position of power or influence at the top of the organization at a conference or something has confirmed that as well. Right. And my understanding is that it really all revolves around this idea of decentralization. We don't need to get into what exactly qualifies as decentralization versus not. Is it spectrum? Is it not whatever? Okay, there's decentralization. People say that's not a security. Ethereum then is the second largest asset, obviously. And I would say that majority is probably how I would categorize it.

• 32:53Anthony Pompliano?

  Agencies have come out and said they do not believe it to be a security. I think there's some that still haven't said anything publicly, but the thought process is maybe it was, maybe it wasn't at the time of which it was issued. But it is now sufficiently decentralized. Again, we kind of start getting into some more of the nuance. And so some of the organizations that have at least publicly commented on it believe that it is not a security today. If we, let me pause there. Is that like an accurate understanding of how you see those two assets so far to where we've gotten from like a regulatory standpoint?

• 33:26Speaker 02

  Yeah, I think that's right. And what you're referring to is actually a language from an SEC commissioner that opened the door for a crypto asset to become quote unquote sufficiently decentralized. What exactly that meant, they never elaborated on. So, you know, we're still waiting for that clarification.

• 33:43Anthony Pompliano?

  Okay. So let's just say that's where we are now. There are a ton of projects, from my view, again, agree or disagree, that are not decentralized. Whether they say they are or they aren't, just not decentralized and likely to either one, not be successful and or potentially come under regulatory scrutiny, potentially penalties, whatever. We've already seen some of them where regulators have gone after them. We've got others that I think, you know, the community, the audience believes, you know, these are likely to be the crosshairs. Let's set those aside. I don't want to deal with those ones because frankly, I'm no smarter than anybody else there. But there is a subset of the rest that are trying to achieve decentralization as

• 34:26Anthony Pompliano?

  a way to operate within the rules, but also provide these technologies, these services to the audience. And so my understanding is that DAOs have, you know, that idea, sort of as an idea before we get to more of like a default product, that idea has become the consensus of like, this is how we're going to do it. What is your kind of understanding of the state of where the DAOs are? And how much of that is like, we're late 90s, good idea, first iteration probably doesn't work and it'll take another decade for it to work versus no, right idea, right time, you know, there are going to be some that work and some that don't?

• 35:06Speaker 02

  I think this is the trillion dollar question for, for the next couple of years.

• 35:11Anthony Pompliano?

  I'm looking, I'm looking for free alpha from you. Come on, just give it to me.

• 35:15Speaker 02

  That's why we're here, baby. So bang, bang. Well, I think, you know, from a personal investment standpoint, you know, I read about this in the thesis and also where you're really putting our money where our mouth is. This is where we're spending a lot of time at Messari, building tools for DAOs and for users that are actively participating in these DAOs. So first of all, you know, what is a decentralized autonomous organization? Right? It's basically a set of smart contracts that creates a governance structure to manage some library of assets, which usually includes a treasury, at least of a native token that

• 35:55Speaker 02

  represents interest in the DAO. And you think about it, you know, a little bit like a share of stock, right? Because it has voting rights and you can basically control the governance of the system. And then it can control all sorts of other assets, either other currencies in the treasury, it can control, you know, the IP and the keys to the protocol, like the root access and where developers can commit updates. At the end of the day though, it's easiest to just think about it as like a community governed bank account, right? Or, you know, some type of collective governed pool of assets.

• 36:36Speaker 02

  And that brings about some challenges in different jurisdictions when it comes to how do you do business with a DAO, right? What type of legal entity is it? Can you even enter into commercial agreements with a decentralized organization that isn't a formal partnership or a formal LLC or other corporation? And then, you know, beyond that, how do you pay taxes, right? So if the DAO contracts with, you know, another protocol and a certain DAO is basically representative of a group of ten developers that are providing like contract auditing services to other protocols.

• 37:18Speaker 02

  Well, how does that entity then pay taxes? Is it pass-through like an LLC? Is it, you know, are they, who's handling the withholdings and all the other kind of payroll tax elements? So there's a whole mess in terms of the operations of these DAOs that ultimately stems from the fact that we don't have a good legal definition of them anywhere in the US. Now, there are examples and kind of early iterations of DAO legal structures that I think are going to become commonplace and will ultimately get adopted nationally. And actually, there's been at least one proposal in Wyoming, and I think another in Texas,

• 38:00Speaker 02

  to actually give certain types of DAOs legal standing and give them a path to registering in the state of Wyoming so that they have a given tax status. What's funny is this actually happened in the 70s with something called the limited liability corporation, which if you're an American, particularly if you're an investor or you run a business, you're probably familiar with LLCs as, you know, an innovative new corporate structure that, you know, frankly, is only about 40 years old. It started in Wyoming and it took about a decade or so for that structure to actually be recognized nationally by the IRS. So there's precedent for this in terms of like starting locally or starting at a state level.

• 38:41Speaker 02

  With a new construct and then you'll bring that up to the federal level. Andreessen Horowitz, Aaron Wright, Lex Node, I always forget his real name from Delphi. They've all written about unincorporated associations, which are basically a form of nonprofit that DAOs could hypothetically follow this path and ultimately become legally recognized in the US. So that's all the legal jargon that nobody cares about, but for the 5% of people who are listening that do and find that interesting, there is a pathway there. I think the bigger challenge that needs to be solved with DAOs is understanding how

• 39:25Speaker 02

  are you ultimately sharing information at scale and how are these DAOs and these token governed communities fitting under the spirit of legacy securities protection or consumer protections? And that's a little trickier because who has liability, who's responsible for this information? It sounds nice in theory to quit among like crypto crowds, do your own research and basically figure everything out yourself. But going back to your earlier point, I mean, the reason that we have an outsized market share in the US of the financial markets is because of the rule of law and property and kind of expectations around information symmetry between investors and fair play. And I think right now we're still

• 40:10Speaker 02

  very much in the early stages where insider information runs rampant only because the insiders are the people building these ecosystems. And hypothetically, these would be startups in any other environment. It just so happens you've got this weird dynamic of public market liquidity, private market information asymmetry, not because people are trying to scam others or outright defraud them, but because it's unclear who can even make a disclosure on behalf of a given community. So I'll give you one example just to make this tangible. There's a protocol called Melonport, which launched a few years back.

• 40:54Speaker 02

  And they since changed their name to, you know, something else. It's called Enzyme now, but when it was first started, it was called Melonport. And the Melon Protocol basically was built over the first couple of years and then ultimately launched into the wild. The token holders were basically given control of the system. And the legal entity that had spun up the protocol to begin with, literally disbanded. They dissolved the entity. And the only thing that was remaining were the token holders that were responsible for ongoing decisions and upgrades to this community governed protocol. Now, other companies could ultimately provide services or contribute to developments.

• 41:38Speaker 02

  But there was no company that existed any longer, and yet these tokens persisted. So in the future, I think you're going to see a lot of structures that either look like that or that basically, you know, start out with these, you know, almost like immaculate conceptions for organizations where it's a handful of individuals and entities that kind of get together and they launch a essentially group project. They have interest in it in the form of tokens. The tokens don't necessarily have any real world value. But then over time, as the community around it gets larger and larger, more people want to enter the community, then by definition, those communities have value.

• 42:22Speaker 02

  And then the membership interests, which are the tokens, you know, will accrue value alongside of it. So there's this like chicken and the egg thing in terms of like the governance of these token systems that are governed by DAOs. How do you, how do you start from day one with disclosures and liability and kind of managing all of the traditional like corporate responsibilities? And then over time, even as you're decentralized, what are the different stakeholder responsibilities in that given system?

• 42:56Anthony Pompliano?

  One of the things that you have in the document is all about venture capital and capital flowing in. So whether it is decentralized, things that we're just talking about, whether it is equity-based opportunities, or everything in between, it's very obvious that there are billions and billions of dollars flowing into the industry. There are now multiple asset managers or venture capital funds that have raised billions of dollars for a single fund.

• 43:24Anthony Pompliano?

  How does the role of an investor change in this new world? Is it still what I'll use as like the quintessential overgeneralization, you know, the VC in the vest who just strokes a check after they've paraded you around their firm and you've met everyone and everyone agrees like, yep, this sounds great and let's write a check and then we'll go brag about it when they're successful? Is it the other extreme, which is like the investor is in the Discord and writing code and you know, is like part of the community? Is there a mix? Like, how do you think about the role of an investor as so much capital flows into this industry?

• 43:58Speaker 02

  I don't think this is unique to crypto, but I think that basically all of the top performing venture funds, whether you're talking about crypto or otherwise, it's getting more competitive to enter rounds and the only way that you can enter rounds and you'll get the preference of the entrepreneurs that you're working with is to be thought of as a value-added partner. And that, you know, well, every VC is gonna talk about how much value they add to their portfolio. The lion's share of the value that they bring to the table historically has been the check that they write, right? Or, you know, maybe one level up, if they sit on the board, they're providing some type of oversight and strategic value at the board level as a

• 44:42Speaker 02

  director and part of the corporate fabric. But, you know, for the most part,

• 44:49Speaker 02

  The thing that really matter for crypto entrepreneurs and entrepreneurs in general is what type of signal is this going to send to business partners, to key recruits, to the rest of the marketplace about our viability as a business because you don't have the benefit of a 20-year track record as a legacy business or legacy brand. And then the other thing is distribution, right? So how effectively will an investor's involvement with a given company help them kind of build out their capabilities on the business development front or marketing

• 45:31Speaker 02

  front? How quickly can they become more widely known and accessible as a product? And I think within crypto projects and those that have tokens in particular, this is kind of dialed up to 100 in terms of importance. Because if you don't have good community distribution and you don't have the ability to get very quickly connected into other projects across a given ecosystem, you are just going to fall to the back of the line in terms of priorities for BD and technical integrations. And then you're also going to fall to the back of the line in terms of investor mindshare. There's so much going on and user mindshare,

• 46:15Speaker 02

  not just like VC mindshare, but like in user investor mindshare. There's so much going on right now that there's 500 protocols today that have $100 million market cap reward. I guarantee you that even most people in the industry would not be able to put 50% of those names onto a whiteboard and get the answer right. Because there's just so many that are like up and coming at the same time. There's a lot of things that are garbage that you've never even heard of. But the fact that you can actually run a $100 million business in an ecosystem that didn't exist four years ago, if we're talking about tokens versus like

• 46:59Speaker 02

  the early generation of coins, like 2017, four years. There are hundreds of these businesses that are less than four years old that no one knows about, right? And so I think the value of an investor in that environment is helping an early-stage community think about how they become ubiquitous, how they actually stand head and shoulders above other competitors in a pretty crowded marketplace, and how effectively are they going to be able to help connect the dots with the rest of their community-oriented investments?

• 47:38Anthony Pompliano?

  When you think about the founder, we talked a little bit about how the investor role changes. The founder used to be the person who owns majority of the opportunity or the entity. They kind of called the shots. With the rise of DAOs, or decentralized efforts, or even just pure open-source software that has no kind of token or anything associated with it, how does the person whose original idea it is, or who writes the first amount of code, or who organizes resources in the beginning, who historically would be called the founder, like, how does their role change in all of this?

• 48:16Speaker 02

  I think it really depends on, from case to case, but I think strong founders that bring projects to market and that have some success, even if they relinquish control and these become community governed hypothetically, the founder still has an outsized role in these ecosystems. And there have been cases where the founder has stepped back and it's been a negative signal, and you've seen a lot of selling after the fact, and people basically lose interest in the project because they think that is leaderless, or they think that it's rudderless because the rest of the community is not going to be capable of

• 48:54Speaker 02

  picking up the slack with the same credibility or passion that the original founder did. So I think it's very important, but again, I think when we go back to thinking about something like the safe harbor and the need to update securities laws... Here is an example of

• 49:16Speaker 02

  the bad things that can happen when you don't take this new technology seriously and you try to label everything as a fraud that's not sufficiently decentralized without any path to actually doing that the right way. You could legally sell tokens to accredited accredited only investors in the US, only distribute those tokens once a network launches, have the network explicitly designed to consume those tokens as, you know, an actual utility coin, not just like a security by another name, but, you know, have have the tokens kind of useful in this decentralized protocol that the investors can redeem and then, you

• 49:58Speaker 02

  know, ultimately reward other kind of new users the protocol at the same time. And the day that you do that, the team that released the token in the first place washes their hands of the project, moves on to something else, and you've now got a non-entity, a non-organization, and basically no leadership for for a set of protocols and potentially a lot of, you know, financial value that basically is floating in the ether but isn't being pooled or kind of put to any real productive use. And there's no kind of ongoing developments that will, you know, scale up the the use of that protocol or scale up the

• 50:42Speaker 02

  scale returns for the folks that remain in the system and are sticking around either using it or trying to reinvest in additional growth. Hypothetically, that would not be a security, because there's, you know, there's no longer a common entity in the case that upon launch of the protocol, the entity that created the protocol in the first place just dissolved. There's no expectation of profit based on the work of others because you're you basically just fired your core development team. And and the SEC would look at that and say, yeah, there's, there's no common enterprise here. There's no ongoing

• 51:25Speaker 02

  development. It's been very clear that any user in the system is just using the protocol, but they're not expecting a profit because how could they? There's no one working on it.

• 51:36Speaker 02

  You know, that that would be seen as a non-security and and you know, probably better than the alternative, which is I have a company, I sell, you know, I I want to retain some governance rights over this protocol. And we're going to retain 20% ownership for for our company. We're going to have 20% to a foundation. We're going to give 20% to users and advisors and have this really sophisticated rollout schedule. Because that's centrally controlled at the time of launch, and the assets are liquid at the time of launch. All of a sudden, that flips into looking like an unregistered security, and now you need to come in and talk to the SEC, even if it might ultimately break the utility of

• 52:14Speaker 02

  the token. I think, again, that's obvious to anyone with with two eyes. That's ridiculous and unsustainable for for us as a country and as an economy. But that's kind of the reality of where we are today. And I think that's that's one of the things that's it's probably the issue of the new year that still needs to be solved.

• 52:42Anthony Pompliano?

  How big can all of this get? Like, we're talking about the nuances here, and I think that people generally are going to end up on one of two sides. They're either going to end up on like, yep, this mostly makes sense. Maybe I'd have some disagreements about some of the the detail, but like, yeah, this is going to be a thing. There's going to be people who say there's zero chance that this is going to work. And like, you guys are all morons and wasting your life and, you know, see ya. Okay, the people who believe it's going to work, if they're right, how big does it get? Is this a, you know, two and a half trillion dollar market today that goes to 10 trillion, 20 trillion? Or is this like a market expanding technology that literally we start measuring entire assets in, you know, 100 plus trillion dollars, you know, kind of market caps?

• 53:26Speaker 02

  Well, you know, there's, at the end of the day, if Bitcoin and crypto goes high enough, the price becomes infinite, not because there's no cap in terms of like growth potential, but because fiat currencies stop mattering as as kind of the base unit of account, right? So that the dollar hyperinflates or the euro hyperinflates or whatever, the whole, you know, one Bitcoin is one Bitcoin meme. So, you know, I do think that if you think about cryptocurrencies as a potential replacement for fiat currencies, I don't think that's completely outside the realm

• 54:08Speaker 02

  of possibility. But I think it'd be a really kind of messy and chaotic future if that's where we go in the near to medium term. What's more likely to happen is, you know, this tech is going to sit alongside the regulated financial system, you know, the Web 2 stack of Facebook and Google and Amazon and all these other big tech companies that we know. And they're going to coexist. So the question is like, how big should the parallel system be and the user own economy be in the medium term? And I think maybe just getting to parity with some of the old world analogues is how we should be thinking

• 54:52Speaker 02

  about the near term. So 55% of gold reserves are held for investment and in central bank coffers. If you get to parity, if Bitcoin gets to parity with gold, just for that use case, that's about $6 trillion, a little over $6 trillion. That would mean we're at $300,000 for Bitcoin, right? So gold, gold, that's parity. Then you look at kind of where Ethereum is, and you think about the Facebook, Amazon, Microsoft, Google, Apple, right? Like somewhere between a trillion and $2.5 trillion in market cap. Ethereum is about half a billion, it's up to 600 billion, I think, maybe today, close to it. So, you know, a double from

• 55:37Speaker 02

  here is getting close to 10,000. And it's still, you know, would only rank, you know, barely in the top five for the things. Then you look at something like DeFi.

• 55:51Speaker 02

  And we are at less than one tenth of one percent, I believe. No, sorry. We're less than one percent of just the banking market cap. So about like 0.7% of the bank's market cap is in DeFi-related assets today. Do you think that can get to 10% in the medium term? I do, right? So I think that becomes your target. And then finally, with something like NFTs, which really is basically just creating digital, scarce digital objects in the virtual world versus scarce physical objects in the real world.

• 56:33Speaker 02

  The sky's the limit there if you expect that we're going to spend more and more of our time online over the course of the next, you know, five, 10, 15 years. So I think the way to think about crypto versus kind of legacy finance or just legacy assets in general is that these are going to exist alongside each other for a very long time. And it's going to be much more gradual than I think a lot of people tend to talk about these things, right? Like, we're not going to jump immediately from like the world that we live today into this like Web3, you know, very futuristic utopia of crypto asset-powered networks.

• 57:18Speaker 02

  That installation phase is going to take 10, 15, 20 years, right? We're still seeing the scale and growth that like the mobile boom has generated. And even like the Web1 internet, so that's taken a good 30 years for the internet, a good, you know, 15, 20 years so far for mobile. I don't expect that's going to change overnight, but it could be, in the same breath, it could happen a lot faster or certain parts of the asset class could grow at kind of hyperspeed in some years and you'll see kind of long bear markets for others. Perfect examples like NFTs versus DeFi.

• 58:02Speaker 02

  NFTs could continue to explode next year because It's an asset that people understand and has like real retail interest and adoption, and not as much in the way of regulatory headwinds. On the other hand, DeFi, very interesting, extremely useful, lots of momentum and lots of interest and technical development, a lot of really smart finance people are working on it, but it's got these crazy regulatory headwinds right now. So it's not going to be a straight line, but I think people that have the long-term mindset are going to be rewarded, not necessarily on individual bets, but at a macro level if they're spending their career here.

• 58:42Anthony Pompliano?

  When you start to look at those cycles, you're talking a little bit about like the decoupling of assets and kind of various severity and length. Are we going to get to a point where everything is completely decoupled? Or will there still be the crypto market, which encompasses everything from Bitcoin to NFTs and DAOs and everything in between? Or do we just penetrate and infiltrate all these other industries? And so similar to, you know, companies used to say, hey, we're an internet company. Now it's just like, we're a company, right? And of course we use the internet. We're like, how do you kind of view this sequentially playing out, if you will?

• 59:22Speaker 02

  I think we've already decoupled to a certain extent. So my friend, Dan Matasuski is an investor too. He popularized what he calls the hot ball of money trade earlier this year. I'm not sure you've seen this on Twitter, but basically, you know, you go to where the hot ball of money is flowing next. And like this rotation between different sectors of crypto over the course of the last year and a half, it kind of reflects that we are decoupling, right? We're decoupling thematically first. And, you know, over a longer time period, we'll likely decouple, you know, from the macro markets and general tech markets as well. But at least for today, there has been a decoupling of different sectors within crypto.

• 1:00:07Speaker 02

  So people have started to recognize that cryptocurrencies like Bitcoin are going to be different and they're going to trade, you know, a little bit differently than like layer one smart contract platforms like Ethereum, Solana, Terra, you know, Avalanche, et cetera.

• 1:00:24Speaker 02

  And you'll see this year Bitcoin has been, you know,

• 1:00:29Speaker 02

  It's had a good year, but it's been relatively flat. I think at the beginning of the year, you know, it's it's less than doubled, which if you compare it to Ethereum and then all the other kind of smart contract platforms that that are competing with Ethereum, that those assets have gone up, you know, 10, 100x over the course of the last nine months to absorb some of this demand and all this transactions throughput. DeFi, you saw the same thing. It's gone the other direction, right? In in Ethereum terms or in Bitcoin terms, a lot of DeFi is flatter down. So it's been in this like nine, 10 month bear market. The the next theme that people have really gotten excited about instead has been NFTs. That's, you know, kind of the the next cycle here.

• 1:01:15Speaker 02

  And I think, you know, as one of these sectors enters a bear market, it's likely that the other will enter a bull market and vice versa. So instead of having this multi-year bear market that kind of washes away a lot of early projects and really creates a lot of pain like we saw in 2015 and again in 2018, 2019. Instead, we might be in an environment where, yes, there's, you know, maybe there's some blow off top and then there's a pretty significant correction. But you'll also see some type of backstop because unlike the last couple of cycles, there's now tens of billions, you know, maybe even $100 billion of capital on the sideline that that's ready to get put to work within crypto.

• 1:01:59Speaker 02

  In the in the events that if things do fall pretty precipitously in 2022 or at some point when, you know, the bubble pops. I think at that point, you know, that's when we'll see like real, like long-term winners emerge and the also rans will fall by the wayside, just like every other cycle, right? So you you'll see some new horses that have some staying power and then you'll you'll see some old ones that, you know, get sent to the glue factory.

• 1:02:24Anthony Pompliano?

  When you start to look at this whole idea of surviving winter, that is one of the other themes in here. I think in past cycles, people have basically gone from those rotations out to risky assets and everyone kind of comes running back into Bitcoin and what's deemed as the less volatile or more stable assets. Now, it's comical to say that because they still draw down 85% in past cycles. So, you know, less stable, meaning that other assets drew down 99%, you only drew down 85, but still, there has been that rotation that you described. How do you think about the activities in future bear markets? Is

• 1:03:05Anthony Pompliano?

  it learned from the past ones? Or because now you get some of this decoupling, you get kind of different assets, you get rotations. Is there almost this belief that like there will always be a bull market and a bear market that could be going on at this any one given time? And so you have to learn more about rotation than it is like what to do in a bear market. You just avoid the bear markets by rotating into something that's not in a bear market?

• 1:03:26Speaker 02

  Well, I think that's exactly right with one caveat. I mean, you can rotate into stable coins as well, which is essentially rotating into cash, but those assets are still locked in the crypto economy. You're not necessarily taking them back out into the legacy finance system. Yeah, I think something would have to go really catastrophically wrong for that to be an end case in the next couple of years from a policy standpoint, right? Because I doubt very much that you'll see kind of user or developer enthusiasm abate to that extreme level that you would just see like a wholesale exodus of assets.

• 1:04:08Speaker 02

  I don't, I'm not someone that thinks that we're just kind of going up into the right in perpetuity, as has been the case for the last decade. There's going to be a lot of volatility along the way. But my point in kind of highlighting that particular section is

• 1:04:25Speaker 02

  We could have a winter where Bitcoin does rally to reach parity with gold as an investment, which again would be about $300,000 per Bitcoin. That would be wildly, wildly overheated, in my opinion. So the crash from there could very well be 80%. Well, you know, an 80% drop from 300,000 is, you know, $120,000 Bitcoin. Or sorry, 60%, if there's a 60% correction, we'll go from 300,000 to 120,000. And that would be pretty bad, right? Not just for Bitcoin and for crypto more generally, but I think for the broader economy.

• 1:05:06Speaker 02

  Because at that point, you're starting to talk about like a ton of real world value that's getting sucked out of people's investment accounts because their assets have depreciated. So what I've suggested, it's just kind of common sense, sanity checks. If you're relatively new to crypto and you are interested in being very aggressive and you've got a risk on appetite, that's fine. But I would just keep an eye on the calendar because there's three types of leverage. There's the obvious, which is you're borrowing to buy more. So your lever's long. And we've seen 20, 30% drawdowns.

• 1:05:48Speaker 02

  The odds of you kind of getting caught with your pants around your ankles is high. And it's a good way to get liquidated when the upside of this asset class and this investment class is still incredibly high. So why take the added risk with adding leverage to go long? The other leverage, which is just the dumbest form of leverage, is like going short anything. Like why you would go short any asset that has a tendency to go vertical because a celebrity tweets about it, it's probably a bad idea. And then the third kind of hidden bit of leverage is tax planning. So I think what I worry about for newcomers is anyone that's made a lot of money this year, particularly in something

• 1:06:31Speaker 02

  like NFTs, where they're going to have to treat these as capital gains and they haven't done the tax planning in advance. Well, if we have a 40% correction on January 1st, some of these folks might actually owe more in taxes than they made all this year. And you know, tough shit as far as the IRS is concerned, right? You can write off those losses for the next 10 years or whatever, but that doesn't change the fact that you still owe what you owe for last year. So this is basically like a one month warning. Get your shit together, you know, write off, you know, try to realize some tax losses if you have them and make sure that you have the cash on hand to pay whatever your liability is for next year. Otherwise, it's a hidden form of leverage.

• 1:07:16Anthony Pompliano?

  Public markets have come into play. We've seen tons of Bitcoin miners either become public or start to get a lot of notoriety and capital markets exposure using debt markets or equity raises. Then obviously we had Coinbase go public as well, which was kind of the quintessential, you know, American brand, if you will, at least from a retail and Wall Street perspective. How do you think about public markets and that evolving through 2022?

• 1:07:44Speaker 02

  I think it's good for the free marketing and for the insights it gives like institutional investors into how this entire ecosystem of new assets is evolving and where to look for opportunities. Coinbase in particular is interesting because you see how quickly some of the non-trading components of their business are growing, right? Particularly staking and custody. So you can tell just from their custody numbers that they're onboarding a lot of new institutional entrants. You can see from staking that this migration to proof of stake networks is going to be extremely lucrative for anyone that's actually, you know, custodying assets and serving as like a hosted

• 1:08:24Speaker 02

  service for users. So as an insider, you know, I like looking at their 10 Qs just because I could care less about the transaction revenues. You know that that's going to be volume driven. And you you more or less know on a day to day basis how much these exchanges are making money. If you just look at their historical volumes, which are public, you look at their quarterly reports, which are now public, and then you can kind of, you know, guesstimate what the the average, you know, basis point take rate is on on those volumes. So it's not necessarily useful for anyone that's in the trenches and knows where to look within crypto, because a lot of this is just, you know, public record.

• 1:09:08Speaker 02

  I do think that the the large institutional investors that are going to, you know, make their initial plays in crypto, they're going to look at things like the ETF. They're going to look for things like Coinbase and some of the public miners that they can get behind.

• 1:09:28Speaker 02

  But the reality is, you know, that those assets are probably going to underperform the underlying at this point, particularly, you know, when it comes to like new token related projects. So if I were to guess, you know, where the returns flow in the next couple of years, number one is going to be in liquid tokens. Number two is going to be in startup infrastructure and all of like the new, you know, kind of pre-IPO infrastructure. And then, you know, number three would be anything that's publicly traded. So a perfect example of this is Digital Currency Group, where great business has grown to,

• 1:10:09Speaker 02

  you know, $10 billion valuation, which just announced a few weeks ago, they did a large transaction with SoftBank. But, you know, it depends on your vantage point, you know, whether that's that's been a good investment or not, because, you know, that as an investment is incredible by like real world venture capital standards. It's outperformed Bitcoin by 80% over the same time period, right? So like those, those are the things that companies, public companies and and and non-tokenized companies are competing with, these really crazy outsized returns within the liquid markets. Whether that's sustainable is, you know, for the investor to to kind of make up their mind.

• 1:10:50Speaker 02

  But I would argue that if you are trying to go non-token, because you think tokens are in the bubble, but you still believe in the asset class, you probably want to be making, you know, venture style bets on on some of the enabling infrastructure versus the the public markets.

• 1:11:06Anthony Pompliano?

  Last thing I want to talk about, which you kind of cover in here, kind of not, it's just memes. The meme is the message. It seems to be more and more understood every day, every week, every month. You do cover W A G M I, we all gonna make it as one part of this, but I think it's one piece of a much bigger story just around, you know, kind of memes and how they fit in here. I don't think there has to be an answer to the question I'm about to ask, but I'm interested in your thoughts. How much of the Bitcoin, smart contract, Ethereum, stable coins, DAOs, NFTs, like the whole spectrum has to quote unquote, grow up and

• 1:11:51Anthony Pompliano?

  mature and fit in with the Wall Street finance and like, you know, Silicon Valley tech VC crowd versus they have to capitulate and they've got to learn the memes, they've got to come and play the game, they got to take their suits and ties off and go the other way. Is it either or is it mutually exclusive? Is it blended? Well, how do you think about it? Like memes to me is like the, the big thing, you know, you don't exactly imagine like a Wall Street banker texting somebody W A G M I, but I've seen it. So how do you think about this?

• 1:12:33Speaker 02

  I think it's a little bit of both, right? I certainly think that, look, I think the banks will ultimately leverage open protocols like Ethereum or, you know, in DeFi, you know, like, like Maker DAO, like we saw with SocGen in France, providing collateral to Maker, which is a decentralized finance lending platform. I think you'll start to see more of those integrations and you'll start to see the major financial institutions take it seriously because one thing that they're very good at is going where the money is. And historically, the problem has not only been regulatory in nature, but it's been, you know, is the, is the liquidity

• 1:13:15Speaker 02

  of the asset class deep enough? And like, is there an opportunity to make kind of real outsized returns for the technical regulatory, you know, and financial risks that that would be entailed with going all in here? I tend to think that most of the growth here will come via M and A. And you know, it's going to only happen once there's a little bit of regulatory clarity and there's some kind of clear guidance from on high, what is kind of fair game and fair play for the banks themselves. I definitely think some of the like regulatory pressure is coming kind of indirectly from the banks, but not maybe in the way that crypto folks think that it is.

• 1:14:00Speaker 02

  It's not crypto is like a existential threat to us and our business models. Yeah, maybe there's a little bit of that, but the banks are pretty fucking powerful. So like, you know, I like, I don't, I don't think anyone is losing sleep over this right now. It's mostly, we want to play by the same set of rules and we want those rules to be enforced because there's an ungodly amount of money being made. And if you're telling us that this is illegal, then we want to be able to participate and we want guidance on how we can participate because you know, it is a threat for us to be forcibly removed from this market and kept on the sideline. You know, or crack down on it, right? Like enforce the law.

• 1:14:44Speaker 02

  If you, if you think that these new assets are unregistered securities and you think that it's ripe for scams and abuse and all that, then then shut it down or actually pick up the enforcement against bad actors. So, you know, there's, there's definitely history on the side of Wall Street, you know, they digitized pretty effectively. Peer to peer lending, all that market making is basically now done by the big lenders, the big banks. So, you know, I, I don't really view crypto as ultimately being any different and we're starting to see more, you know, legacy financial firms come into the fray, you know, like, like Jump Capital and, and some of the big market makers, you know, Siskiyou and whatnot.

• 1:15:29Speaker 02

  I think. That's inevitable and it's the it's kind of the other side of the coin when it comes to regulatory updates, right? If if smart regulation is passed, which again, I think I'm in favor of, I think most professionals in the industry are in favor of smart regulation and weeding out fraud and making sure that everybody's playing on equal footing. But I think if that is all handled and Congress or policymakers don't throw the baby out with the bathwater, then you will see financial firms enter in a meaningful way and the space

• 1:16:10Speaker 02

  will continue to professionalize. And just like, you know, tech and every other asset class, you know, the incumbents will adapt. Maybe you don't have to wear a tie to work anymore. Yeah, I think that pressure's already come from Silicon Valley to the banks. But, you know, at the same time, maybe the folks that are walking around in sweatpants and hoodies and flying by the seat of their pants are kind of managing, you know, multi-signature wallets that have billions of dollars worth of assets on it on their own personal hard drives. Like, maybe that'll get cleaned up as well. So there's, I think, it's less about

• 1:16:53Speaker 02

  like banks versus crypto or like legacy finance versus crypto and more about like the crypto cowboys and then the crypto professionals and how that spectrum ultimately integrates with the rest of the financial system. So we're getting there and I expect I expect next year to be another big year, even if the market growth and appreciation cools off a little bit.

• 1:17:20Anthony Pompliano?

  Can't go up hundreds of percent every single year forever. But I tend to think that there's no better market in the world to be spending your time, energy, money, etc. And so I feel like you feel very similarly that I do. Where can we send people to read this report?

• 1:17:40Speaker 02

  You can go to massari.io. It's going to be right on the homepage for pretty much the entire month. And it is a media report, so we're releasing it early in the hopes that people will be able to read it, you know, kind of throughout through the holidays, whenever you have a few hours, because it is going to be about, I think, 180 pages. But the good news is it's split into about 120 sections. So 10 chapters, 120 sections, give or take. And those can all serve as tear sheets for different rabbit holes that your listeners might go down over the course of their journey and over the course of not only kind of holidays, but into next year.

• 1:18:21Anthony Pompliano?

  Where can we send people to find you on the internet? Where do you want them to go?

• 1:18:26Speaker 02

  I am at twobitidiot, all spelled out. T W O bit idiot. The most fortunate accident of history. My 2013 Reddit throwaway name is now permanently tied to my identity. And it fits, you know, that pump.

• 1:18:42Anthony Pompliano?

  Two bit idiot who can churn on 180 pages. You, I wish I was an idiot.

• 1:18:51Anthony Pompliano?

  Awesome, man. Listen, thank you for doing this. I enjoy reading it every year. I've had the ability to skim through it, but I feel like it's one of those things where you're scratching the surface like, damn, I had to sit down and read this whole thing. I shouldn't have even skimmed it because now I'm convinced that four or five hours one day, that's what I'm going to go sit down and do. So I appreciate you coming on. If you do not follow Ryan on the internet, I don't know where you've been, but you should definitely go do that. And then massari.io if you want to read, read the full document. But I think that's it, man. Thank you so much for doing this.

• 1:19:26Speaker 02

  And you know what? If people just cannot bear the thought of opening a document that's that large, which I don't really fault them for, I will also be in massari-crypto, at massari-crypto, will be tweeting out chunks of the report, basically all throughout the month of December.

• 1:19:44Anthony Pompliano?

  I feel like the Twitter thread is the cheat code. So I'm going to read it first before you do that. All right, my friend.

• 1:19:52Speaker 02

  One more thing. We've got a big announcement coming up next week. If the theses weren't enough, we've got a major new products that's coming out next week focused on Dow operations and participation. So people take a look at that. If they want to sign up for updates can get that same place you sign up for the thesis.

• 1:20:13Anthony Pompliano?

  You're a legend. I appreciate you. Do it again next year. Maybe we'll do it a couple times between now and then too. But thanks so much.

• 1:20:19Speaker 02

  Back to the man. Thanks as always. Make it an annual tradition.