How Unichain and Geopolitics Are Redefining Crypto's Value | Avichal Garg & Michael Anderson

Hey everyone, no roundup this week. We're coming live from Permissionless. Got too slammed at the conference and you are allowed to give Santi shit for this. He was not able to make it. So instead, you're about to hear a chat that I did on the main stage. It was a fireside with Michael Anderson from Framework Ventures and Avichal Garg from Electric Capital. We recorded it Friday morning. It was a really interesting conversation about both the election and its impact on crypto in the US. Some new ideas that you probably haven't heard before there. And then more importantly, really in-depth thoughts around the future of apps and Uniswap and the UniChain and what that means for OP, what that means for Uni, what that means for ETH.

So hope you guys enjoy.

This episode is brought to you by Anoma, the universal intent machine introducing a new era of applications where you define the outcomes you want. To stay up to date with Anoma, you can follow them at x.com/anoma or sign up for the newsletter at Anoma.net. Special thanks to Anoma for sponsoring today's episode. Let's face it, building on crowded L1s or expensive L2s is just not going to unlock the next generation of applications. Supra Containers offers dedicated customizable app spaces running on Supra's 500K TPS Layer 1 blockchain, giving you complete control over gas tokens and fees. Get notified when Supercontainers are ready for builders at super.com/containers.

I think I'm doing the intro. Uh, please help me welcome Avichal from Electric Capital and, uh, Michael Anderson from Framework Ventures to the stage. How we doing?

Fantastic, how are you?

Good.

Good to be here.

Good to be here.

What happened to Vance?

We lost one.

We lost one. Tough, tough. Didn't want this heat. Um, alright, few topics I wanna talk to you guys about. There's this thing that I'm starting to, uh, probably annoy people with on Twitter and in person already, which is like apps and this, uh, entering the golden era of apps. So I do want to talk about that. Unichain, I want to figure out if you guys think that's bullish or bearish for things like UNI, ETH, OP, like where the value accrues there. I'd love to talk about gaming, and I'd love to talk about actually the election. Do you guys have a preference on where we start?

No preference, but I will prestate that I'm just going to disagree with everything.

You're going to what?

I'm just going to disagree.

Naturally. We're going to disagree on everything. It's like really boring if we all just agree on everything. Whatever he says, I'm just gonna debate format.

Great, great. And by the way, Santiago is supposed to be here, so if you guys, uh, want to make my day, you could tweet at Santiago and give him shit for why he's not on this panel. Um, all right, maybe we can actually start with Unichain. Um, so, so Uniswap launched, uh, Unichain, and you know, there's already been multiple panels on it today, but, uh, none of them really covered like, like value accrual and who this is bullish or bearish for. And there's tweets You could find a thread about why it's bullish for Uni and bearish for ETH, or bullish for ETH and bearish for Uni. I'm curious from a value accrual perspective how you guys are thinking about both Uni and Unichain, but this broader AppChain thesis in general.

I mean, I think the first thing is, will probably be difficult to disagree on this one, but it's definitely bullish Uni. I mean, the way that it works is it's an L2 that's specific for Uniswap. It's going to be cross-chain compatible. Cross-chain compatible. I think they said 250 milliseconds block execution time, starting with 1 second, getting down to 250 mils soon. But that's going to be the fastest, I think, execution on-chain. And the way that it'll work with the Uniswap token is that you will become a validator by staking your Uniswap tokens. And once you have enough stake, you become part of the validator set. Once you're a validator, you can earn a share of the revenues that are generated by the exchange. And so I think ultimately, this is adding more functionality. It's adding a new revenue stream. Obviously, you've got the governance capabilities with UNI already. But first step is definitely bullish Uniswap.

What about ETH?

ETH? I mean, I think one of the things— What about Coinbase? Yeah, Coinbase, who knows? I mean, what at least I saw on Twitter yesterday and this morning was that this is bearish ETH. And I think one of the reasons why people are taking that perspective is Uniswap has been the largest burner facilitator of Ethereum burn over the last year, basically since the merge 2 years ago. And I think that in the short term, maybe there's less ETH that is burned, but I think that's actually the mid-curve take. And I know we're on the Empire pod right now, but maybe the bell curve perspective is it's actually very bullish ETH. Ultimately because not only does it provide a new execution mechanism for Ethereum swappers, I think historically we've also seen, as you reduce the cost of transacting, ultimately what happens is there's more volume that gets transacted. And so over the long run, I'd expect that this actually far surpasses what Uniswap was burning in terms of Ethereum tokens. And you know, this may take another 6 to 9 months, but ultimately I kind of see this as being in the J-curve where we're in the bottom of that curve and as we get more and more transactions on-chain, they're competitive with centralized exchange, that's ultimately going to drive more volume. And so ultimately, that's more bullish. And one of the things we were talking about backstage with Sam from Frax is if you just take the perspective of valuing Ethereum based off of a DCF or a price-to-earnings, you can have a bearish perspective on this. But I think one thing you have to factor in with Ethereum is the monetary standard that Ethereum tokens also should imply into their valuation. And so ultimately, I think this adds to the monetary standard. It will ultimately also add to the DCF. But when you find those two together, it's fundamentally bullish.

And the last one is, do you have a take on if this is bullish or bearish for the OP token? Right, because they did this using the OP stack, right?

Yeah, so this will be an OP stack Superchain. Frankly, I think I still have a question as to the implementation of how does this impact OP. Devil will kind of be in the details. I think one of the other questions that I have is, are you paying the fees in ETH, or are you able to pay them in Uniswap? There's still some open-ended questions. This was just announced yesterday. So maybe I'll reserve the right to hold my perspective.

So I got to make the bearish case?

I think you got to just argue in some way here, yeah.

In front of a bunch of ETH maxis? OK. Well, OK, well, first, everything I say is not financial advice, and you should not listen to anything I say about this thing.

Likewise.

Ever. Related to crypto or otherwise. OK, bearish case. So here's one way to think about this. I actually wrote a— I should publish this publicly. We wrote a paper about this internally for our LPs. I'm saying like 2020, which is sort of like our theory around how DeFi would evolve. And it was sort of modeled on how other industries have evolved over time and where value capture is in other industries. OK, so imagine an x-axis, which is essentially like your value chain, your supply chain, right? Um, so like Tesla just had a big announcement last night. So, so think about Tesla. Tesla has a brand, they have end-user relationships, like you buy directly from Tesla. Um, and, uh, there's a bunch of components in the middle that they have to get, right? Like carbon fiber to like make robots or, you know, glass to make windshields that gets installed in their factories. Um, and then there's some like critical components all the way on the other side, like maybe some GPUs, you know, ARM chips or, or Nvidia chips or, Mobileye for self-driving, right? There's like some hard fab, like custom chips kind of stuff that's real technology, right? That's, that's sort of the pipeline. You, you see this in other industries like, um, Facebook owns, um, the end user experience. They now have kind of this hardware that they're building, which you'll put on your face. There's a bunch of, um, you know, SDKs and open source software and stuff in the middle. And all the way on the other end, they have to run this stuff on AWS servers, which are big data centers and, and very CapEx heavy. OK, so that's the x-axis. You'll see essentially from user relationship to usually some very, very heavy CapEx investment. And if you put a y-axis on it, you can say who captures all the value, what you get is this U-curve. So if you own the end user relationship, you can capture a ton of value. You can squeeze your suppliers. You can say, we're Tesla. We have volume. If you want to be the Tesla supplier, you got to work with us, yada yada. Facebook can do that to open source. And all the way on the other end, if you're building data centers, you have a lot of leverage. It's actually hard to displace Azure or Amazon. The CapEx costs are huge. Leverage in it so they can squeeze the people in the middle. And the people in the middle that are sort of like systems integrators and they sort of like pull things together kind of get squeezed. And this is actually an observation from the Acer CEO in the late '80s. He sort of noticed this about the PC supply chain, right? So Windows makes all the money, Intel makes all the money, and if you're kind of in the middle and you don't really have a relationship and you're selling through Best Buy, you get squeezed. And so if you do that with crypto, I think what you end up with is that, you know, Coinbase and Binance make a ton of money, and have a ton of leverage on one end because they own the end-user relationships. And ETH, Solana, Bitcoin, all the way on the other end are these massive capex-heavy— like you'd have to spend billions and billions of dollars today to get that kind of capex investment and compete at a network level. And then everybody else sort of falls in the middle. And at the bottom are the components that anybody can just integrate, and they're open source and free. And I think Uniswap sort of sat near the bottom there. And so they've had this tension for a long time about which direction do they go. In Uniswap Labs, the interface kind of needs to go up this side of the curve to get to the users, and they have to kind of build that interface. And ultimately, that starts to look a lot more like Coinbase, and you start to have to compete against Coinbase for users. And you have a different architecture. It's not necessarily— and then you kind of have a tension with the protocol going the other way, which is you kind of need to move up the chain that way and get leverage. And so to us, it's always made sense that what you would try to do is essentially try to end up with your own chain, in a sense. And I think that's really— to the earlier comments, like, I think that's really bullish ETH because, you know, there's like— do you know what the term is? There's like an economic— there's like a known concept in economics where like when you drive down fees or transaction costs, you drive up volume.

Can't remember the term.

It happens with all infrastructure. It happens with roads.

It happens with oil.

It happens with oil. It happens with energy. It happens with bandwidth on your phone. It happens with CP— it's just like that always happens. So, but there's a term for it that's escaping me right now. And so the real, actually, I think interesting question I have here is like, I think the incentive structure, to get back to the bearish case, I think the incentive structure actually might be that Uniswap ultimately is competing with ETH or that these L2s are ultimately competing with ETH. And they have an incentive to essentially become what ETH becomes over time and become the L1 ultimately. Because if all the transactions are happening there, you can be the system of record and you do get some sort of a significant premium. And you have all the killer apps, like, why wouldn't you become the platform? And the analogy here would be, if you look at, let's say, Google, you know, growing up in the era of Microsoft, Microsoft had the operating system, and what Google was always scared of was that they would get kicked off the operating system, and so they ended up building a parallel operating system, and they built Android, and they built Chrome. And so they built these parallel operating systems that then extracted all the value, right, in this new domain. And so I think there's an argument that, in the fullness of time, actually, this is potentially challenging for ETH, because if the killer app and all of the killer apps are in one place, that ecosystem has leverage over the platform, and there's no reason you couldn't swap out the platform and essentially replace the L1.

So, yeah, go ahead.

Well, yeah, so I think another phrase for this graph that you just drew is the smiling curve, right? And I think the core question comes down to whether or not you think that ETH and Uniswap, Unichain will be competitive, or whether or not one is building off of the other. Because if you're all the way at the end and you're not competing with Ethereum, and you're something that's in between, then you're still stuck in that smiling curve. And so it's just a question of, you know, can you base a lot of the value around the fact that you're built on top of Ethereum, and are they still at the far end of that curve? Or is Uniswap going to be something that disintermediates ETH eventually?

Yeah, my instinct is based on kind of from that 2020 kind of guess that we made turning out to be correct, I think the incentive structure is— I'm not saying they're thinking of this today. I'm not saying that they are planning to do this. I'm not implying anything nefarious or anything like that. But I just think the incentive structures in the fullness of time very well might mean that one day, in the same way that Facebook woke up, or the same way that Amazon woke up, or the same way Google woke up and said, hey, we have the killer app. Like, why shouldn't we build the infrastructure underneath this? Why shouldn't we go down the stack? That happens all the time. And so if it turns out Uniswap is the killer app, and I think arguably is one of the killer apps on ETH, And then they have all the DeFi stuff happening and you're like, well, DeFi is the killer app for this thing. Why wouldn't you move down the chain, right? Like, why wouldn't you go replace it? I think that's the incentive structure. So you can see that happen.

Well, you wouldn't do it because if you're, so for some of them it made sense to go down the chain, right? Like, or go down the chain in the Web2 sense. Like Facebook, it made sense to go down the chain. Amazon, it made sense to go build AWS. But for 99%, it doesn't make sense for Blockworks to go down the chain and build AWS. We just build on top of AWS. So for, as you guys like talk to your guys' portfolio companies, how do you know and how do you recommend like, OK, for you, you should go down the stack and go build an app chain. For you, like why don't you focus up here a little bit more?

It all depends on what plane of competition do you want to be choosing for yourselves. Are you want, do you want to be competing at that level? You know, Uniswap is moving, as we just described, in both directions simultaneously. Or Uniswap Labs is moving in one direction, Uniswap the protocol is moving than the other. And it becomes a question as to like, do you want to be competing on two fronts? You know, that historically hasn't been, you know, the easiest thing to do. And you know, one of the examples that I give, I worked at Dropbox for a few years. Dropbox is the classic case study in this where they got squeezed on both ends because you had free storage on one end with Google, and you had AWS, which they were built on top of. And their decision was to go backwards into the protocol level and try to compete with, you know, owned and operated, AWS capabilities. Ultimately, that decision was an NPV negative calculation, but it was only discovered later on. And so you really have to understand, I mean, do you want to be competing on the user interface level and build the best trading execution, or do you want to be competing on the protocol level? Uniswap, I think, it'll be interesting to see how they do, but that's kind of the question that we pose.

Well, and it's a function of scale too, right? Uniswap is in a very different situation than most startups are, right, in terms of— just their presence and place in the ecosystem. And so their ability to bootstrap an ecosystem around Uniswap on Unichain is just so different than what most startups would be able to do. And then, you know, what are the consequences of such an ecosystem emerging? If that's— you know, imagine a world— I'm not saying this is going to happen, but imagine a world where 80% of DeFi activity is happening on Unichain on ETH, right? Like, that sort of asymmetry between what's happening in the L2 in that ecosystem, in that chain, versus what leverage does the L1 really have in that case of like 80% of the useful stuff is happening in one place. That power asymmetry positions them to do certain things that a typical startup may not be able to do.

All right, so let's say you have Labs, gonna just keep going with this smiling curve. If you have Labs over here, and they're trying to go direct to the users, and you're basically saying Labs is ultimately trying to compete with Coinbase and Binance and the exchanges, then you have the protocol and they're trying to compete more with the chains and compete with Ethereum and folks like that. Where does the, where does the actual value, what's more interesting from a value accrual mechanism? 'Cause if you look at a lot of these venture deals, right, you might have like a 1-to-1 or a 2-to-1 or a 3-to-1, right? So you might get equity in Labs at $100 million and then equity in the token at maybe let's say it's a 3, they're doing a 3-to-1, so then it's $300 million. And historically the thought, at least in my head, has always been, okay, the Labs is kind of like a, there's no actual value accruing there, it's all going into this The interesting thing is, you know, what is the valuation of the token during this raise? But now, maybe Labs, if they are able to compete with someone like a Coinbase, there is actual, like maybe you could see, let's fast forward 5 years, someone acquir— you know, I don't know, Robinhood or JP Morgan wants to acquire Labs, 'cause that's the centralized entity, and they do a traditional acquisition, like a Web2 acquisition, but Uniswap the protocol, with the token, keeps accruing value.

I mean, this is one of the unique aspects of crypto where you have two incentive layers that are going off in different directions, where you've got an equity company that's moving in the direction of competing with Robinhood, Coinbase, et cetera. And there's a team around that that's building that. It's a totally different operational cadence, execution cadence. I mean, it's a completely different set of initiatives and incentives. Whereas on the other end, you've got Uniswap the protocol that has UNI token. And so I think you don't really need to choose which one is going to be better, because they're both going in different directions, and they both accrue value to different assets.

I'm supposed to be disagreeing, so I'll just disagree. I think most companies is one or the other. Uniswap may be an exception, but actually in most cases you either should be picking the equity as the thing that has all the value or the token.

In the same way that Amazon is an exception with Amazon and AWS.

Correct. Yeah, yeah. So you'll get some exceptions, but I think for the vast majority of projects getting started, probably from the get-go, it should be pretty clear whether you're some sort of a a protocol and the equity is just going to go to zero, or if the equity is the thing that captures all the value and like there really isn't a token there and people are sort of forcing a token in. Often it's quite clear. And so, yeah, I think most of the time it's actually— it's one or the other.

And we agree on that.

Ah!

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Maybe I'll lay out the arguments for why we are moving away from the infrastructure phase of crypto into the application era. And I'm curious if you guys agree or disagree with this. So there's a couple of factors going into this. One is tokens are going public. At a valuation lower than the last private round for the first time kind of ever, right? So someone might, might raise at a $3 billion valuation in their Series C, and then the token goes live and it's, oh crap, it's only $2 billion, right? So that, that's not good. The second factor in this is that applications are starting to raise a lot of money, right? We saw Infinex raise $54 million. The third factor is that, uh, you know, this whole AppChain thesis is happening. Uni is launching UniChain. There's going to be this proliferation of them. Maybe that drives more value back to the apps. And the fourth is there's going to be popular apps, you know, the Polymarkets of the world launching tokens soon. OK, boom, we get a bunch of apps. What is your guys' thoughts on like this idea that we're entering the golden age of apps? Infrastructure era 2020 to 2024 maybe is kind of behind us. How do you think about this?

Well, I mean, the classic adage is infrastructure enables the applications. And I think what we're experiencing now, I mean, the first time that probably just about every single person in this room actually used a crypto application was in the last 4 years, maybe less than that. On that. And so the application era of what is capable is really a very short period of time. And one of the questions that we get all the time is like, well, it's been a decade. What's working? It really hasn't been a decade, because if you're using an application, a DeFi protocol in 2021, you were probably paying a couple hundred dollars in gas just to be able to use that. And so the likes of Infinex, the likes of Polymarket, the likes of basically every application that's coming to market, UniChain is an example here as well. They're enabled by the infrastructure that we've built over the last few years. And so generally, our perspective is it's not really like an ebb and flow. You have infrastructure build out, and there's an infrastructure phase, and then there's applications. It kind of happens simultaneously. And infrastructure, at least from our perspective, is kind of an always-on investment category. There's going to be new chains. There's going to be new concepts. There's going to be new things to invest in. But the applications are only capable based off of what has been built so far on the infrastructure side. And so I think the golden age of infrastructure, if we want to call it that, is really just the work that's gone into building out the infrastructure over the last 2, 3 years to where we can have wallet abstraction. You have EVM and SVM chains that can interact with the same wallet structure like with Infineon. And I think these are kind of obvious in hindsight, but it's pretty crazy that we haven't been able to have sub-second, sub-cent, and sub-second transactions on Ethereum, at least in the last year. That's been a new adage. And that enables things like games, that enables things like DeFi trading. But it's only happened very, very recently. So I think we are entering that, but it is enabled by infrastructure.

What's the other side of it?

The other side of it is probably that, look, we all want to invest in applications. We all want to invest in applications, and we're excited about these applications. But look, from where I sit as a VC in the industry, I need to make returns, and the applications have not been able to drive any returns so far. And I know we need applications, but like, I'm not the VC who's going to take the risk and bet on these applications until I can actually see some of them start to make money.

That's pretty good. I think, you know, maybe just like building on that, I think the thing that— OK, so there's like a really beautiful thing in crypto with tokens. I call it participatory capitalism. Which is sort of this intuition that it does somehow feel unfair that we've ended up in this system where all of the gains are on the private markets in startups. That like a company won't go public until it's worth $100 billion and then you're like, okay, well, maybe if it's the next NVIDIA, I'll get to participate if I'm a normal person. Um, when it used to be that, you know, Amazon went public at $300 million valuation. And so you, you, there's this notion of like the average person could participate in the markets and, and see some of that gain, like as the American economy grows. You get to participate. And we kind of have lost that. And there's a whole— you can point fingers at whatever reason, but that's not the way the world works anymore. And so crypto offers us a possibility of having that again, where the people who create value, the users, like the first 1,000 Uber drivers should have gotten, you know, equity, and they should be rich. The first 1,000 Airbnb hosts should be millionaires, right? Like they did a lot of work to make the thing successful. That's the intuition. Now the problem is that when you have apps, people can do back-of-the-envelope math and figure out Oh, here's like the total addressable value for this thing. And they can figure out what the equity value of the thing might be, and hence what the token network value might be one day. And those numbers are just generally smaller. And what's a little goofy about infrastructure or platforms is they can be anything. It can be like, this is now the way that value gets exchanged. And you're like, well, what's the TAM on value? That sounds like everything. That sounds like $50 trillion. And so then you're like, well, OK, if a bunch of people who don't really understand venture capital and that a bunch of stuff will go to zero are sort of thinking of this, and you can plausibly say, yeah, well, yeah, maybe if this is the next Bitcoin or the next Ethereum, this is worth trillions of dollars. It creates this weird pricing in the market where a lot of people are pricing some option value on a network being worth trillions of dollars. And hence you get this sort of— pricing effect where it just like rationally makes sense for a lot of people to keep investing in infrastructure, because you can cast the story around infrastructure being worth trillions of dollars. And then that sort of perverts the markets in terms, in terms of like where the dollars go. Yeah. Um, so I think there's, there's actually like a rational economic case to be made for, look, we wish the world worked a certain way, which is that people wanted to use apps and people wanted to invest in apps, but that's not the way the world works. And as like a good rational investor, what you should do is look at the way the world works, not the way that you wish it worked. And the way the world works is people cast these really large stories about what these things can be worth. And hence you get things that are sort of, you know, they are what they are, and that's where you should invest to make money.

Yeah. The other part—

And therefore the cycle will continue. Therefore, like, apps will perpetually be underinvested in, and infrastructure will perpetually be overinvested in.

I mean, I also think apps are sort of a proxy, or the valuation around apps are sort of a proxy for how many users are in the space. And right now, you know, historically, we haven't had that many users relative to other consumer markets. But maybe to play a little devil's advocate from my own perspective, if Uniswap was going to launch today for the first time, would they start with Unichain? It's possible. And I think one of the things that will also happen is as the infrastructure gets easier and easier to build out, you're going to start to see applications choosing to go the full stack approach and not start as a smart contract platform on Ethereum. And maybe they're just going to start with their own chain because the L2 model is robust at at this point. And so you might actually have sort of the combination of infrastructure and applications. And if Unichain was launched today as a new application and there was no Uniswap, would we consider that application or would we consider that infrastructure?

Interesting. I think you guys can, both Framework and Electric can invest in both the liquid and the private markets. Do you guys think at this point in the, where we are in the cycle, there's more opportunity in the liquid markets because the only things that have really gone up this cycle are Bitcoin, SOL, and meme coins? Or do you think there's more opportunity in the venture markets? Yeah, that's the question.

Well, I think, you know, at least the way that we approach things is when we're making a sizable investment, we underwrite to be able to return the entire fund with that one investment. And I think it's very, very—

That's why you invested in Blockworks.

Yes. And that, I think, is very hard to do when you're talking about liquid markets, unless you're looking at something that's at a very, very small valuation. But I think that those opportunities are harder to find. And yes, we can invest in liquid things, and we definitely have perspectives on liquid assets that have 10x potential plus. But I just think the multiple probably exists more on the private side.

Cool.

I can take the public side.

Cool.

The listed side. I think back to the same observation that a lot of people all over the world are looking at these infrastructure things and spinning narratives for these things being, you know, worth trillions of dollars, when really they could be worth $10 billion, and there are not that many $10 billion companies in the world. I think the flip side of that is, one way to think about that is most people, most average market participants, whether this is the US equities markets or token markets globally, are not that sophisticated in terms of understanding how to price these things. And so actually there are a lot of things sitting out there that are phenomenal, that are actually quite useful, that have a lot of flow going through them, that are truly decentralized, and they're just undervalued because people don't understand them and they're not appreciated. And back to this idea of participatory capitalism, that you don't need a lot of money to participate in those. Actually, you can buy a little bit and you can start using the product and you can facilitate greater success of the product and actually have significant upside. And so I think there are probably at least as many opportunities on the listed token side. And one sort of thing to think about, right, is like when you have listed markets, whether it's US equities or tokens or whatever, versus private markets, the mechanism by which price gets determined is different, right? So on the private markets, it's the highest bidder, right? The founder's coming in, they're going to pitch 7 VCs, whoever gives them the best terms, that's now the price. It's the high watermark, right? It's like whoever gave me the most. On the public markets, it's essentially the market clearing price, which is a little different, right? It's like if you have 10 bidders and you move a certain amount of liquidity, it may actually be the way the order book works, right? It's like the midpoint. And so actually, a lot of the assets that are more listed or more publicly available often have better pricing because it's not like one person coming in and saying, I'm enamored with this thing. And I'm going to buy 5% of it and pay 3x what anybody else is willing to pay. And so actually, you can often find much better opportunities.

What is the most interesting opportunity in the liquid markets today?

Well, you should not listen to me on that. This is not financial advice. So instead of saying one opportunity, what I'll say is I think—

He's trying to get Avicii to give financial advice here.

What I will say is I think— and this maybe dovetails a little bit with the regulatory stuff— is I think that our thesis has always been— we wrote a paper about this before we even started Electric. Which sort of catalyzed the start of Electric in '18, that what we have always thought is really interesting about this stuff is that this is programmable money. And what it makes it easy to do is write code around money, right, assets and money. And that lets you control who can see it, who has access to it, what you do with future cash flows, how those cash flows get distributed, how you dispose of it over multi-year time horizons. And instead of that being sitting in legal contracts, it can now sit in in smart contracts. They can sit in code instead of in legal code. And that's really powerful. And then you have these global capital markets that would sort of emerge around that. And I still think people have not fully internalized how big that is. And I don't think people fully appreciate how revolutionary that is. And so I think this stuff is going to do to the global capital markets what the internet did to the global information markets. You had these local silos. You had local newspapers, the way information flowed. If you were funny in your hometown, you were the funniest best person ever because I was the funniest person you'd ever met, right? So comedy had to change because now comedy is working on a global scale. Like, everything changed when it came to information flows. And so I think everything with money is— is just gets uprooted over the next 20 years. And I think people have not fully internalized that. And so when you look around at some of the things that exist today, um, you know, like I look at something like stablecoins, which I think is a wedge on the regulatory side, um, you know, we just, um, we launched a site called stablepulse.org. We launched these sort of public dashboards just to sort of show what's happening. And one of the— I can't take credit for the origination of this idea. I can't remember. I saw it on Twitter somewhere, but we thought it was so interesting that we decided to build a little tracker for it, which you can just track how much treasury, how many treasuries like Tether and Circle own now. And in aggregate, they own more than Germany, Mexico, or the Netherlands. It's like a top 20 treasury holder in stablecoins. And so as you get 10x growth in stablecoins, like all of a sudden you're talking about like stablecoins are like a top 3 treasury holder in the world.

Like, US, China, and then stablecoins.

Yeah, it's really wild.

The 3rd largest owner of treasuries.

Yeah, it's going to be really crazy that that's the world we end up in. And so when you get your head around that, you're like, wait a second, that's not just like an interesting factoid that there's $1 trillion of stablecoins and maybe $800 billion or $1 trillion of treasuries sitting backing these stablecoins. This is now like a too-big-to-fail situation. This is like a geopolitical situation. This is like a thing that the governments of the world have to think about, right? And I don't think most people fully internalize that, so I think that whole sector of stuff people are sort of sleeping on a little bit in terms of like how transformative it is.

Yeah. Maybe with the time that we have left, we can pivot into the election and politics, just because you two have both been fairly involved, I would say, this year in the election and in local seats as well, in both the House and the Senate. Vito, I feel like you're in like every political room these days on both sides of the aisle. Maybe you guys can give a Just like, how are you guys feeling? I mean, the election's in less than a month. Like, how are you guys feeling about it? And how are you guys feeling about the impact on this industry?

Yep. Um, I don't know if this will be something we agree on or disagree on, but probably agree. I mean, our perspective to date has been supporting pro-crypto members or candidates for Congress. Whether it's House races or Senate races, that's been our kind of general approach. At Framework. And we view that as being the most important sector, just given what has happened so far with FIT21 passing the House. There seems to be some momentum on the Senate side for the Digital Commodity Act. Both of these will probably meet somewhere in the middle in this next Congress. And so having more people who understand this, who can speak the language and have, you know, real conversations about it and also impart some of their perspective into it is really the goal. From our perspective. I don't think that it's inconsequential what happens in the presidential election. Obviously, Trump is definitely more actively pro-crypto than Harris. Our view is generally like, what matters most is what happens in the Senate, just given the perspectives that we've already seen in the House. And so that's where we focused. How am I feeling about it? I'm feeling pretty good. I mean, it looks like most of the people that we're talking to on the Senate side are going to be in office come January. And I think we're going to have momentum to be able to get something done, whether it's the stablecoin bill, a market structure bill, maybe even something bigger than that. I think that's kind of the main question. But generally, the perspective is that in the next 2 years, in this next Congress, there's going to be some sort of seminal market regulation structure that, frankly, we think would be as big of a financial legislation as something akin to Glass-Steagall. from the '90s, where, you know, the structure of the banking industry was completely changed after that. We think that this would, you know, be something that creates digital assets as a regulated capital asset, and we will have a playbook for how to invest in it.

Um, yeah, I generally agree with that, though I'm trying to think about how to disagree. But I will say, you know, I— maybe one way to think about this, um, and this is a very recent thing, I would say in the last 12 months or so that I've sort of come to this conclusion. So for context, I'm, um, I'm chairman of the board at a group called CCI. Crypto Council for Innovation. Fred Ehrsam rotated off earlier this year and I stepped in. So it's us, Paradigm, Andreessen, Fidelity, Block, a couple other folks, big folks will be joining. And so we do a lot of advocacy work and education work with both sides in DC, at the state level, internationally. And I think the thing that really sort of changed this year that I think most people don't realize is crypto won. It's kind of game over. And whether Elizabeth Warren likes it or not, whether Gary Gensler likes it or not, it's kind of game over. And the reason in part is, A, Wall Street got on board with Bitcoin and the ETFs and ETH and the ETFs. And the reality is once Wall Street's on board, you have an entire sector of people that are very good at working with the government. And helping them understand what matters. And ultimately now you have a profit motive there. But also too, from a national security perspective, the reality of stablecoins sank into the US government. And so, you know, you can think of this sort of as a US and a non-US. And on the non-US side, I think a lot of people have been much more pro-crypto for the last few years than the US has been, in part because they saw what happened with the internet. And on the internet, what ended up happening was all the American companies won, right? Amazon won, Facebook won, Google won, Nvidia won. Like you just look at Microsoft, you just look through the whole top companies that control the internet, basically. They're all American. And so now if you're the EU, if you're China, if you're India, if you're Turkey, if you're Brazil, you have no leverage. You can tell Zuck that he needs to go, come to your country and sit in front of your parliament or whatever. He's not going to come. He's going to F you. Like, whatever, I'm going to do what I want. I'm an American citizen. You can't make me. And so I think that reality of how the internet shaped out sort of informed their views on what they should do on crypto. And so that was always going to work because of that sort of realization that they couldn't, they couldn't kill crypto. They sort of needed to embrace crypto. They need to embrace AI. And so a lot of the governments of the world, if you look at how they're thinking about technology, they're thinking about these things through a national security lens and a sovereignty lens. And that bit flipped for the US in the last 12 months or so, in part due to a lot of work that, that, you know, folks on the stage are doing, um, uh, plus a lot of other folks in the industry. And, um, and that realization of, wait a second, stablecoins are a way to extend the strength of to the dollar. And actually having dollars in the world down at the retail level means that sanctions still work. And you may not like US dollar hegemony. You may not love that the US gets to do this. But I would assert that actually, if you look at the empirical data, look at something like violence from Mexico when there's multiple drug cartels trying to fight for power versus just one cartel in power, violence goes way down. When there's only one drug cartel. So it's the reality of the world that like if we didn't have that, then probably there's a lot more wars and there's a lot more, you know, bombs being dropped on people and drone attacks. And like that, in my opinion, is strictly speaking worse than actually— we would actually have real hot wars and like, you know, humans getting killed. So it's better to have US dollar hegemony. And, and that bit sort of flipped for people that, um, you know, maybe the buyers of last resort are not the central banks. The central banks of the world may be dumping dollars and switching over to gold, and maybe Bitcoin one day. But the retail on the ground loves dollars.

Um, the best commodity in the world is the US dollar.

It's the best commodity in the world, and I would argue it's the best brand in the world. You know, they do these like tech surveys like, oh, Google's the number one brand in the world, Apple's the number one brand. I, I would assert that the US dollar is the number one brand in the world because even if you hate the United States of America, you want US dollars. Yeah. Um, right, if you're, if you're Iranian, if you're Russian, if you're Putin, like, you still want dollars. And that's remarkable, right? You can hate the place that it comes from, but you still want the thing. And so I think like the buyer of last resort turns out to be retail on the ground, and that's how you dollarize all these places. And that bit flipped in Treasury, that bit flipped with national security folks. And if there's one, you know, if you look at the TikTok stuff that was happening with the select committee for competition against the Chinese Communist Party, the Dems and the Republicans all got on the same page. Like when it comes, it turns out, But when it comes to national security, there are enough good people in government still that say, OK, like, you know, country before party. And they'll basically do the right thing. And it turns out stablecoins were that wedge. Which, by the way, I think is— if anybody knows this comment Elon Musk made a few years ago, which is the most ironic or the most hilarious outcome is the most likely. I just think it's so funny that the reason this whole thing was created— Satoshi wrote a white paper. It was like, you know, F the banks. Like, we got to get a different financial system. Like, the dollar is screwing us. Like, inflation is bad. But like the thing that is going to save the whole industry is actually like the US dollar. You know, it's like pretty, pretty hilarious actually to me. But it kind of makes sense.

Yeah, I think your national security point is the exact right one. We had a— one of the senators from Texas almost spoke here, and we said, you can speak on anything that you want to speak on. Just— we'd love to have you speak on— he said there's only one conversation that matters in this industry, and you guys are all missing it, which is national security. National security for Bitcoin mining, national security for stablecoins. Both of those things have to be in the United States. If the government misses that, we miss out on the next 50 years of growth.

Yeah, that's literally every conversation I have with every senator, every— and it works. Yeah. It's also, I'll say as an aside, because there's a lot of, I think, crypto people that are sort of— if you all know the political science framing of exit versus voice, there's sort of one approach of, I'm out. This is what immigrants do. They're just like, this is too broken. I'm going to go over there. And this is what engineers tend to do. It's like, ah, this codebase sucks. Throw it out. Let's rebuild it. And there's voice people, and it's like, OK, let's go reform the system. Let's go reform the institution and fix it. Crypto people tend to be exit people. But I will say that this process for me for the last couple of years of engagement has really shifted my perspective on how democracy works. And actually, though everything is— on the one hand, it's all 50/50, and you're like, oh, you cannot get anything done. On the flip side, what's really interesting about that is if you convince 2 people Like, everything can change. Which is pretty crazy. That's like, that's totally doable on anything. Like, you can literally just like convince 2 humans of the other side of it if they're willing to listen. Um, and get them to listen after a couple years if you just pound the pavement and they'll actually change their minds. And so if you look at, you're talking about Fit21, like when that, when that, um, SAB121 bill happened or the Fit21 bill happened on the House, like 21 Dems crossed over and, and voted for it, right? And you're like, wow, how did that happen? Well, it's because a bunch of people just went and talked to those 20 people for 2 years and eventually they were like, oh, you're right. Stablecoins are really good for national security, and they changed their mind. And that's all it took, which is actually like a remarkable sort of vote in favor of democracy.

All it took. And having one of the largest PACs.

Yeah, well, carrots and sticks, that helped too. Yeah, all credit to Coinbase and Ripple for shifting that too.

Maybe we can end, just because we only have a couple minutes left, with just an idea of what 2025 could look like.

Oh. We were talking about this backstage, but, you know, depending on who wins the presidential election, I think, you know, no matter what, it's going to be a fundamentally bullish perspective going into the new year. One thing that we've gotten from, you know, our investors and people that we talk to in the industry is basically the last 60 days has been a no-trade zone where no one's making any decisions, everyone's kind of waiting to see what happens, and it doesn't really matter the outcome of the election. It's really just they're waiting to see. And so I think what will happen in November is you'll get clarity. It removes market risk. There's going to be a lot of positive things that happen from that, and probably going to be a lot of activity around that. But I think that that sets up for a lot of launches and a lot of new applications that are kind of waiting for that bull trend to be able to get back in. I think there were a lot of things that wanted to see that this summer that launched maybe in the early parts of the summer and kind of fell on tougher times. But I'd say one of the things that I'm very excited for, particularly, is having the OG DeFi come back. Because I think the second that you start to see positive market sentiment, that means revenues are higher, that means more stablecoins on-chain, as we're talking about. But I think DeFi OGs that have been waiting around since 2020 are going to be back in favor.

Yeah, I generally agree with that. My only sort of concern is that we get too bullish too quickly and that that poisons the well. Like one—

Oh, we had that a little bit with the Bitcoin ETFs where the juice in Q1 sucked out the juice for the rest of the year.

Yeah. Well, there's that. And then I think, you know, one maybe sobering thought to think about is, you know, people talk about crypto bubbles. I don't think we've really had a crypto bubble. If you go back and look at the '99, 2000, 2001 tech bubble, that got to— if you add up like the market cap of the Nasdaq and the S&P got to about $16.6 trillion. The last crypto cycle was like $3 trillion. And so this cycle, you could credibly see it getting into sort of like NASDAQ, you know, S&P 2000 kind of territory. And this time Wall Street rails are ready to go, like you have, you know. And I would argue that you don't really have bubbles unless Wall Street is involved, and now Wall Street is involved. And so one sobering thought here is like, the real thing I worry about is not like, you know, are we in a good spot as an industry in 10 years? But I worry a little bit that if we get too to over our skis next time. Like, the people who get burned now, it's like, you know, grandma and retirement accounts and like people's 401s and mortgages and that kind of stuff. And so I would really encourage people, I think, I think as an industry we're gonna have to like hard pivot out of the bear mindset into the bull mindset to be like, hey, like, please stay out. Like, don't come in here. Like, don't mortgage your house. Like, don't lever up. Like, please don't have this blow up in your face and like teach people that like everybody in this room has been through that and understands how to do that. Most people don't have— not had sudden wealth and like see their portfolios go up 5x in a week and like they don't know how to handle it. And if we don't teach everybody else in the world how to do that, it'll actually blow up in our face. And so yeah, I'm like fundamentally quite optimistic, but I worry a little bit that we could actually get like too bullish and that would actually be bad.

Interesting. That's all the time we have. Vitruvial, Michael, thanks so much.

Thank you.

Thanks for watching today's episode. Just wanted to quickly mention that the wait for crypto's killer app wave is nearly over thanks to today's sponsor, Anoma, the universal intent machine. To stay up to date with Anoma, you can follow them at x.com/anoma or sign up for the newsletter at anoma.net. Thanks again to Anoma for sponsoring today's episode.