The Bull Case For DePIN, RWAs on Hyperliquid & The Onchain Endgame | Weekly Roundup

So we think people are just misunderstanding one, like the valuation multiple that should be applied to Deepins, but more broadly, like the real story, like those, that's a 2 or 3x difference. You know what I mean? Like me and you might disagree between 10 and 30x, but the size of the revenues and how long they can compound is the real alpha. Like you can grow 30% quarter over quarter for several years, for half a decade, for a decade. It's a massive, massive business.

Nothing said on Empire is a recommendation to buy or sell any investments or products. This podcast is for informational purposes only, and the views expressed by anyone on the show are solely their opinions, not financial advice or necessarily the views of Blockworks. Our hosts, guests, and the Blockworks team may hold positions in the companies, funds, or projects discussed. All right, everyone, welcome back to Empire. We got the roundup. Not only do we have Santi and Rob with us, we have special guest, friend of the pod, friend of Blockworks. We got Sal, who's one of the founders of EV3, coming off the back of a huge fundraise today, just raised $61.74 million for their new fund. They're the best fund in the deep in space. So yeah, really excited to have Sal on. Sal, welcome and congrats, man.

Yeah, thanks, Jason.

$61.74 million. You couldn't get another $200,000 and $260,000 rounded up.

So it's a— I probably have to change it after this pod now, but I've been using 6174 as like my debit card PIN since like I was probably like 11 years old. It's just like, this is how one of the reasons me and Ash became friends actually. It's a really special number. So if you like take any 4-digit number, has to have at least 2 digits, order them from top to bottom, bottom to top, and subtract those 2 numbers and do it recursively, like any number will get you to 6174. Within like 3, 4, 5, 6 iterations. And I had like a terrible memory for anything administrative. So I used to forget my debit card pins all the time. And anyway, 6174 is a special number to both me and Mahesh. So we decided to rip it with the fundraise.

Dude, that's awesome.

So you sold for exactly $6174? Like you told the LPs that?

Yeah, well, we had up to $62 and then, you know, the GP commit has some flex and we decided to go for the special number.

So it's an interesting, it's an interesting number, right? Because it feels like this iteration and subtraction, like Deepin is in that state. Where probably the first instantiation was not really good. You invest in a number of projects, but like, you know, tell us what the conversation was with LPs. A lot of what we talk in the pod is the deep end. A lot of the protocols, just for better or for worse, have just not panned out in the public markets. What are we missing? Like, what, what, what is the alpha here?

I think definitely like the first iteration, like you said, the first iteration wasn't perfect and you can't expect it to be. Neither was it for DeFi or really any other spaces. For us raising this fund, like Fund 1 was such a bear for us. We raised Fund 1 in the middle of 2022. We felt like we raised it 3 times because we kept getting cut back as LPs like died or went bankrupt or whatever. And back then when we started raising it, it was basically like Helium has already taken over the space. You know, Helium is at $15. They were like, Helium won. Like, how many more Deepens are there? Then Helium went from $10 to $2 and the question was like, okay, Helium is broken. Like, why would you invest in anything that looks like Helium? And as they started sort of growing revenues, the question was like, okay, helium seems to be doing okay, but there doesn't seem to be— there's like 15 companies in this space. How can you build a venture fund focused on a vertical with 15 companies? And so after, you know, like raising Fund 1 took us a year of basically like answering those questions. Fund 2, we felt like we had a pretty good sense of the both like the underlying fundamental data. The space is generating revenues, it has real customers, like there's real entrepreneurs that have raised real money. And so frankly, it was a lot easier. I think like it's a little bit decoupled of the sentiment we see on Twitter, CT, and prices relative to people who are actually underwriting businesses. And like they look at SaaS companies, they look at payments businesses, they look at these things, they're like, okay, SaaS businesses aren't all that great. These deep-end projects are actually growing much faster. The multiples now are cheaper or on par with what you would pay sort of like in the public markets for a median-style company. And the markets are absolutely gigantic. And so frankly, I was super impressed. I think it can be hard to wrap your head around DePIN, but a lot of the LP community understands that you're basically buying infrastructure businesses when they're cheap and they're growing fast and they're hard to— you know, there's not a new DePIN wireless network that's global spinning up every day. Like, these things are defensible and hard to build. And all those ingredients make for what look like a really asymmetric venture fund profile.

I think a lot of people— like, how's the conversation been for you during the fundraise, especially, you know, for, for Deepin, where, you know, these are, you know, have real-world applications? Like, these are in many ways businesses that have attached a token to them. So when the LPs ask you, like, equity tokens, like, how is value going to accrue? What are you investing in? What is the focus for you? Like, how do you answer that question right now, especially at a time when You know, to your point around Helium, you can say Helium is, uh, growing very quickly, right? From a protocol perspective and the token's been basically straight down.

Yeah. I think this is an extremely tough question for later stage VCs. At the, the right answer for LPs at our stage is like, well, if you're investing at the pre-seed or seed round, you get both. And so regardless of what we may dream up about our opinions or our biases around which one of these is gonna accrue value. You as an LP are protected by owning both of these things. Obviously, like at late stage, these things decouple and you may only invest in the token or the equity. And like we saw that with Helium. I will say that like the teams that are serious and have built real businesses in the space are trying to unify those things. Like Helium team's focus is on trying to tokenize their equity or merge it or somehow. And there's obviously real barriers to that regulatory-wise and practically, but the intent is there for it to happen as soon as it is feasible.

So Sal, on the, um, I think just to lay some context, so like when I was investing in DeFi early on, like you would always think about like what percentage of DeFi as a percent of the total market cap, and you're like, God, like this should grow. And you know, I would say like it didn't grow as much as I wanted. It still made for a phenomenal return. The deep end right now is like less than kind of 1% of the entire market cap. um, from a revenue perspective, you know, depending on what your classification of Deepin is, it's, you could argue it's like, you know, the revenue's just not showing up there. Like there's some highlights like Helium, I think is at like $13 million annualized on the MVNO side. Like GeoNet has like close to $10 million of ARR. These are like the revenue bases, you know, to your point, like businesses are using GeoNet, you know, Helium has an MVNO, like Hive Mapper has like pretty big customers that are using them from a data streaming perspective. Like, hey, do you think the deep end deserves a greater market share as today given the revenue opportunity? Or is this a lot of like, hey, it's on the come, the tokenomics are just broken for a lot of these deep end projects. We're going to see the second iteration and that those projects are going to have like just a better value accrual and that's how you see a path towards Steepen being 10, 15, 20% of the entire market cap? Like, what's, what's the thesis?

It's, it's both revenue growth. One is like the revenue growth, like these things, the real-world industries. Like, if you have something— again, you're not spinning up a new worldwide RTK or, or wireless network in like a day or two. So these things are really defensible, and the revenues compound at like 30% quarter over quarter. Like, those are the growth rates that GeoNet and Helium are putting up. And it's not like this is a one-off quarter. They've been doing this for 2, 3 years consistently now. And so part of it is just like these markets are huge and they've proven you can just steadily compound revenues over and over again and eventually like they're going to get really big. The second piece of it is also the multiple, sort of like what valuation multiple do we slap on these things? Like people, I think, are crypto investors specifically, like a DeFi revenue is not the same as a Deepin revenue. Like one of these is cyclical and one of these is not. It's like commodities versus like a SaaS business in the regular industry, right? Like when commodity prices are high, your earnings look crazy and the multiples look really low, but that doesn't mean it's cheap. Because when you go through the commodity cycle, prices go down and now your earnings get decimated, and actually like your normalized multiple is much— is actually really high. Um, so we think people are just misunderstanding one, like the valuation multiple that should be applied to Deepins, but more broadly, like the real story, like those— that's a 2 or 3x difference, you know what I mean? Like me and you might disagree between 10 and 30x, but, um, the size of the revenues and how long they can compound is the real alpha. Like you can grow 30% quarter over quarter for several years for half a decade, for a decade, it's a massive, massive business, even starting off the basis that we're at today.

Back to like tokens versus equity. Uh, I get why a token allows you to bootstrap crowdfunded infrastructure and convince a bunch of people to basically front the CapEx as opposed to a Trimble versus a GeoNet.

Great.

You get the network coverage, but then there's like a, why do you need to have a token after that deployment? Because the reality is most Helium miners immediately dump to recoup the CapEx spend. So you have like Bitcoin in the early days kind of had this problem where like miners just constantly dump Bitcoin to recoup, you know, their CapEx and then OpEx. And then you just sort of assumed that like you hit some sort of, you are able to break through that sell pressure. But I, you know, as I look through most deep-end projects, like it's clear that you haven't, and you, you have this sell pressure that constantly depresses the price. What's the solution? Like, we've thought about it a lot from the inversion side. Like, hey, if we're buying a business where we can use deep into lower costs, we don't necessarily feel the need to sell a token that we might be accruing. But you haven't really seen that much yet. What's your take on that? Like, token equity— are these businesses better off being like private companies and just enterprise software and somehow subsidize, like somehow find capital to invest in the CapEx versus having the community like depend on the token?

I mean, if it were going to be done, it would have. Like all the biggest and fastest infrastructure buildouts of the world have happened with DePIN at this point. Like there hasn't been any other RTK network built out as fast, another mapping network, another wireless network. So I think like if you believe that speed matters and we really, I think all of us on this call like really do, then DePIN is just an accelerant to get there. I disagree with your premise that it's similar to Bitcoin in the sense that the miners are constantly dumping. The actual behavior we see with DePIN miners is you sort of get your payback, you take that out in cash, and you feel like you recouped your hardware, and then you let the rest ride. And so it's really like a fixed cost, right? Like a Helium miner, it costs you $200 for the device, and then it maybe costs you a few cents a year in electricity costs and your bandwidth connection that you're just already using for free. It's not like a Bitcoin miner where you're pouring massive amount— you're using massive amounts of power. So that's the core thing. It's like these things, they have a fixed cost base that you build. And yes, like it's expensive to do that with tokens, but that's the way you do it fastest. And after that, it's not these perpetual emissions that constantly need to be repaid, like they're getting paid by revenues and usually they're keeping their machines on and letting the, the gains ride. Um, so I think it's just a fundamentally different market structure than, than Bitcoin. Yeah.

Uh, how much of your thesis for Deepin and this next iteration of Deepin projects is predicated on like a change in regulatory environment where you can tie more closely value accrual to the token?

It's—

that's, that's a really tough question because I, I feel like for us as VCs, like, we're good at underwriting how big things can be, We're really bad at underwriting, like, when things will happen. And for me, it's inevitable that there will be a regulatory sort of like merging or clarity in the sense that to make these businesses more legible and more investable. If it's going to happen in this administration, the next one, like, we have a 10-year fund, we can wait through 2 and a half administrations. And I don't know exactly when that's going to happen, but, um, I, you know, the hard thing for in my mind is making the businesses work. Uh, being able to navigate regulatory and sort of like optimize the capital structure is, is a secondary to that. And we've already gotten most of the— by tapping into debt financing through Infrify, which a lot of the leading dPens are doing now, you've already sort of gotten most of the way there in optimization of lowering from like your 4%.

What is Infrify? Sal, what is Infrify? I've never heard that term.

Yeah, so we— USDAI is the poster boy for this sort of movement. But effectively, if you were launching a dPen in 2021, the capital out there to get was speculative utility. Like, you launch utility token, it gets bid up in speculative value, use that speculative value to incentivize hardware buildouts. Today, like, that game doesn't work. We've seen on exchanges, like, there's very little speculative bid, but there is a lot of demand to earn yield on stablecoins. There's now over $300 billion of stablecoins. There's like $15 billion of— maybe a little bit less than that— sitting in yield-bearing stablecoins. And people have there's an extremely proven demand for people to ape basically a black box that you put your stablecoins into and it pays you yield. Like USDAI, they opened up their caps by $150 million in like 45 minutes. It's sold out. And they're basically today just paying back T-bill yield and points. And so this is like the new financing mechanism, the more efficient and new financing mechanism that we have to bootstrap infrastructure that we call InfrFi, which is debt and not equity.

Let me ask you a question on that. And because you guys are investors in Daylight as well, which I know they're starting to do some of on this. Um, so we're also investors in USD.AI, and so we're— we share that cap table. Um, the, you know, one of the questions that I've been talking to them about is, to your point, I think there's still— like, how many loans are outstanding today? It's, it's like relatively de minimis, right? And so I think there's this question that I have around, um, the— you're getting a lot of— there's a lot of capacity on-chain right, to go and put, you know, stablecoins into these, these protocols. The origination is a lot harder, I think, and the kind of the connecting of, you know, these real-world asset infrastructures and being able to win those deals and then being able to be credible to like the counterparties. I think, you know, Santi's, you know, dealing with some of this as well and how in his conversations with bankers and counterparties, etc., on Inversion, like, how do you when you talk to the founders, how do you figure out if you think they can actually make that connection? And what matters more to you in terms of whether it's, you know, call it crypto-native, you know, mindset and crypto-native backgrounds versus like being somebody who can like really go and credibly say, I've operated in this, you know, area, I've operated in this, this vertical?

I think both can work. What we really look for is like an understanding that with credit, you really can't lose people's money. Like, it's very, very hard to build the trust back. And you can— like, originating isn't the hard part. It's like originating safely so that you get the money back, right? It's the magic of the lending business. And what I like about David and the USDAI team and also Daylight is like, they're— yes, the goal is to scale as quickly as possible and get the loans out, but only if it doesn't like lower your credit quality and your ability, like when things go wrong, to get money back to the depositors. And so there, you know, it's obviously a tough balance. Like, it's not like, it's not like Aave or whatever where you can just like instantly come out loans. Like, you have to go and like do, you know, the GPUs have to get installed in the data center. Somebody has to go out to a homeowner's house and install a battery and get the local permitting and all this stuff before you can start earning yield. But I, we're always like, what really matters to us is like that the number one thing they understand is like you cannot lose money in a credit business. That's just the name of the game. And to do that, you have to originate really safely. And that means sometimes not putting the pedal to the metal, but operating at whatever, 60%. I think the USDA guys have— the more you can give transparency to the market as to when the originations are going to happen, why they're taking longer, obviously it builds more trust. But that is the number one question, how quickly can you safely scale originations given that the capital is available for everyone? People are just seeing a black box vault that they put stablecoins into and they're going to put their stablecoins into the one that pays the highest number as long as they trust that they're not going to lose money.

Yeah, because I think in USDAI, it's like $640 or $650. And like almost like 3% of that, or all but sorry, 99.5% of that is in, is in T-bills at the moment. Right. And they announced, I think, a facility yesterday or earlier this week that, you know, could be up to $500 million, but then actually like going and like deploying these facilities has been really slow. And so I think I, I mean, those guys are great. So I think they're going to figure it out. But I, I do wonder about when the market depends on the, you know, getting capital from like, you know, whatever, like prosumers and consumers who like, you know, want to put, you know, the stablecoins in these black box, how long they're like, how sticky that capital is, and how long duration that capital is relative to like the duration of like the thing you're trying to do on the other side.

I think, like, when I think about, like, the rotation of capital in DeFi is very real because it's chasing hot ball money, like all speculative stuff. But, like, in the case of, like, Daylight, for instance, like, solar financing is a bitch. It's a super opaque market. Like, JP Morgan and two other banks control it. When I was at JP, we were looking at, like, some of these businesses like Vivint and SolarCity, and it's a very opaque and illiquid market. In theory, it should work. Like, if you bring, like, a quality product, like, of energy into a liquid market called DeFi, then people should in theory want that yield because it's attached to like a very concrete real business as opposed to some sort of token emission that is, you know, vaporware. Um, and, and then, and then second of all, like I think you, you can have more transparency in the origination and the underwriting. Like in theory, if it's tokenized, like you shouldn't be able to do what First Brands did, which is just double pledge in theory.

Well, I think the, I think the question, Santi, is like, and we've dealt with this for years on like private credit on-chain, right? Which has been, is the money that is already on-chain, is this actually what they want access to? Right? Like the— I mean, you can look at like the history of Goldfinch. I think like every Goldfinch loan is now in default, right? Like to Stella's point earlier, not losing money is, you know, obviously one of the most important things here and having good loss ratios. But it's also just, you know, people put money into Goldfinch, I think in part because they wanted, you know, Goldfinch tokens in the future and then raising that back to them. But like, does anyone really want access or do they know— do they— are they sophisticated enough with the capital on-chain to know that, hey, like, you know, this motorcycle or motor— it was— they were like lending against like mopeds in like Thailand, right? Like, is that something that like really makes sense for me? Obviously now, now we're talking about, okay, GPUs and USDIs point, or, you know, Daylight, we're talking about solar financing. But, but I do wonder if, um, and this is a question we're always asking ourselves, is this— is the capital that's already on-chain, the stablecoins that are already on-chain, do they actually want access to, or do they care about access to, you know, GPU financing? Or do they just want, you know, what they hope will be future token emissions, right? And then they're going to rotate. And if that's true, then is the story that we actually need to actually bring more people on-chain? There needs to be an easier way for people who would actually want to invest in this to come on-chain? And I think that's the question that I've always asked myself around, especially around, I think, a lot of these like real-world vault products and DeFi is like, how do we get the money that has actually long duration that wants exposure to that thing on-chain relative to, you know, all of these traders who exist today?

Let me ask you a question for the group. Like, why haven't we seen fixed paper? Like, like it's all variable, like short duration variable rates on any money market. Like what I've invested in, like 2 or 3, like Yield Protocol and like a bunch of others. They haven't worked. And I think they haven't worked because you have an adverse selection problem historically. The, like, people that have to have come on chain are the bottom of the fucking barrel. Like it's just, they can't get money in tradfi, they come on chain. But presumably that changes when you have, you know, with Daylight or some other deep-end project where the quality.

I mean, right now, like, the, the user behavior on-chain has been entirely around liquidity is king. And that's because people do rotate, they do move, they do, like, want access to their capital. People hate locking up their, their money. And they're willing to do it sometimes for, like, airdrops, right? But they're not typically willing to do it for anything else. I don't know, Sally, maybe a perspective on that.

I agree. I think it's path dependency. I mean, like, whenever I just— for my personal lesson, it was like Olympus. Like, we probably all, like, lost money on OHM back in the day. And it's like, that was like, to, you know, you would stake like 2 weeks that you would lock your money up. And it got proven how expensive those emissions were very quickly, how expensive it was to even incentivize people to lock their money up for 2 weeks. So I think there's a big path dependency in the user behavior on-chain. I do think this changes, especially what we've seen even in the money markets. Now you have curators who are basically the middleman interface layer managing these things. And if you imagine people just come on-chain with stablecoins and they want yield and they trust some curator, then that curator is going to be able to putting a portion of their book into longer duration things and they're more well positioned to understand maybe solar or GPUs and the underlying yields. And so I do think it'll happen. I think there will be some really big winners on like Pendle and other types of protocol or these CDS protocols that are spinning up, which are like sort of necessary once you start extending duration. So like net new opportunities for DeFi as well. But the user behavior has to change.

Pendle is the closest one to starting to do this, I think. Can we, Sal, can I, I have a different, unless, do you have anything else on this topic?

I just have one thing about like, just the bear case for Deepin. Like, I get that, that there are network effects, more hotspots, more coverage, strengthens the case for enterprises like MNOs, like AT&Ts and Verizons, and to use it. We looked extensively into that. There's like, Google's already also doing this without a token. Um, My question to you is more like, is there a scenario where like the price can just not like, not move much and like it creates, like how durable is the network and is it tied to the price? Or is there a possibility where like just miners just go offline because there's a, to Rob's point, like there's just a better opportunity to deploy your infrastructure compute whatever into another project. And so I'm just trying to like poke holes into this argument that like networks are strong and, but they can be very reflexive if price just doesn't go up and like the ROI is not there for the incremental miners. And just how durable are these networks?

Yeah, I mean, the, the longest empirical data point we have is the Helium IoT network, which like the traffic has rounded to zero for several years now. They had close to a million hotspots at peak, and today it's like 550,000, 600,000 or something. So you can, you know, that's like maybe 10% churn or something over several years of having basically no earnings, which I'd argue is like actually pretty sticky for people having boxes like put up in their homes. For me, the bigger bear case on Deepin is that when I look at like what Apple has done, like I think of like all the cool things that Apple or Google, like you mentioned, is able to do. Like, you know, your phone can be like not have battery, but it can still ping some low Bluetooth signal, and they have this mesh network where like your AirPods, even though you and I have never met, or we have, but say we never met in person, Sanzi, you have lost your AirPods. They can use my phone in a completely encrypted way, even with no battery, to send Bluetooth signals and locate it where we're on the beach next to each other. And this is a vision for Deepin. But Apple does this today. Google does this today in different ways. And so for me, the bear case is just like we can't actually build something that's differentially meaningfully better because these closed ecosystems are just so powerful today. And they have a lot of talent. They have all the engineering capacity. They're able to optimize their hardware at a scale which D-Pins are not able to and are unable to stand out. So for me, when I think of what's the smart skeptic take on D-Pin, it's just like Apple and Google do this better and they do it today, not 3, 4 years from now.

Sal, if you had to bet on only 3 or 4 D-Pin companies right now, who would it be?

They don't exist yet. That's the whole point of the fun, man.

No, they could. You could double down on— could double down from the first one.

It's true. Um, I'll stick to liquid tokens because it's more fun anyways, and that way we don't have to choose favorites. But I think, like, we just wrote this big State of DePIN annual report, uh, that we published a couple days ago. And so I spent a lot of time, like, in the data, in the Blockworks dashboards, and doing stuff, looking at all the DPINs. I think there are the 3 networks that I can make an unambiguous argument right now that are just like cooking are Helium, Geodnet, and Grass. Helium and Geodnet, because they've gone through like now multiple cycles of growing revenue, they're pretty much at scale on the supply side and they have these big enterprise contracts. Grass is earlier in the lifecycle, but I had, you know, there's this big question like, is the revenues real? They tout like $50 million of annualized revenues and everyone sort of like dogs on them for not having it on-chain or not being transparent about it. We had the chance to basically sit down with Andrej, the Grass CEO, and go through like 80% of their customer contracts with top AI labs and actually saw the invoices, saw the monthly revenues that these guys are paying. And it's all real. I was shocked too. I was the biggest proponent of this. If it's real, put it on-chain. Why would you hide it? The pricing is not that much of a secret. But it turns out that they're really just cooking and it's all real. So those are the 3 networks where I'm like—

So why don't they put it on-chain? Because we have this issue when we're building out these dashboards for Deepins, which is with Deepins, in revenue, a lot of it ends up being off-chain. I think we were going to go build a dashboard for, I think maybe Hive Mapper, they had the same thing. Why is this the case?

Part of it you can imagine is customer concentration. There's not that many AI labs that are willing to pay $10 million a quarter. If you have one customer that's the bulk of that, you don't want to put— and they know the number they're paying you, you don't want to publish a number that's 20% bigger than that because you lose all your negotiating power. So I think a big part of it is, you know, a lot of DeFi things are like very small, long-tail supply and then a concentrated set of enterprise customers on the one side. And these guys know how to negotiate and they know if you tell them your margins, you're basically shooting yourself in the foot. And so I think that's the main reason.

Who are the 3 best? You remember DeFi Summer and kind of these like founders came out of it. It's like Leschner and Kane and Hayden and things like that. And they're kind of seen as like, I don't know, Yeah, the founders you think of when you think of like OG DeFi, who are the founders who you think of as being like the best founders in DePIN today?

I think when I think of like the elder statesman type role, I mean, Amir from Helium has to be up there. He's an investor in our fund and we've been obviously close to the Helium team for a long time. They've been like, they're just relentless about— I mean, they've been at it for a long time. You know, they were at it for 4 or 5 years before crypto even, and now they've been at it for like 7 years with crypto. And so I think they're like true missionaries. They've basically, like, any idea of a new sort of like protocol architecture or structure in DePIN, they've thought about it, maybe not pursued it. But I think when, yeah, when we look back at like who's going to be the Leschner of DePIN or, you know, to take your pick of those guys, Amir is probably at the top of that list for me. Yeah.

So any super interesting LPs that came into this that you— I don't know how much you can talk about the LP base, but Yeah, one that we can talk about is Sundana Capital.

It's a big— what we found is like tough fundraising for crypto VC specifically is like pretty tough right now. Like, a big part of the reason for that is because 2 years ago, 3 years ago, there was this cohort of like 10 to 15 crypto-focused fund of funds, or maybe like 8 to 15 crypto-focused fund of funds. That capital today is like pretty much disappeared because these guys either they don't have distributions or the fund of funds game has just gotten more competitive. But is basically like maybe this was 20-30% of crypto VC capital last cycle is now like gone. And so you need to make that up with non-crypto fund of funds, of which Sandana is one, and we're one of their only crypto bets, or to, you know, other sorts of like endowments or bigger pools of capital. But they've been great. They've backed— I had not, you know, when you're investing or you're an investment firm, you don't have a reason to like really catch up with all the LP community stuff. But Sandana has been backing emerging managers for almost a decade now, and they've backed some like incredible funds across all different spaces. So super excited to have them on our side.

Nice.

So one, um, so you guys, I think, are the only, like, deep-in-only fund, uh, that exists, or, you know, of any kind of real size. Um, who else do you like to co-invest with? Like, who else do you think is, like, good at deep-in, uh, that invests alongside you guys?

Yeah, I mean, we have a couple portfolio companies in common, Rob. Obviously, like, uh, Dawn from back a few years ago, Inversion, USDAI. I think you guys have crushed it at the growth stage. We've seen— I didn't mean for this question to be about you.

So who else? Totally.

I think Kyle and Tushar at Multicoin have been investing in this for a long time, doing things like Helium and Render and HiveMapper, even before, way before we had a fund. And actually, Tushar signed me my first Helium hotspot back like 6 years ago now or 5 years ago now. Vance from Framework has been at the top of this, like, the infrafi movement. I think he saw very early in DeFi that, like, there's capital out there now to get, and his involvement, like, you know, he's got a shit ton of capital from Maker now, which is committed to helping bootstrap these infrafi projects. So he's very, very deep in that space, and they've done super well. And the Andreessen team has also done, like, Guy there has done a fair bit of investing in deep-end projects, and they've have, you know, even like doubled down on some companies. I think they have a lot of independent conviction in the space.

Let's go. I liked your guys' launch video. It was good.

Thank you.

Also, Sal, do you have an EV3 tattoo? Is that what I'm looking at on your neck here?

I do. Yeah, I got it right. I actually got this and Mahesh told me the next day he wanted to change the logo. So it was a little bit of a first, first founder, co-founder disagreement, but it's, it's for life now.

Rob, where's the Dragonfly one? Yeah, show us.

Please, I can't show you where it is.

It's not safe for work.

He got a big dragon on his back. Coinbase crypto-backed loans powered by Morpho empower users to borrow up to $5 million using Bitcoin or $1 million using ETH as collateral. Loans originate in seconds with no additional credit checks and competitive rates typically between 4 to 8%. Use USDC for down payments, debt refinancing, unexpected bills, and more. Repayment anytime with no fixed deadlines. Over $1 billion in loans have been opened through Coinbase to date. With the Coinbase app, you can manage crypto-backed loans with ease. To learn more, click the link in the show notes. As always, investments in blockchain technology involve risk. Terms and conditions apply. Let's get into some of the news of the week. Where do you guys want to start? So here's, here's what's on my mind. So we've got stablecoin stuff. Tether launched their regulated stablecoin USDT with Bo. By the way, I heard an interesting fact, which is there were 50 different companies that were trying to hire Bo and Tether outbid all of them. A little fun fact of the day. Fidelity launched their stablecoin. Hyperliquid, RWAs, gold. I mean, I don't want to really talk about gold. But we could. Rob, where do you want to— where do you want to take this?

I mean, I think the hyper liquid, like, HIP3 markets, and like, you know, how well Trade.xyz and RWAs is, like, very topical for the crypto native audience. I think some of this stuff around— there's been, you know, this debate around crypto becoming fintech or co-opted— being co-opted by fintech and what that means. I think that's interesting. I don't know if we need to, you know, talk about all this specific stablecoin stuff that's happening. There's— because that's every week, and I feel like people are sick of me talking about stablecoins. But, um, yeah, those feel like the, like, the topics.

Yeah, I mean, what do you make of, um— so yeah, so, so basically, I'm sure everyone who's listening to this knows, but gold and metals, copper and metals have just ripped, obviously, in the last week. Uh, today, I think gold— we're recording this on Thursday— gold's down like 7%, but, um, you know, I think yesterday was up 8%. So yeah, these— the It's the first time I've ever really seen these commodities move from— they're now just these like crazy swing momentum trades, it feels like. So it's really interesting to see this play out. But one of the more interesting things is that if you look on Hyperliquid, 6 of the top 10 assets by trading volume yesterday were RWAs. So if I go down the list, it was Bitcoin, ETH, then silver, then Solana and HYPE, then XYZ100, then gold, then copper. Then XRP, then silver. Um, and I was trying to find the volume. It looks like the silver-USDC pair, which is— it's a new pair. I think the pair went live at like the end of December. It did a billion in volume in 24 hours. Uh, so silver alone brought in a— did a third of the— of Bitcoin's volume on Hyperliquid. So yeah, it's just interesting to see. I mean, I think the tokenized stocks narrative and idea was, yeah, a relatively new thing. And I think Oftentimes with these narratives, the narrative gets a little out in front of its skis and then the products need to catch up. But I actually feel like this is a pretty unique example of the products are keeping pace— products and the demand are keeping pace with the narrative. But yeah, I would love to get all you guys' takes on this.

I think it's actually quite interesting. So the, you know, the silver and like the gold rally and just like there's also just like broad metals rally happening right now. I think uranium is like ripping today as well. As well. And these are all— I mean, they're all related, but like, there's also like different stories. Uranium, obviously a big part of the story there is around nuclear energy and, um, and what's happening around it, you know, uh, energy generation, you know, more broadly, and especially with around AI. I think on, on Hyperliquid, it's quite interesting because, you know, Ostium kind of started with this market originally and they never quite took off. And there's definitely— there's a lot we can talk about in terms of the way that Osteum has built their business relative to the way that the infrastructure works for Hyperliquo and HIP3 markets. But it's also, I think, just somewhat of a story around like who owns the end consumer. And there's these network effects and liquidity effects around just people already having capital on, you know, in a platform that's actually not that easy to take money out of, more similar to like a centralized counterparty from at least that friction perspective. Um, but I, you know, I think, I don't know that I heard the same thing you did that I was thinking, the Thread guy said silver was one-third of Bitcoin. I think if you look at it in total, in the last 24 hours, the hit markets with Trade XYZ was like $3 billion of volume. And so that's inclusive of all of the, you know, I think silver, gold, etc., and also some of the equities. Um, and that, that is about a third in total. Of all hyperliquid volume, right? And so that tells you that because Hyperliquid did about $9 billion in the last, uh, last 24, and that number has been like steadily increasing. And it tells you a lot about like what's happening towards just, you know, the trader mentality of like what's interesting, what's moving. People want to chase these things that are having a kind of high reflexivity and big, um, in a lot of volatility. And, but it also tells you a lot about just the disinterest, I think, and a lot of what's happening in crypto, because then there's Bitcoin and then there's Ethereum, and then there's basically no volume in almost anything else in crypto right now. And so I think it's like quite interesting that one, Hyperliquid's been able to, um, have this success and the HIP3 markets are working so well, but two, just how little interest there is on any alternative token across all of the trader ecosystem.

Is it that the traders are now like moving and buying copper because Dan Druckmiller and a couple other billionaires are punting it? Or like, like, where— to your point around like, uh, where's the demand coming from? Like, is it just crypto people saying, fuck this, I don't want to buy a token, I want to buy metals? And just like, like, because like, it always goes back to like, are you solving a problem? Like, who's the audience? Is it like crypto native people that want exposure to this? Because you can buy these commodities in like traditional brokerage account.

So I think most, I think most crypto traders, and we've talked about this a bunch, Santi, most crypto traders are momentum traders, right? Like they're chasing momentum. It does, like the asset could be anything, right? There's, there's, we've talked a lot about how, and Sal kind of brushed this off earlier, I'm not sure if I totally agree with him around like if we need more regulatory clarity for the tokens to do well over, over the long run, because I think you need that like fundamental long-oriented buy-and-hold type investor for these things do well over the long run. But when you talk about these like short-term volatility that we're seeing right now in metals, I think most of the crypto traders, but whether they're institutional or not, are chasing short-term volatility, short-term momentum, and they're happy to rotate into anything. It doesn't matter if it's a meme coin or if it's Bitcoin or if it's metal, like they will rotate into anything that they feel they can chase this momentum. It's, um, and those markets have kind of acted quite a bit, uh, like, you know, meme coins. And frankly, if you look at like the funding rates right now on Hyperliquid, I mean, there are huge negative funding rates, uh, or positive funding rates, but the funding rates are blowing out in these times with these big moves right now because everybody is just trying to take, you know, this asset and put a ton of leverage on it the same way they would on, you know, anything else. That's—

isn't that what it actually comes down to, Rob?

Is—

so, Santi, to answer your question, why are they using Hyperliquid to trade gold? It's because the leverage, right? I actually am not entirely sure how to go get 10x leverage. I know how to buy gold, buy one of the gold GLD or something like that. I'm not sure if I wanted to get 25x leverage on gold, how I would do that other than going to Hyperliquid. So I would assume— I haven't looked into the numbers. I don't actually know the— I know what pairs they're trading. I don't know with what leverage, but I would assume that's why people are using Hyperliquid.

Let me ask you, also, just money's already on chain, right?

And then there's this like, you know, uh, there's this anonymity and, you know, regulatory arbitrage, I think, for Hyperliquid relative to some of these centralized platforms.

Let me just get this straight. Like, if you're, if you're in a world where like not these platforms start working for non-crypto traders, the perp, the perp ideas actually could attract non-crypto traders. Like, I get that. Uh, the question is, would a Robinhood kind of just launch this or a Coinbase launch this? And then like, you know, at that point, or an IB, like Interactive Brokers launches. Versus like, you know, setting up a new account and going on-chain through Fireblocks to Hype.

Uh, that's no different than traditional like Bitcoin and ETH.

And yeah, you know, I get that. I'm just saying, is, is the perp, uh, is a perp feature like worth the hoops? And then what do you have to underwrite to like, there's a lot of debate around the funding rate, like Ostium, like there was just a heated debate on-chain, like on Twitter about like, hey, what's funding rate? Um, I don't— I'm not sophisticated enough to have an opinion on that, but I'm just curious, like, are you taking— it's always like, how many more incremental risk units are you taking for the value of trading a perp on these things versus remaining in your brokerage account? And that calculus is not clear to me right now.

Well, the easier thing about, uh, so, so I mean, there's one— there's, I think, the conversation around like whether or not perps are better products. And to your point, I think we— a lot of us, probably all of us, believe perps are better products than like options. And like retail are going to like pile into perps over time. I think there's also the idea around, you know, uh, so commodities are working right now in part because they're moving so much in traditional markets, but also commodities are an easier thing to trade on-chain 24/7 than equities are. Cuz you don't have these closures of the market, right? In the same way, like the commodity markets are open almost the entire week, right? Not quite the whole week, but almost the entire week if you move with the sun. Right. But it's, I think it's very clear. I mean, if you actually look at, so it's the volume on Trade.xyz right now is about a third of hyperliquids, but the open interest is only about, uh, 1/10 or about 10%. Right. And so what does that actually tell you? That these are people that are short-term trading these, like, you know, highly volatile moves and not people who have like long-term oriented perspectives on what silver is going to do over time.

If you guys had to bet, do you think that 1/3 number, like a percentage of hyper liquid that is coming from HIP3 broadly including commodities and equities, you think the 1/3 number goes up or down, say over the next 12 months?

Well, you think volume or is it like, because volume like depends on like the asset price itself, right? So you could be trading a whole lot more velocity on a crypto asset, but How much?

I don't know.

I think it probably stays roughly here. Uh, I think we probably trend higher in the near term and then we normalize back to 25 to a third, I would guess. But that's because I believe that eventually people will care about crypto tokens again, uh, which I think we all do, uh, except for maybe Santi and fresh, fresh, uh, I'm like, you know, the best part of all this is I haven't refreshed, checked TradingView, CoinGecko.

I'm disconnected and I'm just fully—

I actually, I will admit, I didn't even know gold went down 7% today until I got on here and Austin, our producer, was like, yeah, gold's down 7%. It's like, oh, I'm— I've never checked the markets less than I checked them today.

Yeah. I mean, it's about that, right?

I, I will tell you, I did, um, I bought a bunch of ETFs earlier this week, uh, for like a bunch of different things, um, but including commodities, but also including like nuclear energy. I bought a bunch of like uranium-related, nuclear energy-related ETFs as well. Um, and so I have been checking it a little bit this week, and I've actually never seen my equities positions like move around as much as they have this week, um, because also like, you know, the NASDAQ's down 2.5% or 2.5 points today as well because people are concerned about AI, AI fears. And it does feel like the— like, like it feels a little bit weird to see my Fidelity brokerage account move around as much as it has this week. So I don't know if I like that.

Goddamn, Rob, you know what's doing well? Western Union, man. Stablecoin at $9.46. Love to see it.

All right. I'm taking us into the next topic.

I, I did notice, can we talk about like, uh, you guys announced a huge fundraise prop today, I think. Is that right?

Uh, we announced it on, on Tuesday.

Okay.

Uh, yeah, I didn't even see that.

Oh, oh, around, uh, at least someone has money. That's these days.

We— well, Sal's now got money. Sal's got $60 million, so, uh, that's great. Um, no, no, we— so we announced a— we led a an investment into a business called Mesh, $75 million round, unicorn business. They, they are by far the leader in essentially connecting all of the exchanges, all of the liquidity providers, all of the wallets to make like a really easy interface to basically deposit stablecoins, right, or not just stablecoins, but any tokenized asset, any crypto, etc. So, like right now, if you go to some e-commerce websites, not all of them, there's like a PayPal has like a pay with crypto widget in the same way they have like a PayPal widget. If you click on that widget, it'll pop up an interface and it'll give you some selections. It'll say Coinbase, Binance, MetaMask, etc. And you can basically in one click, if they already know who you are, if you've already signed up and you don't have to have KYC, you just have to have like, you know, signed up with your wallet, you can— you're one of your wallet addresses. You can in one click, uh, deposit, uh, your any sort of crypto, pay with crypto, etc. And so, yeah, so essentially it looks a lot like a Plaid and/or Stripe Link, you know, some sort of combined of the two, um, for crypto. And we're starting to see a— that part of the market, uh, pick up quite a bit. Um, they also power Kalshi. Oh, everything that you do on Kalshi in the, in the crypto side is powered by them. Um, they're going live with— I think they just went live, or they're going live pretty soon, uh, with one of the largest fintechs in the world to power all of their crypto deposits and withdrawals. And so they're doing— they're just making it very easy in a fragmented world. And I actually do think crypto is getting more fragmented in the near term because of the fact that all these fintechs are going to pop up, because of the fact that everybody wants to start moving on to tokenized assets. They are the network that makes it easy to move your capital between any of these different, uh, different use cases and not have to go and, you know, what you do now, right, which is that you, you, you pull up the, the wallet address, you click copy, you go to the other one, you, uh, your wallet, you like put in the address, you confirm the transaction, and you don't have to do any of that with them. And they're connect— making all of these connections.

So do they compete with the on and off ramps, Rob? Like, do they compete with those like a ZeroHash, for example?

So ZeroHash, mostly today what they do is they take, uh, fiat in and then they swap it into crypto or vice versa, right? And what these guys are doing is right now is connecting after you've on-ramped, connecting every single source of liquidity.

Oh, I get it. I get it.

Okay.

Yeah.

Yeah. So I mean, they, they will launch some fiat capabilities this year as well. Uh, and they already kind of work with partners to do that so they can offer like a single, uh, an easy UX, but, um, the right, the right way to think about them today is that like if you are doing an on-ramp, uh, you want to connect to them because that then immediately gives people at, call it, you know, someone like a Revolut maybe, uh, immediate access to easily taking, you know, some sort of crypto from you and sending to them or vice versa.

Yeah. Yeah. It's very interesting. The things that are, I'd say the hottest in the funding markets right now are the things that enable fintechs and payment providers. To move on-chain and do things in crypto. Like, we have an episode coming out with the Rain founder, which was a fantastic episode. And yeah, he talked about how they, you know, they raised 3 rounds in 2025. Like, their business is just exploding right now. Rob, I know, I know you know this very well because you guys are an investor, but like, you know, Mesh again. And these are— the other thing is these are great founders. I think the early wave of crypto was a lot of like, yeah, 23, 24, 25-year-old founders, first-time founders. I think we're seeing a lot more like like, bam, I know Bam, the founder of Mesh, like he's a very, very, very good founder. We've actually had him on the podcast. Folks can go listen to that. We had him and Charlie Noyes on the podcast maybe 6 months ago. The Rain founder is very, very good. Sal, I'm curious when you look at the, I guess when you look at the deep end space, like I guess two, two related questions are have you seen the founder maturity start to happen? Like, you know, the 35-year-old founders instead of the 25-year-old founders? Because that's an interesting sign of kind of a sector inside of crypto growing up. And the other thing is, are there— is there infrastructure that's needed to take DePIN to the next level in the same way that, you know, Revolut needs Mesh, it needs Rain? Is there a thing— are there things that DePIN needs right now?

Yeah, I think DePIN is a little bit different because we never went— like, infrastructure never went through the fintech phase. Like, you know, there was for 10 years basically like a huge amount of VC funding and really great entrepreneurs going after the last mile of financial services, and they called that fintech. And now we're replacing the entire backend. And of course, you need a middleware layer to interface between those two things. For DePINs, it's like there is no fintech version of AT&T that you can go out there really. There was never that 10-year phase of deep investment in Web2 last mile rails. And so I don't think there's the same opportunity, frankly, to, to do this, at least not yet today. The closest I can think of are, for example, like Multicoin funded a company called Oxio a number of, a few years ago, which enabled like a, if you were like a large retail chain or a media brand or, you know, a news channel or something, and primarily in Latin America, you could launch a phone service plan that was like white label branded to you, and they would be the interface between AT&T, maybe in the future between Helium and all the other carriers, and and those brands. And so what we've seen though is that like they, those companies don't really tend to lean into the Deepin branding. Maybe Inversion is like the, you know, the one counterexample to that where like they're very publicly being like, hey, we're going to use Deepin and go build a real business. But primarily like those guys, they might use Helium or GeoNet in the backend, but they don't need to talk about it and they never do. And it's not an advantage for them. And so there's less of this, less of this like bridge opportunity that I think is really, really attractive in fintech and DeFi.

Do you guys see Robinhood's announcement? Said in Europe in the coming months, we're planning to unlock 24/7 trading and DeFi access, which will allow investors to self-custody their stock tokens with possibilities of lending, staking, and more. It's kind of related to our RWA chat. But yeah, I think the, I think the megatrend, if you had to define a megatrend of 2026, I think it'll be very clear that the megatrend of the year is companies are moving on-chain. We're talking about the people who enable it, MESH and RAIN and things like that. But like, yeah, everyone from the, the telcos to the, you know, I don't know if Santi is going to, you know, maybe buy some of these telcos, put them on, put them on a blockchain. But, you know, clearly the fintechs and payment providers are coming on-chain. And I think you'll see this with the brokerages too. It's not just that I feel like Robinhood 3 years ago is like, oh, we're turning on trading for 100 assets. Now it's Hey, we're turning on, yeah, on-chain trading. So it's very, it's very cool to see. I don't know if you guys have any takes on this.

I'll tell you, like, my thesis summarized for this, like, coming years is, like, to your point, companies are coming on-chain and they will reap most of the value. And adoption doesn't translate to value accrual in infra tokens necessarily. And, like, the tech is very real. Like, if you want to go structurally long that thesis, like, how do you, like, Would you rather own like a Klarna, Robinhood, PayPal, maybe PayPal not so much, it's just slow, a Nubank, maybe even a Revolut if it goes public, like versus SOL, XRP, Ethereum, Bitcoin, any of the other majors, like even maybe DeFi projects on the margin, maybe because they have been depressed for a while. But I think like investors are not dumb and I think they're just, other than momentum traders, like I, I think there's going to be more adoption, but it doesn't accrue to the underlying infrastructure tokens, but it does materially improve the business of a Klarna. Like I'm really excited to see how Klarna kind of transforms itself in this pro forma after adopting stablecoins. And if that's the case, and other public companies are going to do that and other private companies are going to do that, And that's where most of the value capture will happen.

Yeah, yeah. It's like when— it still feels very risky, I think, for a public— we had a call last night with the head of crypto at a public company. And he's like, I spent half my job convincing people internally that this needs to happen. But do you— I don't know if you guys remember when Tobi, the founder of Shopify, wrote the piece about how all of Shopify is moving on to— it's basically becoming an AI-first company. And every single person at the company has to start using AI. And then it was kind of I remember this in like the founder group chats and stuff. It was kind of like the, ah, okay, like we can push this too now. Like Toby, it was, uh, and you have these moments in time. I remember, uh, May 2020, Paul Tudor Jones calling Bitcoin the fastest horse in the race. Boom. Now hedge fund managers can allocate to Bitcoin. It's safe now. And, uh, I think that'll, you'll see, I agree with Santi. I don't know if it's Klarna. I don't know if it's, you know, Vlad at Robinhood. It's probably, I think Vlad at Robinhood is starting to be this character. But, um, yeah, he's, he's unlocking it, the ability for other people to be like, I can do this, Robinhood is doing it.

I think with, with stablecoins, with tokenized assets, like, I think we're already there actually. So I think for finance, I think when we start talking about DePIN, we start talking about, you know, other traditional companies using blockchain rails for parts of their business. We're not there yet. Uh, we have— I think we've seen a little bit of this. I know there's you know, non-publicly, there's like, you know, traditional manufacturing companies and commodities traders and utilities that are looking at like stablecoins for like treasury management and stuff like that. But if they're going to do other— if they're going to like tokenize, like, you know, some sort of like hedging contract or like, you know, commodity like that, I think we're still pretty far from that being mass market. But when it comes to finance, I mean, we had the NYSE come out, I think last week, and say that they're putting up their own order book for tokenized assets. DTCC has specifically talked about how they're going to tokenize equities. We've got, you know, Fidelity announced their stablecoin, I think today. They've obviously been at the forefront of thinking through how to do more in crypto, uh, where, you know, I think, uh, we, I think Santi and I talked about this a little bit on the pod that you weren't on, Yano, but just how crazy it was what, um, what, what Larry Fink said at the, uh, at the World Economic Forum where he was basically like all of future finance activity is like coming on-chain and everyone is going to be interacting in a shared ledger. And that is, required for us to continue to grow these markets. So I think, you know, Robinhood obviously has been a big part of that. So I think for finance, for tokenized, you know, equities, tokenized like real-world assets, uh, that train is off the station. Now whether or not it's in a— what type of, like, a permissionless form factor, and, you know, it's freely tradable, and, you know, how we think about the regulatory environment in terms of KYC, AML, and if these can be in traditional DeFi protocols, etc. That's still to be decided. But is Robinhood going to launch their own chain? Are they going to put it in their own walled garden? And it's, you know, probably hundreds of other types of, you know, finance-first or fintech-type companies. Are they going to do the exact same thing? Like, absolutely. And it's happening. I think that's— you can't put that genie back in the bottle.

Rob, I have a question for you. Given you guys have done so much investing in this, like, the bridge between fintech and crypto. What's your take on the state of compliance? It's top of mind for me because I'm from Venezuela. There's this Venezuelan startup called Contigo, which has got very popular. A lot of people doing Binance off-ramps. And it was like a known secret within the Venezuelan community that these guys were basically just laundering money for PDVSA, the state-owned oil company, through this. It's basically an entire career in Venezuela. You can buy stablecoins on Binance P2P or Contigo or whatever and offload money for the state oil company, which has sanctions against them. So when you see like these— when I see these crazy growth numbers for, you know, card issuing companies, for like pay on and off ramps, payment trails, I'm like, you know, it, it could be or is very probably pretty likely either in the past or today that a large part of this is like illicit proceeds just because they're the first adopters of new financial, new low-cost financial rails. I'm curious, like, when you think about the state of compliance today, what's your—

are you—

feel like there's a lot of work to be done there? You think we're all the way— we're most of the way there?

No, there's a lot of work to be done. I think that's very clear. Right. So, you know, Contigo was an interesting one because we passed on a couple of rounds there and then they came out and they got like really hot and they were saying they were doing $20 million of revenue and, you know, it was growing really quickly. And I looked at it and I was like, what did I miss? I always try to do these, these kind of, you know, retros. And interestingly, the first time we looked at it, they weren't even in Venezuela. They, they, they were in Venezuela. They kind of came in Venezuela late. Um, and I think, you know, having seen— there's a number of companies where if I scroll through Twitter where there's a lot of people excited about them, that having looked under the hood, it's like very clear to me that they are not doing the appropriate levels of, of, you know, compliance, and they might be serving customers that, uh, that the US government would not be okay with. And we spend a lot of time in diligence looking at that because while I think it's very important for startups to get very close to the edge and to move quickly and be okay with taking risk. Uh, you, it's certainly, you don't want to be, you know, a backer of a startup. I'm sure you feel the same way of somebody who like is knowingly probably crossing the line. Right. And, uh, but, but that line can be pretty thin for people. Right. And so you, you have to, a lot of it is also just judging the character of the, uh, of the founder and like, what are they going to do to to grow. So we care a lot about that. We think a lot about it. There are the tools in place today though to do the appropriate compliance. Like, you know, now, you know, according to Genius Act, if you use Chainalysis, you do the right transaction monitoring, you do the right KYC at the endpoints— depends a little bit about what happens in market structure, Bill— but there are ways to make sure that you're operating within at least, you know, close enough to the white area that it's appropriate level of gray, uh, and to grow your business. But a lot of people are taking shortcuts, right? And so it's— you just have to be really thoughtful about that as a VC investor. But the tools exist. It's not— it's— it used to be in my mind that it was hard to do compliance. And so if you, uh, you may not even be able to get appropriate— the appropriate level of transaction monitoring, the appropriate level of KYC to serve certain clients. That is no longer true. Now it's just about willpower and about willingness to, um, find that line but not cross it so that, and compete against people who maybe are willing to cross that line. Uh, and it's something that we think a lot about and, and our companies do.

Uh, Rob, speaking about compliance and whatnot, like, um, I haven't heard, uh, Chainalysis, CipherTrace, some of these companies that, you know, raised a ton. Uh, in 2021, like any update there, like, are they going to go public or are they going to get acquired?

I think Chainalysis is a, is a 26 public company. Um, so I think they're, I don't, I don't know.

Do you think they get out this year, Rob?

I do. I think Chainalysis gets out this year.

Who else do you think gets out this year? Grayscale, Kraken, Anchorage, maybe?

I was having a discussion with the leading IPO underwriter about crypto IPOs, uh, earlier this week. And, uh, this person was telling me that they have 7 people that they're currently working on their IPO with right now. Uh, and I did ask him, cause we were talking a little bit about the BitGo IPO and you guys remember last Thursday how bearish I was on the BitGo IPO. And, and, and Yano was, I think, uh, pretty bullish. And then it was down 30% the next day.

Um, I didn't say I was bullish on the, on the 24-hour chart. I said, I'm, I'm bullish on Mike Belshi as a human being.

I think it found its footing around where I said it would, which is around $13.

You actually did call the price pretty nice.

It is at $12.61.

Yeah, Rob did say it was going to $13, so I will, I will tip my cap, Rob. Go ahead, 7 people, 7 companies.

Um, yeah, but he was saying 7 people and I was asking, I was like, well, how many of these companies do you actually think are like good public companies? And this person was like, I think maybe 2 to 3 of them. Are actually good public companies. And, uh, you know, maybe 5 of them are better than BitGo, right? And I think that there's this thing happening right now where everybody in crypto feels like, you know, okay, we have this window and we need to go get liquidity and we need to try to get out into the public market. But most of the companies, or very few companies that are actually the right size, the right scale, the right growth, the right compliance infrastructure, the right accounting infrastructure, and the right leadership to go be a good public company, to get large hedge funds excited. Right. And not just the, you know, the trading hedge funds, but like the fundamental long-only buy-and-hold type investors. And so I think Chainalysis will be one of them because they just absolutely dominate the US government markets. And especially in this world where everything is coming on-chain, like everybody uses them who is willing to pay, who wants to operate legally and appropriately. I think I have no idea what their financials are, but I think they're over $300 million of run rate, uh, or of ARR now and growing.

$300 million of run rate. I don't think it's ARR.

Sorry, of ARR. Sorry, of ARR.

No, no, no. I don't think it's ARR. I think because there's recurring sticky revenue, which are these software contracts, and then there's a lot of services work like any of these.

So yeah, I don't, I don't know the revenue mix. So you're fair. I don't know the revenue mix. Um, and so like, they're probably on the edge of big enough. I think you probably have to have, I think closer to $500 million of revenue is, is right, right now, considering how big the public markets have gone. I mean, we're going to get 2 or 3 over trillion-dollar IPOs this year, right? Like the public markets have changed so much.

Who, who, Anthropic, SpaceX?

Uh, we're gonna, you're gonna get OpenAI and SpaceX for sure this year. Yeah. And both of those will be over a trillion dollars.

Yeah. Here's my, here's my market prediction. The equities market tops in June or July, whenever SpaceX IPOs. That is my, I think we go on a ripper of a run up to the SpaceX IPO and then top.

There's a, there's a SpaceX round happening right now at $800 million. And it's like, it's oversubbed by like 40. Yeah. Like people are diving into it at $800 million.

Rob, you said $800 million.

It's—

what did you say? 40x oversubscribed at $800 billion?

Yep.

So you guys doing that?

Yeah, it's crazy.

I do think like work, it's going to be bullish for Deepin actually.

Like I think like very few, very, very few investors have looked at wireless business. Every investor in the world is going to be looking at a wire, like trying to understand what a wireless business can do now. And they're going to look at you know, this business doing like $10 billion run rate revenue that's growing like 50% year over year. And I do think it'll be super bullish for people as people just like start to understand that this can get fucking huge again.

So I do get asked this question a lot from people when we were like underwriting the Helium story and coverage. They're like, hey, wait a minute, talk to me about Starlink. What does that do to Dawn? What does that do to Helium? Does that For someone listening, asking that question, what would you say to them?

I mean, they're compliment— one, I'd say, like, if you think about the physics of it, like, if I wanted to send you a piece of data, I'm not going to send it out, like, whatever, 10,000, 12,000 miles into space and then back down. It just, like, it takes slower and it's longer. Two, I'd say, like, the pieces where Helium is making money today are, like, indoor hotspots in highly populated areas, which is exactly where, like, satellite pointed at a big area is not going to be effective. So I think it's super bearish for the telcos because now you have, from the bottom last-mile grassroots end, you have Helium and Dawn and all these deployments putting routers on the ground. And then on the backhaul end, you have satellites to cover huge areas. But I don't think there's actually that much competition. If you think from first principles, that's like get one piece of data from point A to point B in the world where it makes more sense. You either should use one of these things or the other. It's very rare that both of them make sense. I don't think it's super competitive. With, uh, with Deepin.

I spoke with Neil about it and he said the same thing, because the physics just make it that the mesh network will always be cheaper. Uh, it's really on the remote areas where it makes sense to have Starlink, uh, where just don't have coverage, just don't have density.

Yeah. It's gonna be a good year. You guys remember IP, uh, 2021 where all the IPOs started ripping around like Q2, Q3, it was like Roblox, SoFi, Toast, Affirm, Robinhood, I think was 2021. Bumble, um, Nubank. I think, yeah, I mean, I think you'll see the same thing this year.

What's Bumble doing now?

Oh, not well. I know, right? Let's see, I'm not sure. Yeah, their market cap's sub, sub a billion now.

Yeah, 900 million.

Oh, that's a gnarly chart. They, uh, they're down 95%.

Gosh, what a time 2021 was.

Great year.

Great year.

So I was reading, um, I've been reading a lot about just old, old books, uh, and about what finance kind of looked like, like in the even, even like 1940s, 1960s, hedge fund managers that got started there. And it was just like, you're almost like reading, you could Ctrl+F Yeah, and you see the same phenomenon in crypto, uh, but like people forget, like, you know, illiquid markets and tokens are not the only thing that goes down 90%. Um, I will say like sometimes that happens and like doesn't necessarily mean that the project is not good, the business is not good. It was like markets are not necessarily good. Um, you know, they sometimes you have this irrationality in the market and it should have never been valued at that price, but that doesn't mean the business itself is not good, which is, I think, probably a lot of DeFi, a lot of DePIN, a lot of maybe gaming resurges.

But the question just becomes, who is, who is the Karvana, right? Because a lot of tokens are about to look like this. And then who, who comes back?

Oh, I would say, but yeah.

What'd you say?

I want to say like about to, I mean, it took 2 years, but yeah. There's like the climbing up where people are like, oh shit, you know, I'm not going to buy it, not going to buy it. It's just, you know, still not a good business.

And there is an amazing episode on Invest Like the Best. Let's see if I can find it. Invest Like the Best with this. Yeah, this guy, I forget his name. Here, let me pull it up. We can find it. It's this episode called Investor Details Carvana's Wild Ride from Down 99% to Market Leader. Cliff Sossin, an amazing episode about just, yeah, he basically bet the firm on Carvana and it went down 99% and he I mean, he just kept doubling down. Yeah, I don't know if it's a good bet or a bad bet because I think it's now back to like break even. But, uh, you know, good.

You have to, you have to pick one public, one token that you think is going to do a Carvana. That will be now a term that we use in this pod. What's going to be the Carvana crypto? Which one? NFA.

For me, Helium.

Helium, the MVNO, or helium, the token?

I think on a long enough time frame, they're both the same.

I mean, Solana did this. Solana hit $260 and went down to $8. I think there's a chance Hyperliquid gets completely crushed at some point and goes and then comes back.

I think that North Korea hack when they get hacked by North Korea.

Yeah, exactly.

The truck and buy hype.

I'm long term very bullish on Athena, I would say. Like, I think I've talked about ad nauseam, but like, I think Guy's an amazing founder. The token's getting crushed. It's down to $0.15 or $0.16. But, you know, off of a high of like $1.40, $1.50. But, you know, long, long term, I think Athena will do very well.

So Carvana did a 100x, right? $400.

Mm-hmm.

Coinbase is now what, $200? Went all the way down to $20 when the— like we're talking about on this pod, right? So it's a 10x.

I don't think it went all the way down $20, right? I thought it was like a— yeah, like a $60, $70, $70, but maybe it did.

No, no, Coinbase went to like $35.

Yeah, $30.

Yeah.

This is like a 10x.

I mean, a lot of these, a lot of these, a lot of the best stocks have done this. Um, uh, Robinhood, remember Robinhood was at like $50, $60, went down to like, I think it was down to like $8 or $9 or $9.

Yeah, now it's at $110 or so.

Yeah.

So, all right folks, um, good app. Sal, thanks for joining. Content of the week, what do we got? So we're always doing a little content of the week. Rob likes to choose a horror story.

Santi likes to choose something more normal, but, uh, I'm the only one who like actually does, you know, some sort of fiction here. I want people to enjoy themselves.

I took your— I watched, I watched Sinners.

Did you like it?

Best movie of the year.

Both liked it and didn't like it. I thought it was like such a good, such good, um, like showing Mrs.— I don't know when the time, time was, like, I don't know, some somewhere between 1890 and 19—

Prohibition, right? So like the 20th. Yeah.

Okay, 1920s, like showing Mississippi in the 1920s, 1930s was like, they did that better than anyone could do. I thought, I thought it was amazingly well done in that sense. I didn't, it was too jumpy of storytelling. It was like boom, boom, boom, vampires, like boom, boom, boom, we're killing the Ku Klux Klan. Like I was like, where, where, there's no, oh, all the characters are dead. All right, like just boom. All like, so yeah, it was a little, it was a little jumpy in terms of the storytelling, but 16 Academy Award nominations.

16 nominations.

I mean, Michael B. Jordan's amazing, so good, good on him. Content of the week, Rob, what do you got?

Uh, so I am gonna go horror. Uh, so 28 Years Later— everyone knows 28 Years Later, the original movie. Um, they, they're doing like a new trilogy, so the second of the new trilogy, uh, called 28 Years Later: Bone Temple. Was— I think it was like, it came out like 2 weeks ago or so. Uh, actually great movie. I saw it this week, uh, and probably my only bit of free time, went to the— actually went to the theater. I'm still keeping theaters alive. I'm the only one. And there, it was just like, it was funny and it was, um, you know, it was really, I think, nuanced and interesting about how you can think about like society and how society constructs itself and how they might fall apart and how it might construct itself when it falls apart. So, uh, go see it. 28 Years Later: Bone Temple. It's actually doing quite bad in movie theaters even though it has great reviews and is a fantastic movie. Go see it.

Go see it. It's doing horribly.

I mean, 92% of Rotten Tomatoes. Like, it was better than the first one. The first one did really well. So like, you know, go see it.

Rob was a principal there, the GoFundMe campaign. And so, you know, he stands to benefit from proceeds.

Listen, if you have a horror movie, uh, an indie horror movie that you think will do well and you need funding, come pitch me, dude.

Isn't that like the best performing category in like, uh, movie business, like indie horror movies?

Oh, incredible. Horror is the only place where indie film continues to do well. And you see these— the— it's kind of like a venture outcome because it's like power law dynamics. You see these, um, franchises that get built off the back of like the first, you know, movie gets built, uh, or gets funded for like $5 to $10 million, and then they do $120 million at the box office. Like Smile was one of these.

Uh, Paranormal Activity was one.

No, yeah, Paranormal Activity was like that. Obviously that's an old one. Um, Smile was one of these that's more recent. Uh, there was, um, there's this one, I'm, I'm forgetting the name now, uh, but there's a kind of a, a killer clown, uh, which has like this like really just like deep, like niche, rabid fan community, which now has made 4 of them and has made the— and they're, they're— you watch them, they're like really low production quality, but people just love them. It's, it's, it's basically venture returns, uh, in indie horror. It's the only place that we can do that in film today.

Well, please send me the deck to Horror Capital Management LLC.

Content of the Week, hit us.

So I started halfway through the book.

We got to survey the audience at some point to be like, do you guys like the content section? Because it's— I bet if you looked at our listen rates, it's like, good, good, good, just drop.

Okay, but we're still going to— this is where the market's wrong. We're going to keep doing this.

Okay.

We like doing it. I'm halfway through the book, The Making of a Paramahbear. By Jeremy Grantham. He's kind of a legendary investor, built kind of early on the indexing trend based out of Boston. He also has a couple of YouTube videos if people don't want to read the book. He at the peak managed like $120 billion, then went down a ton. It's just, you know, it's a very, like, you know, old-timer. And I always enjoy reading those kind of books. So it's called The Making of a Permabear. Seems apt for where we are on the market too.

So what do you got?

I'm halfway through this, halfway through this book called The King of Oil. It's just about this trader called, uh, Mark Rich, I think his name was. It's super good. This guy was absolutely insane. He basically pioneered— like, oil used to be traded bilaterally between companies and countries, and he like created a spot market for it. And he's like super under the radar but would do all these insane things like It was like the Iranian Revolution. He was buying oil from Iran and selling it to the Israelis under the radar without telling either side. Just crazy insane shit. And the CIA was looking after him for a while. He actually couldn't come back to the US because they wanted to arrest him. So it's a crazy, crazy book, both in the sense of him as an entrepreneur and then actually pretty informative on the history of commodities markets as well.

I'm like 100 pages into The Beginning of Infinity by David Deutsch. And I think, I think, yeah, I think I like it so far. So it's about like, yeah, he argues that explanations have, are like a fundamental place in the universe and it kind of explores like human knowledge and argues that like good explanations and unlimited human progress through the refinement of knowledge, basically, then I don't know what he argues. I haven't gotten to that point, but that's what it seems like it's about so far.

So last question. Last question. I think we're going to have to embed this. Are you— which is the LLM of choice this week?

Claude. Oh my God. Okay, sorry. I should have gone on my rant. I didn't go on my rant this week. I set up— I set up Claude Cowork finally. I've been a little behind on setting up Claude Cowork. I mean, you know what I'm going to say? It's incredible.

It's incredible.

So you got to— I didn't realize this. So you have to download Claude as an application. I always use Claude in the browser, so I finally download Claude, you know, the application, set everything up, connected it to Notion, Slack, GitHub, Linear, email, calendar, our Stripe. Our Ramp account, everything. I can now ask it anything. I can ask it any— I can be like, what are employees at Blockworks debating? What are they arguing about today? And it will tell me. I can be like, what are the 10 weirdest outlier expenses of the last 9 months? Found out someone expensed a Herman Miller chair. That's not on the expense policy. Uh, yeah. So, you know, that person They're going to pay you back. They actually already left Blockworks. So, um, you know, I think they might get the Herman Miller chair for free. Good, good on them.

Um, but you know, when you think about how much time people sit on a chair, you know, it's not—

I know, I know. There's an argument to be made that, that we should, but, um, I also did one. So we have a, we sell with a deck, like we have like a deck that outlines Blockworks, like a 15-slide deck or something. I said, I said, look, here's what I said. I said, we pull it up. I said, imagine you're an incredible product designer and front-end engineer. Turn this deck into an animated, beautifully designed website that we can send to prospects instead of sending them a deck. In 6 minutes, it created probably an 8.5 out of 10 website. So Nice. Yeah.

Yeah.

All right. That's all I got. That's the pod. Good pod. Thanks, folks. Good listening. We got an episode with Belshee coming out on Monday. He addresses all of Rob's concerns. Stock is—

do I just get ripped apart in this pod? I can't wait for it.

No, he actually ends up talking— we ended up talking for like 45 minutes about what it's like as a founder going through the IPO process, which I'd never really heard in that much detail. We didn't actually talk too much about BitCo's business. We talked about like just how crazy the IPO process is, like, like what it's actually like to do a roadshow. So it's really, yeah, really interesting conversation. So see you guys on— see you guys on Monday for that episode. See you next Friday. And Sal, thanks again for joining and congrats on the, on the fundraising.

Thanks, fellas.

Change that credit card PIN.

Yeah, seriously. All right, folks.

Thanks, guys.