The Ether Machine Chairman: Real Risk of DATs And Who Wins From Stripe And Circle’s Chains | Weekly Roundup

I think that there is a bunch of liability in these shell companies, and it's not just, you know, the preexisting, you know, having to pay $5 to the existing CEO of the dying biotech that doesn't know how to spell Ethereum.

This episode is brought to you by Geodnet, the world's largest decentralized RTK network, delivering real-time, centimeter-accurate positioning around the globe. You'll hear more about them later in the episode. 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've got Rob, we got Santi, and we've We've got a fourth guest. I don't think he's vying for the co-host spot, but he is an esteemed guest. We're excited to have him. Andrew Keys from the Ether Machine. Welcome, Andrew.

Thanks for having me, guys.

Yeah. Rob, Santi, how's the week?

Not bad.

No, it's been a great week. I didn't know when you guys asked me to do this pod that I was going to be a DAT pod. DATs every week. And so I don't know if like, yeah, it would have been the same answer, but you know, I'm excited to have Andrew.

I mean, that's the industry. That's, that's the industry today that we live in. We're calling it suitcoin summer. Not my term. I got it from Jameson Lopp. It is suitcoin summer, baby. So, Andrew, I wanted to have you on because several people have told me that. So there's all, there's all these dApps right now. And several people have said you guys are running the best operated dApp.

And that is not—

that's not my words. I'm sure you would say the same thing, but other people have told me that. So I did want to get into use this episode to get into a little bit of the operational side of running the dApps. But actually, importantly, so I think I can publicly share this because I saw the fundraising deck when you guys were raising for the Ether Machine. You had put in over $600 million of your own money. So maybe just important to talk about briefly, like, who is Andrew Keys and how did you get $600 million to put into a dApp?

Happy to. And thank you again, the three of you, for having me. So, so if you didn't know me as of recently, it's probably because I kept my mouth shut during the Gensler era. And prior to that, before Ethereum launched, like a nerd, like any one of you guys, I would— I went to the first ever Ethereum meetup that was held by Aaron Wright in 2014. Prior to the genesis block of proof-of-work Ethereum. Before that, I did a bunch of different things, worked in UBS, the investment bank, but, but, but most recently built a medical records company where, simply put, if you went to the doctor's office and you had a procedure done, all of those demographics and your medical information would get sent to Chennai, India. Where I had medical doctors that would fight with Blue Cross Blue Shield in India, and then we would process the insurance claims. So we did the revenue cycle management and I learned everything that was wrong with payment systems and databases. At the same time, Bitcoin happened and I didn't jump in the Bitcoin rabbit hole because simply put, there is one asset of Bitcoin on the Bitcoin blockchain. And one function, which is send, and the world is much more sophisticated than just me sending you value. When Ethereum, the white paper came out where we could add arbitrarily complex logic, if X happens, then send the asset, else failure, you know, simply put, you know, a smart contract. That's when I got very interested. And we went to this, this first meetup. And Aaron Wright, who created the Lao Tribute Labs, was a professor of law and computer science there. And people like Joe Lubin were there. And basically, we were talking about, you know, what is the implications of this? Fast forward, Joe was building ConsenSys. I volunteered to create kind of a global business development strategy. The first time Ether crossed $1 was because I put a permissioned version of the Java client of Ethereum on top of Azure, Microsoft's cloud. And we put out a 100-word press release in the Wall Street Journal with Paul Vigna, creating a concept of blockchain as a service, which is the thing that kind of R3 started playing with, where you could tokenize an asset and send it around.

Somebody told me, I told them, I told them that you were coming on the show and they said, they said, ask him about blockchain, not Bitcoin and the 2016 narrative. And they said he was kind of behind you and Amanda, maybe at Consensus, were behind the blockchain, not Bitcoin of 2016. For sure.

For sure.

Well, there was also Blythe Masters, like on the front of Businessweek and like Morgan and be like, you're going everywhere and telling everyone.

Glory days.

Glory days, baby. Yeah.

Glory days.

Yeah.

And basically I helped create the Enterprise Ethereum Alliance, which was the largest open source Blockchain Initiative on standards. So the thing like the ERC-20 token standard, things like that, that I think kind of, you know, prior to that, if you talk like Java and when it became the most used software language, J2EE, Java 2 Enterprise Edition, it had clean web APIs and clean database APIs. And that's where a developer in Paris or Mumbai or San Francisco or New York could all kind of coalesce around standards. And I think we got that relatively right, which, which kind of helped, I would say, kind of some of the parallel dynamics Ethereum has now.

Yeah. Okay. So you, so you joined ConsenSys and so, okay, so Ethereum launches, this is 2015, you joined ConsenSys, you and Lubin and all the crew. And I think a lot of people know the ConsenSys story grew like crazy, kicked, you know, spurred a lot of the good innovation in the ecosystem. You did that for 4 years, then we met, I remember when you were doing ConsenSys, then you had just went and did Dharma Cap, if I remember.

Yeah. Yeah. So Dharma is an acronym for Digital Asset Risk Management Advisors. It is a commodity pool operator, commodity trading advisor registered with the CFTC. We've managed billions of dollars of institutional size Ether and basically have bare metal staking, uh, and, and one of the kind of the largest staking providers, uh, on Earth. Uh, we, we've kind of stayed quiet and just done our job over the last 5 years since the inception of proof of stake. But, you know, it was time to kind of start making noise. And basically, kind of, that, that kind of gets us to where we are here now. Uh, one of the large institutional ETFs came up to me and asked me to be a market maker because they believed that ETFs were going to enable staking. And if right now the ETFs don't enable staking, I believe they will. Let's call it 3, 6, 9 months from now. And this is kind of really important of like why we actually did this. If you look at the ETPs in Europe or Canada, they do have staking. But they enable staking at what I call 50% capacity. And of that 50% capacity, they do that at what I call the floor yield. And what that means is if you have $1 billion in the Canadian ETP, they're only able to stake 50% or $500 million, and they're only able to do vanilla staking, which right now, back of the napkin, is generating 3%. So they're really earning 1.5% on the billion dollars. The reason why they're doing that is because of a technical nuance solely in Ethereum. It's not on Solana, it's not on other proof-of-stake networks, because Ethereum Foundation doesn't care about any of these financial wrappers, ETFs, pubcos. What they care about is the robustness and safety and the scalability of public permissionless Ethereum. And simply put, right now, if you want to unstake your Ether, it's about 2 weeks to get it back. And if, God forbid, a black swan event happened on planet Earth and 50% of stakers wanted to unstake at the same time, the withdrawal queue would extend from the 2 weeks it's at now to 6 months or a year. And that does not jive well with the 24-hour redemption requests or mandates of the ETPs, ETFs. So basically I had this kind of thought process that, well, the ETFs are only going to be able to do kind of this 50% staking. You just saw the liquid staking tokens have de-pegged. You're not going to be able to have something like that, I would say, anytime soon. And if you do, you're kind of introducing a different vector of, let's call it smart contract security audit risk factor if you wanted to introduce liquid staking tokens. But in any event, I saw that the ETFs were kind of an inefficient way to hold specifically Ether. And I'm, you know, for better or for worse, a bit of an ETH maxi. And you can beat me up for that. But I think that that point I said, well, you know, there should be a better vehicle for this. And we all know what MSTR did and they're only able to participate in what I call this floor vanilla staking yield. And I would consider that one of three buckets. So you've got staking, now you've seen the evolution of restaking. So EigenLayer is, is one of the main protocols there. Andreesen invested 10 at 100 about a year and change ago. Before then, I invested 2 on my own balance sheet at 25 about 2 years prior. And we've been kind of closest to the metal with them in doing bug bounties, smart contract verification, Auditing user experience. So we saw that, you know, for example, the leading AVS is EigenDA with the 300 basis points that you're earning in staking yield. You can add an additional 45 basis points restaking to EigenDA and there's 300 of these AVSs. 85% of them probably won't find product market fit, but you can work with the top 15 just like, you know, all internet mathematics where 85% can go to zero, 15 of them will work. And so, so there's another bucket there. And then there's the, you know, last bucket that we all know and love, DeFi. And we weren't interested in kind of doing the latest, greatest DeFi app that's yielding, you know, some silly APY, but things like AAVE, are pretty safe. They've had a $50 billion bug bounty over the last 5 years. And you can do things where you can, you know, create a liquid staking token, borrow that and stake more. And basically, you're not taking necessarily Ether price risk, you're taking the risk of the yield of the AAVE interest rate versus the staking you can generate. So there's kind of sophisticated DeFi strategies. And I said that, well, we could create a vehicle that could outperform the 50% vanilla floor staking yield and we could do restaking and we could do DeFi and we could have an actively managed vehicle versus what's out there in the market, which is the kind of the ETF yield. And so, so, so with that, then I went down kind of a decision path. And I think this is something that I really haven't heard you guys discuss, but, but, but because I think you guys have addressed a lot of like the core issues, like DAT selling unlocked tokens and marking them at 1:1 and not having liquidity. I think that's right on like, let's call it the blockchain side of the house, but kind of I'm surprised I haven't heard more about the cobwebs or the, the shadows or the issues of pubcos. And so basically there's kind of two paths one can go if they want to take advantage of, let's call it, the public equities and the public debt markets, which is what these vehicles can do, right? One is you can reverse takeover and you can pick your poison. A dying microcap, a dying Bitcoin miner, you know, a dying whatever. And with all of those, I, I did like 3 of these phone calls of, of these, these companies that were basically failed and, uh, and, and basically wanted to be resurrected as a treasury company. And with all of these, you had to pay the existing operating management. You had to keep them on the board. You had to pay the liabilities. You have statute of limitation issues. So if Company X did something wrong in the last 4 years and Company X was worth zero up until you put $1 billion of— pick your asset— the class action lawyers didn't care. But now it's a honeypot for class action litigation. And, and, and I just kept going down these, these rabbit holes. There was a Bitcoin mining company that had a $10 million a year lease in a data center, and they were in year 4 of the data center lease, and they had 6 more years to pay $10 a year And I was like, well, if I was going to deploy my money into a vehicle, I only want pure play exposure to the asset. I don't want to have to pay, uh, you know, the CEO of the failing biotech that doesn't know how to spell Ethereum. I don't want to have to pay the hardware lease of the data center, uh, that's in year 4 and have, you know, 6 more years.

But don't people do this? Don't people do— I— so I get the problems that you're getting at, but don't people do this because it helps you get public really quickly, right? There's like, there's pros and cons of it.

Yeah, yeah. So absolutely versus IPO, and like, and I think that here's like the devil's advocation to it is like, I, I thought that the better way to do this— so is there's the reverse takeover and then there's the SPAC, right? So the other way to do this is a special purpose acquisition company with a de novo LLC that has no previous operating business no previous liabilities. And I think that we are in the first out of the first inning of all this stuff. And I bet over the next 6 months, over the next year, we're going to see some of the shadows of these previous operating businesses and the issues with that. And there is, let's call it like the liability side of the equation and the cost side of the equation where you have to pay the extra managers. But there's also what really made MSTR work wasn't selling ATM and diluting their existing shareholders, which happens if we sell ATM and issue this equity. What made it work were the convertible debt offerings and the preferred share offerings. And, and when, when you consider that basically the, the buyers of that convertible debt and/or preferred shares primarily are these large hedge funds. And what they need is to underwrite this paper. And we think that— and, and, and you can see kind of the first convertible debt offering in the Ethereum space just happened with ETHZilla. Uh, the terms weren't great. And I think that, you know, basically it was a call option at spot. And if you can kind of compare that versus the MSTR one where they were able to have terms that were over 100% initially and like that can be dilutionary to the shareholders as well. And so where I'm going with this is that I believe that if one has a de novo entity that has an auditor like a Big Four, we are going to be able to have better terms to come to market with what actually works for scaling these vehicles, which is like the prudent risk management of debt and preferred shares. And so while— and now to devil's advocate this, so why doesn't everyone do this? Or, well, we have seen others do this. So CEP is doing this, Cantor Equity Partners.

There's a longer— people don't do it because there's a longer lockup on the SPAC, right?

Right. So, so basically I'm in what's what I call de-SPAC purgatory. Yeah. And, and we're still able to raise capital and we are, let's call it privately. We did the largest common equity offering since 2021, which was, you know, $1.6 billion of committed capital. And we're going through other iterations of things like that. But to your point, I'm not able to sell equity at the money in a public vehicle yet and/or sell, let's call it, convertible debt at a public vehicle. So there's this kind of 60, 90 days that we go through the I's dotting and T's crossing with the SEC that we have to deal with. But that trade-off for me of having something that's completely de novo, that doesn't have all of the kind of operational hair, that I believe will be scalable much faster for what actually works to scale these vehicles, is the tradeoff that I'm willing to make.

Andrew, what would you say to the— so to play devil's advocate, and I don't necessarily disagree with you, but if we look at Bitminer or Bitmine, for instance, You know, they raised $250 million in the PIPE. They hit the ATM really quickly. They scaled quite quickly. I think they're over $2 billion today. They, to your point, they had this, you know, kind of business that existed before that could theoretically be, you know, like you said, a honeypot for shareholder liabilities. But now they're also sizable enough that theoretically those liabilities kind of don't matter. And they printed this meat— this traded this premium, theoretically, that allows them to also be attractive to, you know, the— call it the, the convert investors who want to play, you know, gamma or want to play volatility, right? And so their quickness to market allowed them to do this thing that, you know, essentially where they started much smaller than you are now, your size or bigger, and have been able to potentially, you know, put to rest or not have as much concern around those, those things like liabilities like you talked about.

So, so I think, I think That's a great point. I think for every one Bitminer, there's 10 others. And I think that Tom Lee is a force of nature and is doing great for himself, his shareholders, and for, I would just say, the, the broader Ethereum ecosystem. But I would say that that is kind of the exception. To the curve. And, uh, I do still think that, uh, there is going to be issues with issuing converts because there will be investor exhaustion, uh, at the ATM eventually. And I don't know if it's sooner or later, uh, but I do think the ATM— and I think that MicroStrategy did a good job of of kind of detailing, you know, under 2.5 MNAV, they're not going to hit the ATM. 2.5 to 4, they'll do it opportunistically. Over 4, they'll do it aggressively. And in some of the other vehicles, we've seen negative shareholder sentiment and kind of the stock price selling off when ATMs are mentioned. So I do think the— there is an issue with that. And I do think that the converts, the, the pricing of the converts matter. And in order to get properly priced converts, you have to have the cleanest paper and you have to have the right auditor. And in a bunch of these kind of reverse takeovers of dying shells that have a law firm you never heard of, an investment bank you never heard of, uh, and, you know, an auditor you've never heard of versus we came to market with Citi, with Skadden, and we're going to have a gold-plated Big Four as our auditor. I think that's going to matter in the long term.

Andrew, are you competitive? What are the, what are the competitive dynamics actually in this market? So if you look at the— like you're kind of competing, it's funny, like Lubin, right? You worked with Joe for several years.

Like it's co-optation. And, and, and, and what I'd say is, you know, it's interesting that, uh, and, and I think we're like in a slice of time, right? Like, this is, you know, month 3 out the gate of all of this stuff. And, and it'll be interesting to see month 6, month 9, month 12, month 60, 5 years from now, what, what, what happens. Um, I— what, what, what I'd say is I think everyone's playing nicely in the sandbox with each other. I was just on a, uh panel with Joe Shalom of Sharplink and Tom Lee of Bitminer, and I like them and I want them to win. I think that, you know, there's Uber and Lyft, there's Pepsi and Coke, and, you know, whatever your analogies. And I think there can be multiple players in the space. But I do think that there are kind of differences in these vehicles. And like, I think there are a few things, and I think our corporate strategy where there were a bunch, let's call it in the Ethereum space, that did reverse takeovers of dying microcaps where we didn't. There are a bunch where they're doing outsourcing of asset management. Your typical Forth is Avishal, who I love. He is a superstar and he is the benefactor, the beneficiary of an outsourced management contract. I don't know if for shareholders, uh, outsourcing the asset management— if, if these vehicles are supposed to have active management where they're generating, let's call it the vanilla yield being 3%, and if you can add restaking and participation in DeFi, it gets up to 5% or 6%, um, and outsourcing a fee to an asset manager you know, 2% in, in that example, or to Galaxy or ParaFi and other ones where they're getting— they're, they're paying 1.5%, and that doesn't really scale with AUM, um, because the, the, the fees just kind of grow with the AUM. Um, I think that's a, a difference, um, of, of kind of having it in-house as an operating company where it's kind of accretive to shareholders versus an expense So I think those are kind of differences.

This episode is brought to you by Geodnet, the world's largest decentralized RTK network, delivering real-time, centimeter-accurate positioning around the globe, powering technologies that enable precise navigation for drones, autonomous vehicles, first responders, farmers, and robotics. Geodnet shows that blockchain can be a truly transformative force by Delivering real-time centimeter-level accuracy, Geodnet enhances emergency response, boosts construction precision, and enables advanced navigation for drones and surveyors far beyond the limits of standard GPS. To find out more, click the link in the show notes or follow them on X. Hey everyone, Jason Yanowitz here. Earlier in today's episode, you heard me mention the weekly CIO memo from Bitwise. In an industry as hectic fast and complex as ours, it's incredibly hard to get an easy, no-nonsense stream of what's actually moving crypto. The memo comes from Matt Hogan, Bitwise's Chief Investment Officer. He's been on the show before, and he has this amazing ability to take the most complex topics and break them down with clarity. Trust me on this one, the Bitwise Weekly CIO Memo is really worth the 5 minutes of your time. Check it out at bitwiseinvestments.com/ciomemo/empire or just hit the link in the description of today's episode to get started. Carefully consider the extreme risks associated with crypto before investing. As always, investments in blockchain technology involve risk. Terms and conditions apply.

Just want to go back to like a big picture. Someone who's been around space for such a long time. If you, if an early version of Andrew that went to that first meetup was listening to you right now talk about the overfinancialization of these vehicles, do you think that the vision has been co-opted? Do you think that we've been overly financializing this stuff, or would that excited, nerdy version of Andrew Keys be proud of what he's seeing right now?

Great question. So like, I think there's like the early nerdy version of me like left that meetup and was like, oh my gosh, we're going to decentralize all the things, right? And all of the banks in America are going to go to zero because we're going to be able to have this software that just works, right? And I think I've matured since that point. And I still do believe this technology gives a price discovery mechanism for the value of intermediation. I also believe, like, the notion of, like, decentralized Uber immediately was very naive because Uber's created massive network effects, as an example, has created this slick UX. And Ethereum is almost ready to almost be ready for a layer 2 scaling solution that has privacy, confidentiality, and it takes a decade to actually build good software. So I also think that, uh, this avails public market investors that don't want to deal with a public-private key pair or getting their Coinbase account hacked or, you know, whatnot. And it's kind of meeting people where they are. And I think the other piece to this is like, this is the first time you're going to have real sell-side analysts. I think like kind of Circle was like the opening act, but, uh, you're gonna have sell-side analyst coverage on what is Ethereum, what is staking, what is restaking, what are the financial models that go into that. And do you want to like debate what a TAM is of the internet, or what the TAM is that, you know, trustlessness or decentralization can enable? And I just think what this is doing is broadening the horizon. And, you know, do I think that we should garner 50% of all the assets in this vehicle? No. I mean, MSTR is what, 3%? I think, and I think what Saylor has done as an evangelist for Bitcoin probably outweighs the negative of having, let's call it, 3% in, in a public vehicle.

Andrew, can you talk a little about, um, And maybe, you know, in these vehicles, so understand your point around access and distribution, and you know why you think they still fit within the original ethos. Um, the other thing that we've— there's been a lot of conversation about is not just, okay, well, now it's not just distribution, but we're also doing— I think Santi used the word over-financialization. So there is, you know, call it not just staking or DeFi yield, but You know, there's been a lot of rumors, which I think Tom Lee hasn't really talked about, but maybe he's doing, you know, call it like structured products or derivatives also on these vehicles. And how will that also fit into you? And do you think that's true? And how do you view that as part of a normal operation here?

I mean, I mean, so like it or not, these are the smartest people with the sharpest elbows playing for table stakes of how society is going to work in a decade. These are big stakes, right? Like, this is cool stuff. This is like interesting. And, and I think that financial engineering is going to happen no matter what. Like, I think that having it in a regulated purview that has 100 times the liquidity and depth of the current DeFi infrastructure is good. And I think, you know, having access to the public markets then can actually fill the pipes of DeFi, where you can start, you know, reallocating resources to the DeFi markets and show, you know, the delta of what it costs to do on a smart contract-based rails versus what it would be doing legacy.

Um, I guess as a follow-up, not to harp too much on this, but, um, 5 years from now there's going to be some dApps that clearly they weren't good stewards of capital, the structure was correct. These things work. Bull markets have a phenomenal way of hiding, um, nonsense including poorly structured vehicles. Um, I get your pointer on everything's going to be financialized. Like, crypto is an extremely financial— like, you know, these are asset ledgers. You're supposed to move and transfer value. Uh, DeFi, the plumbing is there. We don't have good distribution. These vehicles can serve that purpose. I'm not— you know, I, I very much agree with that. Where do you think, um, as someone that, you know, has been around for such a long time, like, there are clear risks that you may not control how the end stat gets structured. But as an industry or a person in your position, what are some of the risks that do worry you and what can be done about them?

Sure.

So this is like the part of the equation of like, play silly games, win silly prizes, part of the conversation, I think, that as a participant who's created a public vehicle, I have, let's call it, the tail risk of somebody who also created a public vehicle and that blows up. I'm seeing lots of silly games and lots of silly prizes. The first example is I think that there is a bunch of liability in these shell companies. And it's not just, you know, the preexisting, you know, having to pay $5 to the existing CEO of the dying biotech that doesn't know how to spell Ethereum. I think that there's— that you've started to see, and like the shellcos have kind of gotten picked over, so there's not much left. So like they, they start to cost more money, and you're starting to see kind of issues where now if you were going to deploy capital into this vehicle, they're saving part of the capital that's invested to settle lawsuits. So I think things like that you're going to start seeing wasted. I think you guys already raised this point, but it's amazing to me, you know, in my example, Ether traded $60 billion in volume yesterday, spot, the 200th market-capped asset that hasn't even gone live yet, that has a locked-up token schedule that's getting marked to market at 1 to 1 versus, you know, at a 50% discount because it's not going to be liquid until 2 years from now. I think that's a big issue. I think the dilutionary nature of ATM is like very much in plain sight and it works, let's call it, at a multiple greater than 2. But people are hitting that earlier. And, you know, one of our key— our, our, our North Star, which is going to align. And so I'm patient zero of my public vehicle. I am the largest shareholder. And, and, and basically I'm maniacally focused on increasing my Ether concentration per share. Uh, and I don't know if retail really understands like that notion, uh, in, in any of these vehicles. And they may see a stock go up or down, but, but retail doesn't necessarily know that, you know, an ATM issuance, uh, basically creates more shares, and you still have the same shares, and the price of their shares may go up or down, but, but, but you've basically been diluted. Um, and, and I think kind of like the, the structures around that are important. So I mean, I think those are kind of like the opening acts of what can happen. And then to your point, we've seen this story with, let's call it, the Bitcoin mining opcos. Bitcoin rewards went down, the comp kept going up, busted cap tables, busted governance. They're upside down. And, and the OpEx ran out of control. Hash rates continued to go up. And so I think there's something to be said about like aligning shareholders with executive management in, in like what is the North Star of the vehicle. So again, I put in a material amount of money of my own and, and I am solely focused on generating the, the most Ether per share without diluting myself. And like holding management to that kind of North Star is what I think is the most important.

Andrew, can you talk a little bit about what you think the rollups of these things could look like? Like let's extend Santiago's question out, like some of these blow up. Yeah.

Yep.

So, so I think there's two variables to like consider. One is, let's call it like a creative M&A of, of, of, of assets that can generate yield in the underlying. So let's— for the Ethereum equation, you could talk about potentially a staking company, you could talk about a custodian, you could talk about, you know, maybe even an L2. That can generate Ether-denominated yields. So I think that as we see staking commoditized, the staking companies' yield is going down as well, like as their revenue. And I think that, you know, first and foremost, there's potential M&A roll-up that could be accretive in that direction. But then when you talk about, let's call it the Treasury companies, you know, Treasury Company, you know, 52 of Ether that came out the gates with, let's call it, $100 instead of like the critical mass they need of a couple billion dollars, especially let's call it in the Ethereum space. It's going to be hard to like disaggregate because you don't want to inherit the same issues that I raised about, let's call it, the shellcos, like I'd take the assets, but I don't want another publicly traded vehicle.

You should be able to do like an asset sale. That shouldn't be an issue, I don't think.

Right. So, so, so that's where I think it goes. And like, then like the, the interesting conversation is, is what happens to those shellcos? Like, uh, and, and, and then, but that's not necessarily the acquirer's problem. But I think that you could definitely get to a place where you could do asset sales, especially at depressed MNAVs. And then I think another kind of piece is, is you've kind of seen these like Frankenstein ones, which I was not a fan of, where there's 20% Bitcoin, 20% Ether, 20% Solana, 20%, you know, pick whatever you want. I think those are going to have the hardest because what we found from like an institutional round that was driven by Citi is, is allocators wanted pure play to a specific asset. And so I think the ones that are going to have the most problematic time are the ones that are, A, these illiquid shitcoins, and B, the multi-strat pubcos.

But would you— so I've had this thesis that I think we talked about a little bit on the podcast with Avitral. That, you know, theoretically you might go and buy the Story Protocol one, or maybe not Story because it's all like locked up, um, but I wouldn't touch it.

I mean, I think that's, I think that's it.

Well, so, so the reason I'm asking, right, is so you do an asset sale, you buy, call it whatever, a, another L1 that is locked up, a Solana one that's trading poorly, and you just dump the Solana into the market, uh, and go and use that because again, you got, uh, you're trading at some premium, they're trading at some discount, you theoretically that asset's gonna be sold and you can use that to buy more ETH. Let's call it 20-30% accretive, right? Is that something you guys would consider as well?

Yeah, I mean, it— the devil's in the details of the math and like how you can, you know, convert that OTC and if you can do it, you know, in a time-efficient way. And then you got to pay for slippage. But like, that's the M&A art, and lots of leveraged buyout analysts that are smart smarter than me know how to do that.

Uh, Andrew, where does this, uh, how far down on CoinGecko can you go here? So you, so the Bitcoin ones work, right? MicroStrategy, you've got, you're saying Ether ones work. The Solana ones are like kind of working a little bit, but like not really. Um, in, in the way that you haven't really got the, the nor— the, the story and the narrative like the Ether ones have. Um, Rob was talking to a guy about the Athena one the other day. You mentioned story, like what How far out can you go?

I'm not going farther than number 2.

Why, though? I know you're—

yeah, illiquid. And then with those, like, unused, like, I think Bitcoin is, you know, has its Lindy effect, has its store of value narrative, has its maxi, has its already, let's call it, category-defining winner already. Ethereum, you know, when you go down the rabbit hole, ConsenSys put out this great artifact about kind of the trust report and FASB, the Financial Accounting Standards Bureau— Standards Bureau— Board, excuse me. They have this definition of HQLA, high-quality liquid assets, the $250 billion liquid assets that are high quality defined by FASB, 90% are on Ethereum, and then 10% is everybody else. And it reminds me of, uh, the gravity law dynamics of something— the power law dynamics of Google, where 90% plus of searches happen on Google, and then Bing gets 1%, and Yahoo gets 1%. Like, when's the last time you used Ask Jeeves? And, and I think that we're going to see similar power law dynamics there. And so I don't think it's worth it. But again, maybe I'm biased.

If you were these— if you were founders of these things, would you be— do you think it's smart to do this or do you think it—

Well, I mean, I think if, you know, if I'm the Cardano, you know, if I'm, you know, you pick your asset I would love, you know, if I created asset, you know, 10 to 200 in CoinMarketCap, I would love for an operator to take the risk, spend the time to develop, you know, one of these vehicles that is labor intensive, like it's running a public company. This is like non-trivial. And it'll be very interesting to see what happens 6 months from now because it costs a lot of money. It's a huge time suck. And I think that invariably the— it's not going to be worth the squeeze. The juice is not going to be worth the squeeze for the majority of these things. Yeah. But if I'm, you know, Protocol Founder X and I'm, you know, a technical leader. I would love some operator, uh, take the risk and then try to, you know, sell this to Wall Street, Main Street, and whoever will listen, um, and, you know, try to create some type of, uh, flywheel.

This episode is brought to you by Geodnet, the world's largest decentralized RTK network delivering real-time, centimeter-accurate positioning around the the globe. Powering technologies that enable precise navigation for drones, autonomous vehicles, first responders, farmers, and robotics, Geodnet shows that blockchain can be a truly transformative force. By delivering real-time centimeter-level accuracy, Geodnet enhances emergency response, boosts construction precision, and enables advanced navigation for drones and surveyors far beyond the limits of standard GPS. To find out more, click the link in the show notes or follow them on X. Hey everyone, Jason Yanowitz here. Earlier in today's episode, you heard me mention the weekly CIO memo from Bitwise. In an industry as hectic, fast, and complex as ours, it's incredibly hard to get an easy, no-nonsense stream of what's actually moving crypto. The memo comes from Matt Hogan, Bitwise's Chief Investment Officer. He's been on the show before, and he has this amazing ability to take the most complex topics and break them down with clarity. Trust me on this one, the Bitwise Weekly CIO Memo is really worth the 5 minutes of your time. Check it out at bitwiseinvestments.com/ciomemo/empire, or just hit the link in the description of today's episode to get started. Carefully consider the extreme risks associated with crypto before investing. As always, investments in blockchain technology involve risk. Terms and conditions apply.

I was going to say, it seems you're dubious because you use the word, you know, try to sell this to Wall Street. Um, and you know, the Solana ones have had, you know, decent amount of, of interest. I think there's, you know, probably one coming out pretty soon that's going to have over a billion dollars or something like a billion dollars. Um, when we've seen actually, I think maybe some of them aren't public yet, but probably over a billion dollars of demand. And some of these assets that are like, you know, 10 through 20— I don't, I don't think it's much longer than 20, but why do you—

maybe that's fair, maybe that's fair.

Yeah, why do you think that interest exists? Do you, do you think that's, you know, ephemeral, or what's going to happen there over time?

Yeah, I, I, no, I, I think, you know, maybe I'm, I'm, I'm being a bit curt in, in the fact that, that I'm saying top 2. When it maybe it probably should be top 20. And I think that there'll be, you know, risk tail associated after that. So, so, so, so your point's taken. I think that that is fair.

Andrew, going back to the original thesis of why you did this, you were saying the ETFs are structurally flawed vehicles. What can you actually expand on that? Like, what's your end vision for these ETFs?

So if you consider the ETF a stock that, that, that could have a dividend, so like a productive asset like Ether or Solana, that can be productive with staking, unlike Bitcoin. So like for Bitcoin, I think it makes total sense to have the ETF.

It's the lowest cost capital. I get the, I get the problem, which is the yield is going to be lower, like the dividend will be lower, but long. So because staking, restaking, DeFi activity, yield activities in DeFi. But like long term, do you think these vehicles— I'm talking like 5-year time horizon— will these be larger than the Ethereum ETFs? Like, will the Ethereum ETFs just not take off is what you're saying?

I don't think— I mean, I think that we've seen that, right? Like if you look at what's what's gone on in Bitcoin ETF versus Ethereum ETF, and then you just like match the market cap of Bitcoin versus Ethereum, you know, proportionately the Bitcoin ETFs have garnered more value. And I think that the market realizes in the ETF, uh, you know, I'm not getting my yield. And it'll be interesting to see once yield is enabled or staking is enabled, um, what happens there. But if you look at the proxy in Canada and Europe in the ETPs, it's 50% staking capacity.

Yeah.

And especially as restaking kind of takes off and DeFi continues, that like if you look at this like a perpetual bond, which many do with, with, with staking, you know, if, if, if the ETF's generating 1.5% yield and just out the gate you can double that yield should double the price of the bond. And/or, you know, adding restaking, adding DeFi, it could triple or quadruple. And that's where I actually believe, in addition to, let's call it, the legacy financial engineering of converts and preferreds, that you can justify an MNAV in perpetuity if that's what your kind of North Star is. I think that this is just a better vehicle for the majority of people to earn additional Ether per share.

Andrew, what apps— you mentioned Aave— what apps do you think benefit the most from this?

I think they're going to have to be the— I think something like Aave will be— is exemplary. Of what's going to benefit the most, because I think of, let's call it, the big boys that have, let's call it, over $1 billion of assets, at least in the Ethereum ecosystem. They're not going to go too far down the risk curve because, you know, a lot of this is don't screw it up. And you can earn pretty good yield staking, restaking, and let's call it lower risk DeFi. And, and you should— any of these vehicles, the people on those teams are competent enough to be able to earn a blended 5, 6, 7. And if you're going to keep going on the risk curve to go to 10, 15% yield in a big vehicle that has this, that extra yield, it comes with risk, whether it's smart contract risk, whether it's impermanent loss risk. And I don't think that these vehicles are going to be built for that. I think that, you know, people can take, you know, $100 grand and try to earn, you know, 100% APYs or, you know, whatever. At least our vehicle, we think that we can stay prudently risk managed with, you know, issuing converts, let's call it sub-20% converts or and/or preferreds and generate, let's call it, a blended yield that significantly outperforms the ETFs and kind of stay in a lane safely. So I think kind of like the larger, more established, you know, Aave has, you know, $50 billion plus of TVL for 5 years. So essentially a bug bounty for that long.

So are you, are you buying Aave's token in Dharma?

Like, no, no. But, you know, we've used it. Yeah, yeah, yeah, yeah. Are you— this is like Ether, Ether-denominated.

Yeah. Are you just in ETH right now, Andrew?

No, no, no. I've got some IGEN.

You got some IGEN? What about Litecoin?

I got some Filecoin, which I still think is a great use case. I have a remnant of Litecoin. But it hasn't, you know.

So your portfolio is ETH, IGEN, and Filecoin right now?

Yeah, yeah. I would say, let's call it 98 and 1. Something like that.

Yeah, yeah, yeah. I think that's— go ahead, Santi.

Yeah, maybe more zooming out. Uh, I know you teased out this idea that you were an ETH maxi, and, um, no one's perfect, right?

You—

this is, this is the, the common disease, I guess, in the space. You come at it with a very open mind about changing the status quo, and then you sort of calcify or ossify into one asset that has made you a lot of money. Um, how do you— what are some of the things that— look, Ethereum's Ethereum because in my mind, the proof of stake, the transition from proof of work to proof of stake was remarkable coordination feat. And I think that is probably one of the strongest things that Ethereum has. You know, it hasn't gotten perfect. Uh, it sometimes doesn't serve you well to go first, uh, in this open source environment. What are other ecosystems? I appreciate your holdings are one thing, but are there other ecosystems that you look to and appreciate certain elements of them? Like Solana, some of the other, Sui Sei, what have you.

So I—

Ripple is also a fair, valid response in this podcast. It is a safe space here.

Fair enough. Yeah. Well, you're not going to get too much on those out of me. Unfortunately, I mean, I'll go back to kind of like, and maybe it's an ETH Maxi response, like liquidity begets liquidity. You've got kind of 90% on Ethereum of real assets, you know, Solana can keep the meme coins. You've got, I think client diversity matters. There's one implementation of Bitcoin Core, there's one implementation of Solana, there's 9 implementations of Ethereum. That matters. Uptime and decentralization, I think that matters. So, so like, let's call it like the smart contract layer one. I haven't been too interested. I've been very much into it. And again, maybe it's talking my book, but it's what I do. I've been staking institutionally sized since inception of proof of stake. And I think that like the notion of this concept of using this large proof of stake security mechanism, which is Ethereum's $100 billion plus to secure other, let's call it middleware, like data availability or compute or LLM. So like I've been really digging into what's happened and frankly, to devil's advocate me there, uh, not much has come to fruition yet of like the EigenLayer or Symbiotic, or let's just call it the AVS ecosystem. But I think that there's like a Cambrian explosion there, and, and that's what I'm looking at. And I think like, if you think about like behavioral economics or incentivization, I think like the notion of like issuing a governance token or utility token that's worth $100 million to secure my whatever, you know, my LLM or my ZK-SNARK prover or my data availability vehicle versus using like this larger proof of stake security that's worth $100 billion to secure. I just think that makes sense from an architecture perspective. So I think that the, the, the eigenlayer and symbiotic ecosystems I've been looking at. And then I think that like we've all kind of— and Blockworks, I think, is right that we all have like infrastructure fatigue and like, where's the app layer? And I think that that's totally right. And like you've started to see some product-market fit with things like stablecoins, but I still think that like, we're super early days of like the zero-knowledge world, and, and kind of looking at that. And, and I don't think that there's been product market fit. I don't think we've seen necessarily business plans or operations or scalability in that. But I think that there's kind of so much so like, from like a research perspective, I've been looking at like the zero-knowledge world, and the, uh, let's call it restaking world.

That's fair. In terms of, um, commenting a little bit about infrastructure fatigue, double-clicking on that, you have Stripe now launching their own L1. Um, how do you think about that and maybe overlay some color around the L1-L2 construct? And has that is that work and the value accrual back to ETH as an L1? Like, general thoughts?

Sure. So, so I think I'll start with the latter first. I think that, you know, to kind of analogize things like to Uber, you know, when, when I used to take an Uber from downtown Manhattan to uptown Manhattan, it would cost $50. Now it costs $150. And, uh, it's the same ride. Uh, maybe there's a little bit more traffic thanks to Uber, but, but it, but it's the same. Let's call it 3 miles. Uh, and I think that at the expense of near-term profitability, uh, the Ethereum Foundation decided to make L1 blob space dirt cheap and, and And there has been, I would say there have been wins where you have kind of the fast movers, not like the systemically important financial institutions like the Goldmans and the Bank of Americas and the Citi's, because really they haven't been allowed because this is all new because we're in a new era, you know, post-Gensler. But Coinbase created BASE, Robinhood's tokenized securities is in Arbitrum L2. You've seen kind of the early fintechs that are publicly traded with lots of— I would just call it revenue— deploying these as cheap architectures. And I think that in time you've got EIP-1559 that burns at layer 1 and 4844 that essentially burns at layer 2, or when, when layer 2 blobs are transacted. I think in time the Ethereum community is going to say, well, this is too cheap and you can raise that pricing. But, you know, those are, you know, and Kraken's got Ink, but those are kind of, let's call it, 3 of the fast movers. You need thousands of these L2s. And until that happens, I think that the value accrual will be less than it probably should be. But, you know, the, the example was, was analogizing to Uber. But basically, once Uber became ubiquitous, they tripled the prices. And, and, you know, what, you know, as BlobSpace gets more competitive, you can raise the prices. And I think that you'd rather have, you know, due to the stickiness of technical architecture, you'd rather garner the, uh, the architecture to anchor to your layer 1 with Stripe and the other one with Circle. We'll see. Like we've seen— was it Facebook did— what was it, Libra? Like that never happened. And maybe— I mean, they have— that was, you know, and that was at a time where, you know, there were issues with these architectures and we weren't in a regulatory environment that was conducive to moving things forward. But like, I, if I were to read that, you've seen, you know, Circle ripped at IPO. Now the analysts have dug in. They made this horrible deal with Coinbase where Coinbase is earning more per transaction than Circle is. And they're trying to figure out how do we generate revenue with the incoming lowering of rates. So like their, their, their treasury rates are going to depress. So like if, if, if I'm Circle, where I make my money is I, I buy treasuries, uh, and I live on that spread, right? Then the, the, the user that has the US dollar coin isn't earning, let's call it the 4% treasury, but you get Fed rate cuts in September, October, November, but actually, you know, running the L1, that's not where the money's at. I don't think so.

Rob, maybe can I actually ask you, you had this tweet, you said maybe building off what Andrew was saying, you said pretty clear indicator that they, that they now agree what many others have theorized, that the primary issuance business model is dying and that they need to become a payments business to survive. Can you maybe just, you know, expand on what you think about Circle's launch of ARK?

Yeah, so I think Andrew alluded to this like pretty well, right? So to the point about how does Circle make money today, right? They— somebody mints stablecoin, uh, they buy, or BlackRock buys, a treasury on the back end. I'm simplifying. And, you know, today the interest rate on that treasury is something like 4.25%, right? You know, if you look at their, their, um most recent Q, then they came out with earnings, you know, they put in their risk factors what happens as rates come down, right? And they already have pretty bad margins, to Andrew's point, around the fact that they give, you know, right now it's like 53-ish percent of all of their gross revenue to Coinbase. They, uh, are not now also giving a lot of revenue to basically everybody else for distribution. So they signed a deal with Binance, they've signed a deal with like a ton of startups who frankly they should have or do have a lot of power over and theoretically wouldn't have to share that yield. But it seems like they've really decided that they're going to do that as ways to proliferate. I mean, in their risk factors, you know, they put that if, uh, interest rates were to come down 100 bps, they— that would cut their, um, their gross revenue by 23% and their gross profit by about 30%. We're probably going to get— now, you know, this morning's, um, you know, reading on, on, on PCI notwithstanding, like, we still are probably going to get 100% rate cuts in the next, you know, few quarters, right? Um, so if you take all that into account and the fact that, okay, they're paying more for distribution, gross margins are coming down, rate cuts are coming, like, they don't— they have to look forward and they have to understand that there needs to be something else to make money, and there needs to be a different narrative or story with the public market investors. So they launched CPN. CPN obviously happened right before they went— and CPN is the Circle Payment Network, for people who don't know— that launched right before they went public. CPN has been, as I understand it, and this is not public, has not been particularly well received. And somebody might reach out and tell me I'm wrong, but there hasn't been a lot of flow that's gone through that. But that was— that's kind of a messaging layer that sits on top, and it's really meant to, you know, provide some sort of value-added, like, software services or APIs. To say, hey, look, like, we're a payments company. ARK is clearly an attempt to kind of deepen that kind of like full-stack like payments business. So they're now saying, okay, well, we're gonna have, you know, an FX desk and, or, you know, decentralized exchange that looks like probably like, you know, all of us who have been in FX before, like a, you know, single-dealer type of platform that you see in like a larger bank, right? And so all of a sudden Circle saying like, actually, like, we are a, you know, full-stack payments business and we're a bank, they're, you know, I think it's either public or it's been rumored that they're looking for a bank account license as well. We're going to do, um, you know, all of this called like Swift messaging layer, and we're going to be Visa on the network side. And they're trying to tell a story that like going forward we are a payments company, because what's happening is Stripe is basically doing all of that already and then launching their own L1 and also they're issuing their own stablecoin and telling all of their merchants, you do not have to use USDC I will offer you a great, fantastic product to do everything that you need, but you can use my stablecoin in my network. And why would you even use USDC? And they're clearly being reactive and defensive against that.

And I just add, I agree with everything Rob said, and I just add, then they're the worst payments processor there is because they don't have the economies of scale of all of these other ones. So they're like the last person in the door. In the payment processing world, right? I mean, like, pay with Circle makes sense, or pay with USD makes sense because you're disintermediating the payment processor. You know, I can, I can pay with my American Express, or I can pay 3% less with, with, with Circle or with USDC. But, you know, as a quote-unquote payment processor, when we all know like the underlying technology is dirt cheap now, and any one of the other ones that have these incumbent network effects, you know, PayPal, Venmo, Stripe, it's at all. That's what Circle doesn't really have. So I think that that's going to be, you know, a tough hill to climb.

What would you do, though, if you acknowledge, like, you know, this is as biased of a tweet as you can possibly get, which is from Paolo. Paolo tweeted, some companies' strategy feels exactly like watching moths flying to the flames, obviously in reference to You know, Circle launching ARK. So I guess, Rob, uh, if you, if you acknowledge that there's a big problem, it sounds like you acknowledge the problem, but you don't think ARK is the solution.

No. If you look at what Tether has done, right? And so, so Paolo, obviously, you know, he wants to, uh, you know, he wants to belittle what Circle is doing clearly. Like, you know, they're his biggest competitor today. You know, what has Paolo done? Paolo said, okay, well, we're going to go and actually invest in like 4 or 5 different chains. So they've invested in Plasma, they've invested in Stable, they've invested in Botanix, they've invested in, you know, a couple others. And they're saying, okay, listen, we want to proliferate USDT and all of these different ecosystems. They're doing some, some work with obviously Rumble and some others around trying to proliferate their ecosystem and moving USDT into, you know, different types of, of companies or, you know, real-world usage. Like, they're trying to do you know, what I think a lot of the original vision was, which is, hey, we are actually— we're unopinionated about, you know, how you use our stablecoin, as long as you use it, um, you know, legally, or where you use it. We're opinionated about using it. We're opinionated about getting this better form of a dollar into the hands of people globally, right, and giving that access. And so that's in, like, the— it was clearly the strategy that they've taken We're now— what Circle is doing is they're kind of— it looks like they're trying to control their fiefdom, right? A lot of what they're doing is actually elbowing people out who would theoretically be partners instead of opening up and bringing people in, right? And so when you think about like ARK from that perspective, it's hard for me to see how ARK is actually good for the proliferation of USDC unless they think that they have a better mousetrap with the end customer who they actually don't control because Stripe has better control over them. Or, you know, whoever the actual, uh, other provider on the other end has better control. So it strikes me as very short-sighted in my mind because they don't have the same customer relationship that a lot of these other people do, or Stripe does, or anybody else who might launch an L1.

Mantle is pioneering the blockchain for banking, a bold new category combining traditional finance with the power of Web3. With UR, the world's first on-chain money app, users can manage fiat and crypto side by side using a Swiss IBAN account in euro, US dollar, Swiss franc, and RMB, all posted to the blockchain. Backed by the Mantle Network, UR is the access layer that unlocks a purpose-built vertical platform for on-chain payments, trading, and asset protocols, including ME/TH, MI4, and function FBTC. All economic activity within UR will be captured by Mantle Network to further drive value to MNT token holders. Follow Mantle on X @mantle_official for more. I wanted to take a moment to tell you about Citria, the ZK rollup expanding Bitcoin's utility without sacrificing its security. Using ZK technology, Citria enables Bitcoin to function as a fully programmable financial platform. Citria is optimistically verified by Bitcoin, offering the most secure and native way to extend Bitcoin's utility to DeFi. With Citria, developers can build scalable payment systems, tap into Bitcoin's liquidity with financial applications, and build privacy systems. Citria is currently on testnet and approaching mainnet. To follow their progress, click the link in the show notes or follow them on X @citria_xyz. As always, investments in blockchain technology involve risk. Terms and conditions apply. Rob and Andrew, and I don't know, Santosh, if you have thoughts on this too, switching gears from Circle, what do you guys think of Stripe? So this was, this was not announced, right? This Stripe basically posted a— I think it was actually maybe the Blockchain Association posted a a job for Stripe, like a product person at Stripe to go build this new, this new blockchain that they're, that they're building. And it's a collaboration between Stripe and Paradigm with supposedly Matt, Matt Huang, one of the Paradigm founders, the CEO of this new blockchain. I forget the name. What's the name of it?

Well, that's a force of nature.

Tempo. Yeah.

Like, like, like, like there are sometimes when you talk about jockeys or you talk about business models, like he's a force of nature. And if there's someone who can kind of shoejam this thing in, it's, it's someone like him. That said, liquidity begets liquidity. And I think that, you know, maybe all of this stuff, though, who cares about the blockchain in the end, and it should just all be sitting at the app layer. And, you know, to that point, they already have their network effect, and they already have their clientele, and I don't know, you know, who Stripe is a portfolio company of, like if it's Andreessen's or Sequoia's or whoever. And then basically you can kind of finagle that around to all the other portfolio companies and then bully them into using— I mean, like kind of Silicon Valley, Sand Hill Road 101, where you can kind of just bulldoze those kind of network effects out the gate. Um, but you know, We'll see. But, but again, like, operating— it's like operating infrastructure. It's like, it's, it's kind of a non-event in my opinion, except we're all in the blockchain ecosystem, so I guess that's, you know, talk-worthy. But, you know, to, to Blockworks's point about, you know, infrastructure fatigue and show me the apps, like, really, no one should care, right? It should just work. At the application layer.

Yeah, I mean, Stripe's clearly in a better position here. Like, I wrote this post a couple of months ago, uh, before I had heard this was happening, although it's been rumored for a little bit of time, and basically talking about like, in many ways, if you looked at what Stripe was doing, it looked like they were building a network, right? They, they acquired the orchestration layer in Bridge, they acquired the account in Privy, They issued their own stablecoin. They had their own stablecoin-backed card, you know, issued through LEAD. And so they were essentially already as a PSP replacing, call it like the merchant acquirer, and, you know, a lot of the, you know, the gateway and auth, etc. And now they're essentially replacing the issuing bank as well. And theoretically, if they don't actually need, you know, a merchant to leave their network, if they're settling on their own execution environment, they basically can be an end-to-end payments product, right? They don't have to compete for block space. They don't have to worry about an RPC falling over. Like they don't have to worry about— they can also decide to allow only certain types of transactions and they can probably provide a fantastic customer experience if they own that layer. So for them, I actually think it makes total sense because now they have, they have this mousetrap like we talked about before with all of these merchants. And now they own the full stack and are able to build, you know, call it the best product that they possibly can and get rid of like some of these like intermediaries, the issuer bank and the merchant bank. And they really only need, like, call it the bank who holds their stablecoin, uh, you know, backing now.

Which basically, just in different words, is Stripe owns the volume, Stripe owns the distribution, Circle doesn't, right? Stripe owns the volumes, it owns the millions of merchants, it owns— it's got the license on and off ramps, and Circle doesn't own the end user.

So yeah, if the— we say, or you've probably heard me say this before, like, we invest in a lot of stablecoin businesses, and I always tell people, you have to do the hard thing, right? And being the middleware layer is not the hard thing. Owning the customer, owning the bare metal bank, like, those are the hard things, right? And so if you're just trying to put a blockchain out there and you're just gonna say, hey, listen, like, everybody come and, you know, put their flow on my blockchain, and you're not doing any of the other things, then you're, you're probably in a bad spot.

Yeah, Rob, this is why Tron is strong. They actually did the hard things.

That's right. Yeah, yeah, you're completely right.

You always want to own distribution.

Yeah, 100%. Um, Andrew, thanks for coming on, man. Anything that we didn't talk in terms of the— back to the dApps— anything that you think is important to cover with dApps that we didn't cover?

I, I think to be vigilant in ATM with respect to dilution. Uh, I think that MSTR, uh, set a decent precedent on, on, uh, understanding kind of where dilution occurs. And, uh, I think that, uh, we'll see, you know, 6 months, a year from now, uh, the, the actual metric isn't maybe the amount of the asset one has, but the amount of asset per share.

Yeah. Yeah. I didn't even— Robert, we had a nice tweet I could have pulled up during this conversation, which is you said it seems like everyone in crypto is about to go through a tough lesson on what the term contingent liabilities means.

Agreed.

Yeah.

Yeah.

I have not heard enough talk about that until today. So thank you, Andrew.

Yeah.

Clean living. Clean living.

Yeah. Great conversation, Andrew. We do content of the week, Andrew. So I will ask Santi and Rob, but start thinking. Santi, Rob, what do you guys got?

I'm afraid what Rob's gonna say because last time he dropped a huge, uh, huge bomb on us.

I've become the, um, I've become the, the fiction guy, right?

Did you watch your horror movie?

Yeah, it was good. Go see it. Weapons. Uh, I enjoyed it.

Did you pay a million to get killed on screen or whatever you Weird.

I haven't done that yet, but if anybody's listening, I'm happy to get killed in your horror movie.

I've got one. I listen to a good podcast. There's a— actually, talking about Stripe, what's not Patrick's name? John Collison launched a podcast called Cheeky Pints where he basically just has like a Guinness with like different founders and stuff like that and different people. And he had Vlad Tenev on and people who—

Oh, cool.

Probably are sick of hearing me talk about Robinhood because I think it's a great business. But, um, uh, I think one of the best investing strategies right now is just picking really— when there's so much noise and hype, is just actually spending a lot of time with founders. And if you don't know the person in person, you can listen to a lot of their podcasts. You'll see themes show up over and over again. So I thought, yeah, I would go— if you, if you're interested in Robinhood, I'd go listen to Vlad on this Cheeky Pines podcast. Um, And it was also amazing how much of the conversation— it was probably a 70-minute episode— how much of it was dominated by crypto prediction markets, moving on-chain, tokenization. It was like a 70-minute episode, probably 45 minutes about crypto. So it just shows this is founder Robinhood, founder Stripe.

You're all about disclosures now. What percentage of your book is Hood?

Hood is now my largest.

Shocker.

Yeah.

Yeah. Yeah, yeah.

So I got one for you. I got one for you. So, so back in the day, 20 years ago, does anyone remember Angels and Demons or The Da Vinci Code? Yeah, of course. So there's a new one out called Origin, and it's about the origin of humanity. And, you know, each one of these take place in different cool parts of the world. I remember Da Vinci was in the Louvre in Paris, and this is all through Barcelona. And Madrid. So it's kind of like Spanish themed and it's awesome. So it's kind of a throwback, but it's a Dan Brown book. Yeah. Yeah. Dan Brown, Origin. Highly recommend it.

Great. Love that. Damn, those books are so good.

They're great. It's kind of mind candy if you're dealing with like an S4 registration process. It's like you want to shoot yourself. And then like this kind of puts me into like a whole different world and it's really, really cool.

Yeah, 100%. So that's great. Rob, Santi, you got anything?

So, uh, since I'm the fiction guy, well, I guess Andrew is helping me out here, but, uh, I, there's a show I've been watching on Netflix called Families Like Ours, which is actually in Danish. So, um, you have to like, like subtitles if you're an English speaker, but basically there's like this climate change disaster and then, um, like Denmark decides to essentially like expand the country and people have to like be assigned to new countries. And there's a, it's a miniseries. There's like a lot of social commentary. Um, it's just, I don't know, I think pretty interesting. So if you're looking for something and you don't mind subtitles or you're, you speak Danish, uh, Netflix, Families Like Ours.

All the Danish Empire listeners, great, great rec.

Yeah.

So I believe I mentioned this in the pod before, but I think it's appropriate for this discussion and where we're on the cycle. Uh, the book is called The Missing Billionaires: A Guide to Better Financial Decisions. Funny enough, it's written by this guy, um, Jay Victor, who was a principal of Long-Term Capital Management.

Super about sizing. It's all about sizing your bets. Yep, exactly.

And he starts off by saying, look, most of the billionaires, um, Like, if you go back to, like, I think it's like 1980 or 1970— 1980— most of those billionaires back then are no longer billionaires. And so it's actually this idea that you probably heard it, which is making money is not as hard as preserving it. And I think a lot of that, as Andrew alluded to, comes down to position sizing. And again, I've said it time and time again with DApps, it's like, it would suck if you're long an asset like Ethereum and you pick a DApp that blows up And, you know, you got the thesis right, but the structure wrong. And structure oftentimes is equally or more important. And you never want to increase— like, why introduce more surface area to an asset class that can deliver venture-like returns? Most people, I think, would be better off, you know, if you can buy it on Coinbase, go buy it on Coinbase.

Can I ask a question to end this podcast? Since Andrew said it's all about sizing, Andrew, when you learned about Ethereum and the Ethereum ICO happened, how much of your net worth did you put into Ethereum then?

Decent amount, uh, let's call it 30%.

Okay.

Oh God, I would have thought—

put your money where your mouth is.

Yeah, to be, to be fair, Rob, I think what you're getting at is most of the, of the wealth, like real wealth, gets created through concentration, and you should then snap out of that and do diversification. Which is so hard because you then say, like, for me it was over 90% of my net worth was in crypto at one point. Like, like, put all my bonus at JPMorgan into this thing and was like, YOLO. Yeah, shouldn't ever do that. No one should ever do that.

And, and interesting, you know, you're raising this point, like, uh, a few people asked, well, it's like, so is this your exit strategy? And like, I don't think someone on planet Earth realizes I'm probably the one who can't sell out of this vehicle more than anybody, right?

Yeah, you're, yeah, you're the one who's stuck. Yeah, yeah.

But look at that, and that's why you got to put your money where your mouth is. And yeah, it's all about sizing.

Yeah, indeed. Well, Andrew, thanks, uh, thanks for the— thanks for, uh, coming on. Congrats on everything.

And, um, yeah, don't congratulate me yet. All the work's just about to start.

Congrats on getting it going. First step is the hardest. Fair enough.

Fair enough.

All right guys, appreciate it.

Godspeed.

Cheers.