Token2049 Takeaways (Live) | Weekly Roundup

Now imagine a world if we really nail this right, which I hope we do, is you onboard 100, 200, 500 million users. Those users are very different than your speculator that's screaming for an airdrop and moving around. So I think naturally, if that is true, if this industry really delivers on that promise, more value should be accruing to the application.

Hey guys, Jason Yanowitz here. Just to let you know, we have Permissionless 4 coming up in June from the 24th to the 26th at Industry City in Brooklyn. This is a conference for the developers and builders where we'll be focusing on the DeFi Renaissance, applications, token design, and much more. Click the link in the show notes to grab your ticket today and use code EMPIRE10 for 10% off.

Uh, these are the true believers right here. If you guys want to know what, like, uh, I think a crypto conference in 2014 felt like, it's like this room. Like, the last— hey, we're hanging on, so How we doing? Good, good event? Good. That's energy. I like it. I like it. Yeah.

This feels like my first conference that I went to was in New York in the Bitcoin SoHo Center.

Yeah.

And I was working at JP Morgan at the time. I had like a suit and tie, you know, snuck out of the office and we'll go down to SoHo. Everyone looks at me like an alien. They're like, you've clearly in the wrong room. Like we don't welcome suits very much. Going to take over and blow up JP Morgan. But anyways, felt like this, like no one's there. Like the Andreas Antonopoulos videos.

Yeah. He's like standing there. He's the only one presenting and yeah. Yeah.

We can't promise we're going to deliver so much alpha as Andreas Antonopoulos, like in 2010 talking about Bitcoin, but does anyone here listen to the Empire podcast?

Do you guys have any idea what that is? This guy, let's go. This guy. I love it. Cool. Well, thanks for listening. So Santi and I have been hosting this podcast for 5 years. It's called Empire. Maybe I'd love to, let's talk about token takeaways. One of the things Blockworks does is run a bunch of conferences. We see a lot of conferences. We've both been in the industry for a while. We've seen kind of a lot of volatility, a lot of different narratives come and go. What are your big takeaways from the last couple of days in Dubai? Maybe there's the, there's the on-site token takeaways. Then we've been at some of the kind of side parties and stuff like that.

Yeah, I think it's— I started noticing in earlier in DAS this year and I think it's still true here, which is I just sense that there's more excitement in the, about crypto from BlackRocks of the world, Apollo of the world, Stripe, Visa, MasterCard. I mean, there's a lot of announcements this week and not just because there was announcements this week. I just generally feel that, look, we've been in an environment where prices have either gone down for the vast majority of crypto assets. And that naturally has washed away many crypto natives, but you were talking about this, but like, you know, there's never been a better setup for crypto. The regulatory environment in the US is clearing up, like Trump has delivered on every single one of his promises. And I just feel the excitement, like genuinely this time is different. You're not in that like Long Island Iced Tea, everyone puts blockchain on their earnings to pump the stock. But I do think that institutions are like now, backing up their interests in crypto. And you also see a lot of like the OGs, a lot of my friends are not showing up to these conferences anymore.

Yeah.

So what that means for me is it's a really exciting time to be in crypto. You know, I started investing in 2012 in the industry, and I just think that I'm earlier now than, than what I was before because there's something so powerful about just seeing it actually being implemented. You know, back then it was only Bitcoin. Now I could just never have imagined the timeline, which is like the leading financial institutions are like leveraging this technology.

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Let's talk about this idea of OGs crashing out a little bit, maybe. I mean, you've been in the industry for a while, have invested in some of the best founders in the industry, and it's been interesting being at Token because a lot of those OG founders, if you think about some of the best protocols, the best L1s, they actually, they're not showing up here. And a lot of the presentations are kind of this new crop of founders. Curious how you, your mental framework for that.

Yeah, well, as much as I miss some of my friends, I think it's really exciting to see young blood. Why? Because when I think about investing a lot of times in crypto is we've tried a lot of experiments. The cohort of 2014 and then the cohort of 2017, every cycle you see kind of the same ideas rehashed. And a lot of people might say that's just a waste of time and energy. It's never going to work. It didn't work before. But I do think credibly the infrastructure is very different. The regulatory environment is very different. So when you see Drift or Jito or some of the deep-end networks, maybe they're not the most authentic ideas, so to speak, but they're working now. And I think it's just kind of this idea of it is worth revisiting experiments that didn't work when the infrastructure was very different. And it pays to pay attention in crypto because the infrastructure has come a long way in a very short period of time. Like in the last 2, 3 years, Jan, I mean, the amount of developments on fast, like high throughput blockchains and the proof points, like with meme coins, putting meme coins aside, like the infra is very much ready. And so one of the things that I think you hear, hear, keep hearing in a lot of the panels I heard was, when are we going to get a billion users on-chain? And that's now kind of the focus, right?

Yeah. And what, uh, so this, so this week, talking about some of the news stories of the week, this week there was two actually funding announcements that got a bunch of, basically a bunch of shit on Twitter. I saw one was, um, one was Miden and one was Kamp. And, uh, and, but I know, I know both those teams and congrats to on both of them for the, the, the fundraising, the announcement, because that's always difficult. But I think the thing that people didn't like when you read about these just new chains, another new chain, another new chain, is kind of this like copycat mentality or like, why, why, why are we still focusing on building infrastructure? Why don't we go up the stack, start building applications? What do you think of that? Is that fair criticism or it's like, look, we'll never stop improving the infrastructure?

I'm more of the camp of the latter. Like I think there's always going to be interest and I don't think there's anything wrong with pushing that, those limits. I still continue to believe we're incredibly early. Uh, you know, in fact, we might, you know, I want to talk about Ethereum because I think like there's just a version of this world where the top 10 and 20 in 5, 10 years time is just completely different than what exists today.

Yeah.

Um, so we'll see. I mean, companies with a lot of distribution, like companies like Apollo are using like existing infra to deploy. But that might not be true, you know, 5 years down the line. So I don't know if you believe in that or not.

Do you think returns will start to come? So all the returns in the industry have come at the protocol layer. They've all come at the L1. You know, if you want to make the most amount of money in crypto, you buy L1 tokens. That's basically L1s and L2s and all the applications. Uh, I mean, the, the applications that have made money are actually the exchanges, right? OKX. I mean, you can see KuCoin. Binance, Coinbase, the app, there are applications in crypto. They're just called crypto exchanges. Do you think that from the return profile, the returns will start to weight heavier towards applications?

I hope so for this reason, because I keep saying it. I was on 4 panels this week and it's like, we have 30 to 60 million active users on chain. It's the same users. So I guess like when we think about where value has been distributed, a lot of it is MEV. Why? Because like meme coins have a lot of MEV. So it's all, all of those, most of those users are purely here for speculation. Now imagine a world, if we really nail this right, which I hope we do, is you onboard 100, 200, 500 million users. Those users are very different than your speculator that's screaming for an airdrop and moving around. So I think naturally, if that is true, if this industry really delivers on that promise, more value should be accruing to the applications.

Yeah.

To whether it's middle layer like DeFi apps, uh, or Athenas of the world, uh, Avis of the world, and also like wallets. Yeah, more like on-chain wallets like Infineon style. Yeah, not centralized exchanges.

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Let's talk ETH.

Sure.

Yeah. So I'll read— I'll read this tweet from Hasib. Hasib at Dragonfly said that Ethereum pivot now has a tagline: scale the L1, scale blobs, improve UX. If they can pull this off and buy back some credibility, This may finally be the beginning of the ETH revival. Let's see. And I think we had some maybe interesting— we were at this kind of party last night and there's a bunch of the big Ethereum founders there last night. And this was, this seems to be the biggest topic of discussion at this conference for me is like, at least in the speaker rooms and at some of these side events is like the founders who are building on Ethereum, very, very, very split on if this reprioritization of the product roadmap is the right decision. As someone who's early in Ethereum, I'm curious how you think about that.

Well, that's been my frustration with Ethereum. It's like, it's not practical. And it's been, you know, this different factions within the Ethereum community that all kind of like are pushing their own narrative and the L1 and L2 construct. But I think like everything is now on the table because I think everyone just can align on one thing, which is we're losing a lot of mindshare and market share. And so it's really encouraging to see folks, OGs, the few that showed up that were there mostly and saying, let's actually just think about how do we, ideas that I would've never have heard. Someone that I'm really close with and he's like, you know what, now it's worth considering because if we don't do this, then we're just going to be irrelevant.

Now what is worth considering?

Well, certain proposals out there, which is like, okay, how do you, Can we integrate other pro—

like, yeah, I mean, basically I think the conversation that will start to happen at the Ethereum L2 layer, okay, basically there's been this, there's this weird thing in crypto where there's the, there's the tech layer, which is like the tech is very important, but there's, there's the social layer. And if you talk to a lot of the, I think L2 founders, they are more concerned about the social layer. And as one of them put it last night, They said, what is Ethereum alignment? It's getting your monthly tweet from Vitalik, right? It's, you got it. You get, you get your, we're Ethereum aligned, therefore the EF and Vitalik are going to tweet about us once a month. Right. And I think that social, that social consensus layer is starting to break down and people are based, I mean, basically what happened in the, in the US with like kind of, I think you can equate it with like a lot of the woke stuff of the last couple of years. And then people fought back against that. People are starting to fight back against like does this social consensus, like ETH alignment that we've all really over-optimized for, does that matter anymore? So you'll start seeing, that'll show up in the product, right? That'll show up in things like, I think this hasn't happened yet, but I bet at some point this year you'll see an L2 start to use their own token as gas.

Yeah.

Right? You'll start to see things like, if you see blob prices, blobs get more expensive, you could see an L2 say, fuck this, I'm going to go, I'm getting off, I'm becoming an L1.

Language, sir.

Language. Yeah.

Look, as much as we like to talk about ideology and alignment, the history, if you go study everything that's happened in crypto, it's very clear. As soon as you start getting any traction, you defect and you use kind of the social layer as a way to get a lot of attention. But at the end of the day, I mean, Bitcoin works because it assumes that you can't trust anyone. And so it has almost no social layer. It doesn't have any social layer. That's what makes Bitcoin Bitcoin, which is it's sort of like architected in this manner and that solves Byzantium's general problem. You have now a social layer and some of these other more fluid organisms, call them Ethereum, but you saw it in 2017. Most of the big projects use Ethereum as a capital formation mechanism, launch an ICO, and then launch their own L1.

Why?

Because the economics are stacked more favorably. And at some point that developer says, I'm developing really good tech. Why would I leak that value to Ethereum? And look, it's not to say that that developer is greedy or whatnot. It's just everyone acts in their own self-interest.

By the way, we're overly kind of attacking Ethereum here, which I feel like some people say sometimes we do that on the podcast. But you talk to some of the best founders on other chains too. Yes. Yes. And they're—

because the criticism that I got, which is I'm launching a chain, I never thought I'd launch a chain, but I want to acquire users through a private equity model, bring them on chain. And then one of the OGs says, oh, why are you launching your chain? Like, why couldn't you do this on top of Solana? And I walked him through it. But it's an interesting observation because when I, in a separate conversation with one of the main DeFi protocols of another chain, not Ethereum, I said, is there a version of this world where you bring a lot of the users? It's like the primary DeFi app of this chain. I said, would you ever launch your own chain? Because a lot of times the more CTO technical people say it's really expensive to launch a chain. And it kind of reminds me of the criticism of Solana, which is higher hardware requirements. I'm like, if you get a lot of activity and MEV and fees, it justifies, it pays for the validators, it pays for the hardware. And I pressed this guy, this CTO of this project, and I said, would you ever leave?

And they're one of the biggest apps than one of the other—

They have all the flow. Yeah. And I said, if you have all the flow, what if I told you you could acquire like a Robinhood competitor and you could spin up your own and launch your own chain and beat Robinhood to the—

So why wouldn't they? What'd he say?

He said, yeah, we would.

Yeah. And by the way, and there's a problem Solana is about to go through is I think some of the And it was a project on Solana. Yeah. What happened? If you're in Solana's shoes, how do you prevent, how do you solve that?

Well, I think what, candidly, I, there it's like they need to deliver on like, you know, increased bandwidth, reduced latency.

Because then the chain just becomes a launchpad where you're, you got apps and then they grow and they grow and they grow. And then once they get big enough, then they go launch their own chain.

I mean, I think the company to watch here is Athena. I mean, they're, they're going out, they're launching their own chain. They just announced the Telegram, which is a lot of announcements. So. Yeah, I'm not saying that every major protocol that gets a lot of traction is going to launch their own like Layer 1, right? But I do think that it's just something that you're going to start if you own the user relationship and you can get more economics by being vertically integrated. I think it's something that will continue to happen. That doesn't mean that Ethereum goes to zero or Solana goes to zero. I'm not suggesting that, but—

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Just a phenomenon that—

so the other thing that people were talking about at this event last night was I think a lot of frustration from founders saying, look, we spent all this time building this decentralized network and here comes Hyperliquid and is just, you know, basically like a, I don't know the right, like a data server, like a single server chain essentially. You've got other guys like what Hyperliquid is doing in, where are they located? Japan or something? Somewhere. What they're doing in Japan, like Fogo is going to do in Chicago, these kinds of like hyper-localized, uh, single-server chains optimized for just the user experience, but not optimized at all for the decentralization and things like that. Do you, like, I don't know if you have any thoughts on like how far that push ends up going. Like, are we, are we, is this where it goes? Are we going to keep seeing this more and more and more?

I think eventually crypto is going to be very good at very specific use cases. Technology is incredibly centralizing, but for very specific use cases, DeFi is really good. And there's always going to be someone that is kind of bid for guarantees that blockchains give you, which is credibly neutral to some extent, but also the verification of immutability. And I think that's like the most important thing. So like if you're Apollo or BlackRock, you like DeFi, you like a network like Ethereum because it has a lot of security and it has liquidity, composability. But more importantly, you're interacting in a system called decentralized finance that minimizes counterparty risk where you can inspect collateral in AAVE 24/7, 365. 5. And when you, and that's not the case for a centralized solution.

Yeah.

Um, so I don't know, I think, um, you know, it pays to be practical in crypto, you know, like Hyperliquid is very practical in how they went about it. And I think there's a lot of merit to that.

Yeah.

But I still think that there's very specific use cases where decentralization and security are still paramount and will continue to be.

Um, I know we're supposed to talk about token, token takeaways.

So I have another takeaway from token, which is this says zero, but we can't keep it Or what's, what's—

we're done. Do we run out of time? We're done. I forgot to look at that. All right. Oh, like it's blinking red.

I'm like, what's going on?

Morgan's running out of time. All right. My other last takeaway is I just want to give a shout out to Token because they did an incredible job. It's like such an incredibly, it's a high performance, they're high performance chains. It's a high performance conference. So the organizers did a 10 out of 10 job and big shout out to Alex and the whole team.

Yeah.

So I've been coming here since years and Singapore and here, it's honestly super. I know you run your own conference, which is great too.

We learn a lot from it.

But amazing conference. It's great to see everyone come out. And it's really, especially in a place like here, which is the government so progressive and pro-crypto, and it's just really nice to be here. So it's always a treat.

Cool. Thanks for listening to Empire Folks. Thanks, folks. Cheers. Cheers.