Bankless - 112 - Into the Funtier | Packy McCormick

Episode Date: April 4, 2022

Packy McCormick is the writer of Not Boring, an investor at Not Boring Capital, and an advisor to the a16z Web3 Fund. Packy has a sharp intuition for general trends, and he puts in the work to understand and thoughtfully communicate his findings outward. Writing and creating content is a great way to learn and share knowledge—we would know. In this episode, we explore five of Packy’s most salient articles orbiting around the crypto space. Unraveling the secret recipe for crypto (and life), managing the delicate balance between money and fun is the key to winning these games. Making money on the internet with friends is the new normal. As a talented writer and a great thinker, Packy is a born-again crypto enthusiast as of 2021. He is able to synthesize this chaotic space with fresh eyes, bringing prior knowledge to guide his understanding. ------ ✨ DEBRIEF ✨ | Ryan & David's Unfiltered Thoughts on the Episode https://shows.banklesshq.com/p/112-packy-debrief  ------ 📣 CONSENSYS | M·A·C: NFT Collection for a Good Cause https://bankless.cc/MAC  ------ 🚀 SUBSCRIBE TO NEWSLETTER:          https://newsletter.banklesshq.com/   🎙️ SUBSCRIBE TO PODCAST:                 http://podcast.banklesshq.com/   ------ BANKLESS SPONSOR TOOLS:  ⚖️ ARBITRUM | SCALED ETHEREUM https://bankless.cc/Arbitrum  ❎ ACROSS | BRIDGE TO LAYER 2 https://bankless.cc/Across  🏦 ALTO IRA | TAX-FREE CRYPTO https://bankless.cc/AltoIRA  👻 AAVE V3 | LEND & BORROW CRYPTO https://bankless.cc/aave  ⚡️ MAKER DAO | THE DAI STABLECOIN  https://bankless.cc/MakerDAO   🦁 BRAVE | THE BROWSER NATIVE WALLET https://bankless.cc/Brave  ------ Topics Covered: 0:00 Intro 5:30 Packy McCormick’s Journey 9:55 Born-Again Crypto Enthusiast 12:48 Own The Internet 21:00 Solana Summer 29:32 Monolithic vs Modular 35:44 The SOL Value Prop 42:08 Winner Take All? 47:30 Real vs Fake Culture 55:00 Status Monkeys 1:02:10 NFTs as Status 1:06:23 The Pareto Funtier 1:14:05 A Sense of Meaning 1:19:43 The Web3 Debate 1:29:45 Predicting This Decade 1:35:02 Closing & Disclaimers ------ Resources: Packy McCormick https://twitter.com/packyM?s=20&t=zppneMsLXcmxhoe3-5z7OA  Not Boring https://www.notboring.co/  Ethereum - Own the Internet https://www.notboring.co/p/own-the-internet?s=r  Solana Summer https://www.notboring.co/p/solana-summer?s=r  Status Monkeys (NFTs) https://www.notboring.co/p/status-monkeys  The Pareto Funtier https://www.notboring.co/p/the-pareto-funtier?s=r  The Web3 Debate https://www.notboring.co/p/the-web3-debate?s=r  Player Piano https://www.amazon.com/dp/0385333781?psc=1&smid=ATVPDKIKX0DER&ref_=chk_typ_imgToDp  ----- Not financial or tax advice. This channel is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. This video is not tax advice. Talk to your accountant. Do your own research. Disclosure. From time-to-time I may add links in this newsletter to products I use. I may receive commission if you make a purchase through one of these links. Additionally, the Bankless writers hold crypto assets. See our investment disclosures here: https://newsletter.banklesshq.com/p/bankless-disclosures 

Welcome to bankless where we explore the frontier of internet money and internet finance. This is how to get started, how to get better, and how to front run the opportunity. This is Ryan Sean Adams. I'm here with David Hoffman and we're here to help you become more bankless. Guys, we have a fantastic episode for you today with Paki McCormick into the frontier. The combination of fun plus money wins. That is the secret recipe for crypto. A lot of themes we touch upon in this book, a few takeaways for you.

Number one, we talk about the bull case for Ethereum, also Solana. and Web 3. I think Pachy has a great lens on this. Number two, why humans are just status monkeys. Status seeking monkeys. We talk about that and how it applies to NFTs. Number three, how making money on the internet with friends is the new normal. That's what we're doing here in crypto. And number four, a bonus. We talk a little bit about why Cardano is not going to make it. Oof. And the flaws in that community. Yeah, David, a fun episode with Pachie. He's a talented writer, great thinker on a number of subjects. He also came into crypto in 2020. or re-came into crypto in 2021, which gave him sort of a fresh lens to synthesize and look at

everything that's going on. And we talk a lot about his journey in 2021. And really insightful. What were some of your thoughts? Yeah, Packy's just such a fun guy. It was such a treat to chat with him for 90 minutes. It didn't really feel like a podcast. It felt like just we're hanging out, chatting about crypto, chatting about what he's written. And it's always a treat when we bring on people who can write really, really well, who can make content really, really well, because they have our they have very well-formulated thoughts. This is the process of writing. This is the process of podcasting is these thoughts are already well-formulated, and now we are just deliberating and discussing

them. And Paki, he's intuitive and intelligent enough to really create some really awesome concepts and ideas of almost about everything that's related to Web3, but also how it relates to almost everything else in the world. And so he's bringing a lot of just prior knowledge, outside knowledge, to the world of Web 3 to help guide his understanding. I think I think Lizards are really going to like it. We talk a lot about Ethereum, Solana, modular versus monolithic blockchains and the different niches that those play out. Of course, we talked about NFTs and how NFTs are making the internet fun again and how that kind of is changing the culture of people who pay attention to the internet and how engaging on the internet is fundamentally changing because of Web3. We also touch on Jack Dorsey and his whole anti-Web3 narrative and a few other just fantastic topics. Overall, just a fun episode.

I think you guys are going to be smiling while you listen to this one. Yeah, we talk about the bull case, but we also end on some of the critiques on the bare. case for Web 3, which is always a good thing to add to a podcast of this type. Guys, we're super excited to bringing this podcast with Pachy McCormick. But before we do, we want to thank the sponsors that made this episode possible. The Layer 2 era is upon us. Ethereum's Layer 2 ecosystem is growing every day, and we need bridges to be fast and efficient in order to live a Layer 2 life.

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He's an investor at Not Boring Capital. He's also an advisor to A16Z's Web3 Fund. He's a writer of one of my favorite newsletters, besides bankless, of course. I've got to say bankless is number one, called Not Boring. This is business strategy meets technology. And more recently, he's had a big focus on Web 3, which I've loved to see. And one thing I think we can promise about this podcast is that it will not be boring

because we have the writer of Not Boring. Packy, welcome to Bankless. How are you doing? Hello, Bankless Nation. Good to be here. Good to be here. Thanks so much for having me. Oh, it's awesome to have you.

I think, you know what? We want to start with sort of your crypto journey, if that's cool. hear a little bit more about it because I've been a follower of your newsletter for a little bit on and off. And then I think I really started tracking you when we got introduced. I think somebody from the Salana team actually introduced us and said, hey, yo, do you know Paki McCormick? He's got some questions for you, Ryan, about Ethereum. And I was like, cool. I love questions about Ethereum. And I think one of your first telegram messages to me after we got introduced, you just like laid into some fantastic questions.

Like just, like, bam, you hit me with the hard ones. Like, what's the counter to Slana's argument that L2's break composability? You hit me with that one. And then you asked why the TdL, the total octa value on Ethereum has been declining recently. And then you also asked of all the other L-1s, which, if any, do I think is the biggest threat to Ethereum? And I think at the time, I want to get into your mind space at the time, but I think

at the time you were kind of doing a deep dive on Ethereum and you were doing a deep dive on all of these various web three platforms. Can you give us like a sense of your journey at the time? So where were you in the crypto journey? Had you been in crypto in the past? Were you taking another deep look? Tell us about that. Yeah. So my crypto journey started in, I think, 2013. Whenever Union Square Ventures led at the round in Coinbase, I read the Fred Wilson blog post. I was at a bank at the time. So as I was going bankless and quitting my job at Bank of America, Mara Lynch. One of the things that I realized is that they didn't realize that Coinbase existed. So if you work at a bank, they track all the things that you trade.

You have a 30-day holding period. It's kind of a pain to do anything. Bitcoin, however, they had no idea about. And so I was able to buy a bunch of Bitcoin, I think about $38 of them at about $100. And then a couple of months later, I went to October Fest. I'd quit my job, went to October Fest with some friends. They still worked in finance. So we're going out and having a big night. I pretended like I still worked in finance and woke up the next morning, mad at myself for spending all of that money when I was unemployed and about to start working at a startup, making a lot less money. So I sold the 38 Bitcoin for about $150 a coin. So that was kind of the beginning of my journey. And because of that, you know, I dabbled a little bit in 2017, but really kind of avoided the

space because I was so mad at myself for selling too early and for paperhandsing that trade. So by the time, you know, I think kind of early in 2021, January 2021 is when I started kind of getting interested in crypto and Web 3 again. NFTs kind of brought me back in the space and just kind of thinking about what the value chain looks like when you cut out the middleman. Like, you know, there's obviously all of the kind of like fervor and almost kind of like religious language

around cutting out the middleman. But I was like, what does that actually mean? It means that more value accrues to both sides, to the creator and to the consumer. And that's a really powerful thing. And you can build new business models based off of that. So by, I think May is when I wrote about Ethereum and when we were introduced.

And so my journey at that point was, you know, Ethereum is my biggest holding, still my biggest crypto holding. I think my biggest holding of anything at the point, huge, huge fan, but, you know, like to kind of battle test all of these things because my brain is naturally not skeptical. So I like to talk to people who are smarter than me. I even asked the internet, I got probably a thousand replies and why I shouldn't just put all of my money into Ethereum. But that was kind of the context of us talking was, you know, from some of the biggest Ethereum that I know.

And I think Ben at Salon introduced us that he knows, you know, what are the, what are the, what are the drawbacks? I always find it interesting for people who come into the space and then take a hiatus for a while and then come back because their perspectives as like, okay, how has this space developed is always interesting, especially when you were gone for a, it sounds like a decently long time. The difference between $150 Bitcoin and the rise of the Alt Layer 1s is a very significant span of time. I actually don't know of anyone who has like a longer gap in their crypto history than that. So when you came back into the space, what were your first impressions about like, oh, how has this space developed? What were the things that really stood out to you as somebody that once paid attention

left and then came back? Yeah. So I think, you know, Bitcoin is obviously the OG and is interesting for its own sake and all of the types of things. But as someone who likes technology businesses and kind of diving into how companies work and business strategy, like there's not much there on the Bitcoin side. You know, price goes up, store of value, nothing particularly exciting to kind of break down. When I was kind of reintroduced to Ethereum kind of what was happening there, seeing use cases being built on top, seeing DAPs being built on top, seeing NFTs exploding, seeing DFI exploding. I just realized that there's this whole new kind of ecosystem. This is like a whole different sort of internet.

And so that was just really exciting to me. I think coming back was that the New York Times just, I think, blamed me a little bit for, you know, the Web 3 moniker in a post that Kevin Roosted this weekend. But I do think that there's something to, you know, it being a lot more than cryptocurrency at this point. And that was one of the things that drew me back in, was that it wasn't just about the money at this point. was about so much more and kind of building this thing that the users and the builders get to Yeah, it does seem from your journey, Paki, that you've been sort of a big bull of Web3, and I think we want to get into those themes too. So, you know, for David and I, we're also,

like, content producers. And the way we learn about things is, like, by writing about them or, like, by hitting the record button on a podcast in order to do it. So we've always introduced, like, the stuff that we do on bank lists is it's really part of our journey. And, like, we're inviting a community around us to come, you know, discover, what we're discovering and co-discover with us, this strange new world of crypto. And that's very much in like reading what you've been writing over the past year or so. That's very much what I've observed you doing is you like, you do a deep dive, you ask a whole bunch of good questions, and then you kind of create a synthesis of the answers to those questions, the best answers you can find

to those questions in some sort of a post that you publish. So I think that like maybe the best way to go through some of this podcast and to sort of unpack your brain in what you've discovered since coming back to crypto in 2021 is to actually go through some of those posts because they're fantastically written. And we want to get maybe the gist of the post. And so there's like five posts that I think would be really cool for us to go through. But let's start with this first one, which is the post you published, I think shortly after your telegram message to me, where you were doing a deep dive on this Ethereum thing after a hiatus, after, you know, Bitcoin in 2013 and, you know, the sound money meme and all of that maybe didn't resonate with you,

but now you've discovered this new thing. And so you wrote this post called Ethereum, own the internet, a bull case for Ethereum. I want to start maybe with this question, where we dive into some of the sub-thems of this article, but what did you really discover about Ethereum during your deep dive at that time? Yeah, so a fun bit of trivia is that the opening quote in that article was a Ryan Sean Adams quote the most bullish thing for ether is to be understood stolen from david off i'm going to have to take credit for that one actually that one was that one was wow so a misattributed quote was Ryan Sean Adams quoting david hoffman it was quoting

yeah it's it's packing McCormick quoting Ryan Sean Adams quoting David Hoffman the most bullish thing for ether is to be understood it's a Michael scott style quote exactly so i mean a year ago and it seems crazy but a year ago is kind of when i think Ethereum started breaking into like a very popular consciousness. Like, you know, it was getting written up in Bloomberg and Patrick Ashana, so he was talking about it on this podcast. So for people who were kind of interested in kind of business and technology more broadly, I think early 2021 is when people really started kind of re-learning about Ethereum. Obviously, you know, you guys have been a great resource for that. One of the things that I think, you know, there's a couple of things that I discovered or kind of

just different ways of thinking about Ethereum that I thought were useful. One was kind of comparing it just to, you know, thinking about it as a company as opposed to just an asset. So there's obviously like the kind of triple point argument that y'all made that I quoted in the piece as well, but just the fact that like as usage goes up, fees go up and, you know, it behaves kind of, you can kind of analyze this like you would analyze a business, I think is one interesting thing. A second one is that Ethereum, I realized kind of readiness. I had just written about Excel, that Ethereum really seems an awful lot like Excel in a lot of different ways. One is, One, it's kind of Lindy, so the longer it's around, but I think the less likely that

anybody's going to come around and kill it. Two, that kind of composability is just built into this thing where in Excel, you can build formulas that build off of each other and you get really, really good at it. And so as you build more and more complex formulas and build bigger and bigger models, you're kind of more and more locked into this thing and gets more and more magical. Same thing with, you know, Ethereum and Composibility and people kind of mixing and matching primitives. And then just the fact that it is this kind of just distributed computer, which now I think, obviously anybody listening to this podcast, but really most people in the world kind of understand,

but just was kind of radical to me thinking about it at the time when my previous exposure had really just been Bitcoin. So you had this quote in your article as well. Owning Heath is like owning shares in the internet. Demand for Heath will go up with increased Web3 adoption, while upcoming changes will decrease the supply of Heath and let more value accrued holders. It's like a tech stock, a bond, a ticket to Web3 and money rolled into one. It's just a fantastic summary of the bull case for Eith. So you're seeing Eith the asset both tied to Web3 adoption, but also it being sort of a unique asset that gives you exposure into like a lot of different. It's like not limited to just a money or a tech stock. It's kind of something new.

It's all of these things combined. Can you talk a bit more about that? Yeah, it's kind of this index, right, on the adoption of Web3 almost, where one of the most fascinating things in this analogy has been, I think, used many times, but is if you had to, say, buy shares in Amazon and use that to pay for AWS, right? I think that idea of having to use Web3 by kind of starting by purchasing ETH and then going down the rabbit hole from there and swapping it for other things and staking it and doing all this other stuff, all starts with buying this thing that also, you know, with the proof of stake switch on the verge of the merge, will essentially, as people use it more and more. You have to buy ETH as you use ETH, the value goes up. And so that was one of this

really interesting kind of mental shifts for me is that it really is like buying equity almost except for the fact that you then go and use it. We're about to keep on going down your journey into other layer ones because we're following Packy's journey through the process of understanding Web3. But before we talk about the other layer ones that Packy is interested in, what property or quality of Ethereum has that really, really excites you that no other L1 has? I mean, I think the legitimacy is there for sure and just the fact that that is where so much of the activity lives and so much of the culture lives. And, you know, it just has kind of that beautiful blend of security, but, you know, composability and flexibility and all those types of things that it just feels like a chain that

is going to be around for a very, very long time and will continue to get more and more used and more and more valuable. And then what about the inverse of that question? What about Ethereum do you think really holds you back? I'm not going to say anything novel here, right? Like, you know, I think the gas and speed, all the gas has been a little bit more palatable recently, but paying $10 even limits the kind of use cases that you can do. But I think that'll get fixed. I'm like I said, super bullish. Packy, did anything about your reentry into crypto in 2021 re-excite you about Bitcoin at all?

Or is it possible now to come back into crypto in 2021 and like completely ignore Bitcoin? I've probably actually to my detriment, I think, ignored Bitcoin, maybe even too much. I mean, so much of, I think, the value in the space moves with Bitcoin still, and I'm awaiting the flippinging, listening to Bankless and getting updates on how close we are to it. But I think for now, at least from a financial perspective, so much of the industry moves with Bitcoin that it's, I probably ignored it at my own peril. I just don't find it particularly interesting. I find the idea interesting and I own a little bit of it and it will sit there. But there's not like a ton more to explore from that point. And so I

just haven't, you know, I watched the price, and that's about it. Before we move on from Ethereum 2, I'm wondering if you could kind of paint the picture of the Web 3 value proposition for us a little bit more. So what is it about Web 3? What does this term even mean to you? And how does that relate to what you first saw in Ethereum? Sure. So Web 3, the definition that I've used is that it's the Internet owned by the users and the

builders orchestrated with tokens. And I think there's just so much that you can do when you're able to give. of ownership in the thing that people are using and building. And when you're able to use tokens as incentives and use, whether that's fungible tokens, not fungible tokens, use those things as incentives to guide behaviors and design richer systems than you could otherwise. And you cut out the middleman, not in any kind of zealous way, but in a real impactful way where both sides of the equation who are adding value to the system are able to pull more value out of the system, that's what I think is so powerful about Web3 to me. Okay. Well, let's keep moving. So this

is sort of the first milestone that we picked up in your newfound crypto journey in 2021, which is Ethereum, the ability to own the internet, right? And this is where, you know, Web3 kind of starts at some level. Although some might argue Web3 is also a Bitcoin thing. I'm not sure Bitcoin maximalist would embrace that. But we tend to think Bitcoin is just another piece of Web3. But you said this in your Ethereum article as well. You also talked about some of the risks to Ethereum being like kind of transaction fees and the cost to actually use the main chain network. And you said the L1 that I'm not. most excited about besides Ethereum is Solana. And of course, that was actually a good time to be

excited about Salana, at least it was a good time to be buying Solana, for sure, the sole token. When did you publish the Ethereum article? Was that in like April? That was May of 20. Okay, so it was May. So it was right before this thing that Salana community called Salana Summer, where Solana had a fantastic price run. And also we're seeing some real traction on Solana. So let's talk about the second article on the genesis for that article, which is Salana Summer. So clearly before this article, you had been looking at Salana and been bullish about Salana. But can you tell us why you were excited about it? Was it really the transaction fees?

Were there other elements in play that made you excited about the Solana ecosystem? So in the smallest of small worlds, Ben Sparango, who works at Salana and introduced us, was my neighbor growing up. And so I know that he'd been involved in the sports. space for a little while and I'd kind of tracked him, but as I was kind of out of the space, wasn't tracking as closely. Then I came back in and caught up with him and he told me kind of why he went to Salana and what he was so excited about and what he was working on, introduced me to Anatoly and just kind of got more and more bullish. Transaction fees and

speed are obviously two of the things that got me excited to start. But I think the thing, you know, the way that I tried to frame the piece and the way that I tried to frame a lot of the things that I write about crypto is not as this completely other thing, but as a thing that kind of follows some of the same rules that most businesses have to follow, but just with some supercharged tokenomics built into the mix. And so for Solana, it's really kind of a platform dynamic where Solana does well if it's able to acquire developers who build products that acquire users. And it's kind of that, that simple. And so what attracted me was I started talking to more and more and more people who were building on top of Solana and it felt like there was a lot of

developer interest moving over there. How about the transaction fees in Solana? So in your article, you wrote this. I think at the time, it cost something like $3 to do a transaction on Bitcoin. And at the time, a massively high gas fees, people probably remember this in May of last year, $8 to $40 on Ethereum and Mainnet. And at the time, it only costs 0.001 cents, like a fraction of a penny to do a transaction on Solana. Do you think that is the big kind of value proposition that something like Solana brings, aside from, like, of course, Ethereum has a fantastic community. But aside from that, is it mostly about transaction fees and decreasing the cost of those? I think it's transaction fees and speed, right? It just feels performant. There's,

I'm going to blank on the name. Maybe we can put it in the show notes afterwards, but there's a website that you can go to on Solana that actually lets you kind of just execute transactions in real time as fast as you can kind of hit a button. And it shows those transactions settling, like kind of within seconds. And it's just a very different experience than operating on Ethereum where you're used to signing a transaction with a metamask and just kind of waiting for a little while until, you know, something happens. So I think there's that speed element that attracts people in addition to the low transaction cost, which is really nice as well. Do you think that's what a lot of people are looking for? Like when they come, I mean, everyone's used to mainstream, right? It's like mainstream is used to a

web two experience where just like I click the button and the thing works, right? It's like very easy to use. In crypto, we're kind of used to like janky user interfaces. And so like, I mean, people that use the original MakerDAO interface, you know, they see the abilities that the new generation have today and like the seamless things you can do in Metamask. They think, oh man, this is fantastic. It's so easy to use. But if you talk to like, you know, your mom and get her to do something in DFI, she's going to be completely flustered, like have no idea how things work because it's so clunky and difficult. Do you think that is part of the appeal of something like Solana? Hey, this thing just kind of works the same way the internet does and you click a button and things happen.

And that's it. A hundred percent. I think one of my maybe less popular takes is just that the people who care the most about decentralization, the people who are most willing to put up with janky experiences to interact with crypto are probably the people who are already in the space. And so as you think about onboarding the next billion users, which every product, including Salana claims to want to do, I think making an experience that feels more and more and more like Web 2 and from usability perspective, like kind of the promise of the Web 3 is that it combines the open, kind of permissionless nature of Web 1 with the usability of Web 2. And so I think the closer and closer you move to usability experiences that people are used to,

the better it will be. So you're almost like a UX maximalist then a little bit, like not a maximalist, but things like anything maybe, but like as far as you think that you would prioritize user experience is one of the most important things about the crypto experience. I think it really depends who you're building for. So I wrote about Flow recently as well. And I think kind of similar argument there where there is a portion of people for whom I would much rather they own their NFT and own their digital assets than not.

And if that means that short term, you're not fully decentralized and you're using your credit card and it feels more like a Web2 experience, but you own the thing. That's great. And there's a large portion of the population for whom that's really valuable. there's a smaller but super valuable and passionate portion of the community for whom the Jackie experience is kind of part of the fun. It makes you feel like you're a part of something. And it's almost like a video game where part of the beauty of a video game is that you're

doing something that's hard but achievable. And there's something about that in crypto as well. So I'm not necessarily like a clean, smooth, easy on ramp maxi, although I think they're super valuable to get the next billion people into the space. But I do think that for certain use cases, speed, low costs and just usability does matter. One of the aspects about Solana that I know has compelled you, Paki, and many, many others is the commitment to blockchain-wide composability, right? Like not sharding, not having layer two so that every single defy app is on the same plane as every other defy app. And that in combination with like the low transaction fees is really compelling to a lot of people.

I believe that's what caught your attention about Solana in the first place. Philosophically, that has turned into a debate between people that kind of believe in the modular blockchain thesis versus people that are really committed to not trying to. great composability. And I'm wondering how your thoughts in mental models about this has developed over time. I'm probably a bad podcast because my answers are somewhere, you know, in the middle on a lot of things. I think for certain defy use cases on Salon, I think having kind of full composability is valuable. I don't think full composability is valuable for everything. I think when you think about again, going back to kind of the flow piece, like the fact that, you know, NFTs are able to kind of own different things and just kind of compose a little bit more nicely and

do a lot in one transaction without sharding on flow. I think there's value to that for certain use cases. And then there's some use cases for which I don't think it matters at all. But I think, Ryan, you when we first message had thoughts on kind of composability and sharding. So I'd love to hear your thoughts. Oh, I can't remember what I said. But yeah, I mean, I think probably some of our thoughts right now are, and like, you know, David and I probably skew a bit more decentralization, not maximalist. I wouldn't call myself a maximalist about anything. But like, as close to maybe maximalist as we are about any of the priorities in crypto, in that we think that, like, strong property rights is really the basis of the system

for, like, the long-term achievement of its goals. And so we've done a lot of work on exploring and talking about this whole design philosophy, the difference between a modular blockchain and a monolithic, or something like Solana is going down the monolithic path, where they're trying to kind of expand their base layer, and put consensus and data and execution all inside of the same system. And there are some probably user experience, at least in the early phases, you know, there's a lot of value produced by that because you preserve composability.

And in the earliest phases, of course, you have high transaction throughput and gas fees are cheap and all of these great things. And I think a network like Salon is probably using these things to build this early network effect and create a fantastic ecosystem for itself. And if I was kind of going up against a Bitcoin or Ethereum, I was looking at a spot in the scalability Trilemma to go, like, park my niche, that would probably be a reasonable place to go try to attack and carve out my space. I think for David and I, we probably don't think it's as a durable, competitive advantage over time. We think that ecosystems that are, like,

It's basically like the question of, is UX more important or is decentralization more important? It's like, why can't we have both? And we think that the modular blockchain like design gets you both over time, where you're kind of separating consensus and data availability and execution, and you're doing more on these roll-ups. But it's going to take more time to kind of get there and to smooth out the user experience because you have many various roll-ups. You have like bridging where you have to bridge your assets in between.

And so it's going to be a longer-term journey. But we also think it's going to be the one that is the most effective at preserving decentralization and also at sustaining a competitive moat in the future. But it's also like, who knows how this will shape up, right? So who knows what Solana will do in the future? Ethereum has certainly taken many zigs and zags in its roadmap, as has Bitcoin as well. So at some level, like the competition is fantastic as well. but it's also important that we as a crypto space preserve that decentralization, at least,

you know, that's kind of our take. I think David wants to chime in too. Yeah, in addition to that, like there is always a concern of just like, do people want to be bridging all the time? Like, are we asking every single user to be bridge ores? And at least there is like research out there on the ZK roll-up side of things. When you have ZK roll-ups, especially liquidity across ZK roll-ups, like one uniswop style AMM on one ZK roll-up with a liquidity on a different roll-up, there actually is technology out there, research out there that allows synchronous syncing of liquidity across ZK rollups. And so while you're on different rollups, the liquidity is shared. And so there's like little tricks and tools like this that allows for composability across rollups that we know exist.

We just have not yet applied. So there's a lot of these like UX problems that do have solutions and they're solved through cryptography, which is like hard mode, right? Cryptography is always hard mode, but it's also the way that you preserve decentralization while also solving some of these Ux issues. And so what I think Ryan would agree is like we both think the hardest problem in crypto is getting your monetary policy fixed. And that is the thing that we have not seen any alternative layer ones be able to do. And so, you know, what Solana offers in like cheap transaction fees and universal composability, it loses in an insane amount of issuance of the sole token to provide that service. And so we kind of think.

that if you're not playing to be money, you're not playing to win, right? Like, the game is to be an empire and an empire kind of needs to have its own native currency. And if your currency has a hole in this ship, because it has to issue a ton in order to provide the services that it's providing, then you're playing to lose. And not to say that this is the end-all be-all state for Solana, like Ethereum had issuance, very, very high issuance at the beginning of its trajectory, but also the difference was that Ethereum also was focused on that as a cold, and as a community from very early on. Yeah, I mean, I'm incredibly excited for the zero knowledge future.

And I think there's, you know, there's just so many benefits there that, you know, I'm again, super, super, super bullish on Ethereum. And that's one of the reasons that that's the case. I also think that, you know, the current kind of bridging and L2 experience is harrowing for me, let alone, you know, if we're talking about my mom trading defy, like there is no way that she is sending money over a bridge, even to Polygon and waiting and wondering where that money went and if it will ever hit the other side and all of those types of things. And so I think to kind of keep that like beautiful internet tracking curve of crypto adoption

that we've seen, having other L1s that take different approaches now and to your point may change over time, but that take different approaches now, I think is a really, really valuable thing for the space generally. Can we talk? I'm curious, Pack. You have this great section in your Solana article about how value accrues to Solana, where you also summarize how it accrues to Bitcoin and Eith. And I think you do a really good job of that.

And then you try to put it into words how value might accrue to the sole token. And I'm curious to dig into that. But I guess, you know, the summary here is you're saying Bitcoin acts as a store of value, which is a mix of intersubjective belief, just like the meme value, let's call it. Also supply and demand, the fact that there only be 21 million Bitcoin. There's also these other things like the mining cost floor. And then maybe there's this market cap based on gold price could be one of the intersubjective beliefs that we're measuring it again. So it's basically a store of value.

And then you also see ETH as a triple point asset in that it is a store of value. It is also consumable. So it's every time you spend ETH on block space and there's block space demand. So that ETH is burnt, right? And that goes back to holders in the form of negative issuance. And it's also a capital asset when you stake. We've certainly talked a lot about that on bankless. And then you said this, Seoul behaves similarly to ETH with a few key key. differences. It's also a triple point asset. So you also compared it to ETH in this way. You said it's also kind of a store of value because within the sole native economy, you can use it as collateral for the defy in the same way you can use ETH in the Ethereum economy. It's also a consumable asset. A little bit of

soul is burnt every time. So they have a mechanism similar to EIP 1559. And there's a staking mechanism as well. So triple point and all of those things, except you said one thing that's different. I really want to get into this is how soul accrues value is a bit more complicated because the two main ways sole accrues value right now, in your opinion, is staking and MEV, which stands for minor extractable value in a proof of work mode. I wonder if you could dig into that, specifically the sole value proposition, because this is where I think some people have trouble, like figuring out what the value of soul is. We had Anatolia on a couple months ago on a podcast, and we were like, hey, Anatoly, is sole money?

He's like, no, we're not trying to be money. I don't think Seoul is going for the monetary premium aspect of it, but maybe it becomes the money as a result of its economy. How do you think about Soul, the asset and its value? Yeah, so the interesting one here, and the reason that I said it gets a little more complicated, and I'll try to explain it, is the way that I think Ben described it to me, and as I dug in, I think I kind of came to believe,

is that, you know, essentially the projects that are building on top of Solana are incentivized to have the value of Seoul high enough such that the value of the chain or the market cap of the chain, market cap of Seoul staked to kind of secure the chain is higher than all of the value of all of the things being built on top of Salana, or else there's incentive to go out and attack the network and drain everything on top. And so it's almost like the project's building on Solana as they get more and more successful or more and more incentivized to buy and stake Solana, make the price go up, make it more secure, almost like they're paying security, you know, like they'd be paying for security software except buying and staking of the sole token, which creates more demand and locks it up. On the MEV side, I think this is a little more future state,

but this is one of the things that Anatoly has pointed to, and I'll just quote him on it. He said that MEV means that validators have some information that they've computed, that if they take your order, they can make a profit. If the info you're submitting is useful enough to someone, they'll actually pay you to take your order. It's payment for order flow at a micro level, but in a fair and open market. It makes the high frequency trading spread a commodity. So I think that's a really interesting idea. And back to kind of this idea of owning the internet and cutting out the middleman and value accruing to both sides is that there's this concept that particularly at the time when the Robin Hood scandal was happening, payment for order flow is viewed as this really bad thing,

like one party paying to get information to give them an advantage in the market. Here, the really interesting thing about it is that the people who own and are staking sole accrue the value from MEV in this case. And so if somebody has information, they can make money off of, people who own soul as opposed to Citadel are the ones kind of capturing that value. So that, I guess, the MEV portion of things where stakers are receiving a portion of transaction fees, basically getting paid by users who want their block to come in first, right, or be ordered in a certain way, that's where it transforms Seoul into a cash flowing capital asset, in your opinion. It's primarily from the MEV. Correct. It's always tricky, you know, in terms of like valuing

these crypto networks as well. Do you think this is more like art than science, or do you think this is more narrative than actual concrete, you know, valuation, I guess, discounted cash flow models that we can plug in a spreadsheet? I think ETH is certainly easier and will, you know, kind of continue to get easier with the merge. I think in Sol's case, certainly, maybe I'm just not a good enough scientist and I'm more of an artist, so I'm going to lean towards the artist side, but just, you know, kind of the rough rule of thumb for me is if activity and value on top of Salana goes up, price of Salana should go up. Now could I build you a model that tells you what that price should go up to? Absolutely not. And I think that's kind of, you know, a mix of my shortcoming

on the modeling side and my rustiness there, mixed with the fact that it's a difficult thing to value. And, you know, in all of my time talking to the team, I don't think anybody have ever brought up price once. It's just not as important an aspect in the community as it is for other other tokens. I want to get your opinion on how do you think this plays out over the very long time frames, not just five, 10 years, but something like, you know, 25 plus years. Basically, it's the question of like distribution of market cap. Do you think that this is a winner take all environment? Or do you think this is a pretty wide distribution of many, many layer ones with many, many valuable layer one assets? Gosh, I think this is a, my crystal ball is broken on this

for sure. I think that one of the interesting things to see happening will be to see, you know, as wormhole and layer zero and some of these other kind of, you know, cross-chain bridging platforms emerge, I think it'll be really interesting to see if they all kind of behave as almost one big blockchain with everything kind of coming back and settling on Ethereum, including Ethereum's own L2s, but even non-EBM compatible chains like Solana. I think that's one way that it plays out. I think probably there's certainly, you know, as there are with most things, power laws and I think a lot of value accrues to Ethereum over time. But I do think that we'll have a multi-chain, probably not super wide distribution,

probably like a few chains that do particular things very well, and then maybe all kind of settle back on Ethereum. Something that you said there, I think, is worth pulling apart, where you kind of alluded to like the coming together of all these different chains, including L1s and N layer twos. And I think the image to present a users is something like a superstructure, where we can use the model of defy growth on Ethereum to start with where first we had MakerDAO and it produced dye, and then later we had compound and it

was a money market. But they were all very separate. And over time, all these things started to really come together. And defy on Ethereum is really starting to not just be individual applications, but one significant structure of all these interoperable composed applications. But what you just said was actually the first time I've heard that articulated across layer once, where not only can the defy ecosystem of one single chain start to coalesce into one single superstructure, but you think the entire crypto universe can become one single like composable financial superstructure. Is that a fair articulation? I think it's a fair articulation. I don't see how that doesn't happen over time, right? Like that, you know, if you had to use a different credit card on a bunch of different websites,

you know, that would be a real pain. I do think that there are network effects to, you know, kind of building developer and user ecosystems on top of these chains and that I don't know if everybody moves all use case over to one chain or to one L2 or to multiple L2s on top of Ethereum, I would imagine that ultimately you kind of create the L1 superstructure. But, you know, obviously very TBD and they're people a lot smarter than me on this. That would be just my kind of best guess here. I mean, like you even look at something like, you know, cello where they're starting to build a network of all the kind of regenerative finance and climate-based projects.

And so, you know, part of that might be the technical capabilities of the chain. But part of it is you just build kind of differentiation and an identity into the platform. And you start attracting a certain type of project. So do those all move off at some point and go to Ethereum? Or does Selo kind of bridge into Ethereum? I think, you know, open question, but it'd be hard to see kind of just everything deciding to shift off. You know what helps me in sort of the superstructure lens is actually thinking of everything

as a chain. Just think of everything's a chain. Do you know what I mean? Like your Wells Fargo account is a chain. It's just a side chain. Yeah. Okay? Like Coinbase.

that's a chain. It's a chain of blocks in a way. It's just a, like, centralized chain. Binance, that is also a chain. These are all chains, right? And so... Google Excel sheets. Yeah, I mean, everything's a ledger, right? Everything's a chain. And like what some of these more open, more permissionless, more decentralized chains are doing is kind of like uniting the chains, like bringing them together, being sort of the base settlement infrastructure to kind of draw them all in to themselves. And so I think we're already living in a world of chains. It's just like this whole multi-chain narrative has been recently because there's like, you know, conflict between alternative layer ones and there's conflict between like Bitcoin and Ethereum. There's like a lot of tribalism in the space. But if you zoom all the way out, you already see a world full of chains on some spectrum of centralization or decentralization.

We're just doing more of this moving forward. Ultimately, I think probably if you zoom out 50 years, Cardano wins. but in the interim. I can be partial to many, many arguments, but not that one. That's the one thing. I've written before that I'm a maximalist minimalist, which essentially kind of means I'm not maxi on any chain or even on any aspect. I think there's different use cases that need different things at different times

and even different people need different things at different times. But I think that we can all agree that being bearish on Cardano is what unites a lot can I ask you because it does unite a lot of us but not everyone okay not everyone can I ask you let me ask you a question somebody who's you know came into the space and I think there's some advantage to like looking at the space from fresh eyes and like anew because you're kind of like the kid walking in the cafeteria right and there's all of these little like you know clicks like different groups you get the jocks and you got the you know the skaters or whatever else right and everyone's like hey you know packie come to our tribe like like

Join us. Like, we're the, you know, the real deal. And you get to sort of just choose. You get to kind of look and maybe not pick any one tribe. But I guess my point is crypto has been so tribal and you've been able to look at it with fresh eyes. But you've also been able to like see what the obvious non-starter chains are, like the obvious communities and ecosystems that aren't going anywhere.

Can you tell us about that? Like, how did you figure out what was clearly like not going to work when you did this deep dive analysis as you walked into the school cafeteria. Sure. So I know that I'm going to get dunked on by the Cardano community I did for writing. It's okay. Yeah, I don't know if they listen to it. It's a norm on the podcast here.

Yeah, I don't think there's many in our audience. If so, they're used to the abuse. So the way that I looked at it when I was writing about Ethereum was kind of thinking about trains that felt like they were directly trying to compete with Ethereum. which I kind of, I think I put Cardano in the camp at the time and then chains that were trying to do something else, which is why I wrote that I was bullish on, you know, Solana and Flo, because they were very clearly building for a particular use case and building in a way that was very different from how Ethereum had. And then as I dug in, like, I haven't been at the Cardano website for a little while, but just like the language that they use on the web, like, it just feels like a scam project and, you know, like the kind of language that you'd use if you're trying to trick a bunch of people. They've done, I mean, obviously, like a very good job, I think, of making it like an us versus them mentality. I made the mistake of asking on Twitter, you know, what L1 people were most bearish on.

And I said, don't say Cardano because we're all bearish on Cardano or something like that. And a lot of people kind of came back and were like, yeah, of course, you're a VC. There's no way for a VC to make money on Cardano, ignoring the fact that, you know, one of the reasons Charles is no longer at Ethereum's because he, you know, was greedy, you know, short term kind of greedy there. All of that. it's just a very weird like using tribalism as like the only thing as opposed to kind of any real activity on top of the blockchain if you use the same heuristic that I use for salano where there's a bunch of developer activity happening on salana that's not there on cardano i've not used a project ever that's been built on cardano and so those are some of the kind of

things that i look at it yeah one thing we've said for a while and i'm wondering if you think this experience is true too is like the way to like cut through all of the BS is like go start using some apps. Like stop listening to what YouTubers say and people on Twitter and like go actually use the stuff. Go check out a wallet. Go check out an app. There's one time I asked on Twitter, hey, can somebody point me to like where I can

swap tokens on Cardano? Like where's the uniswap of Cardano? And somebody, some Cardano show and my replies sent me to a link that was a website that advertised being the uniswap on Cardano wasn't live yet. But when I wanted to hit the enter app button, the link took me to go buy a token on Ethereum's uniswap. And so I'm like, who, which leads to a question. You talked about how, like, you got the Cardano Bros replies on your Twitter feed about like, oh, like, you know, anti-VC narrative, like VCs don't invest in Cardano. And we've seen this narrative weaponized many, many times before.

This was definitely a very significant part of the culture of the Wonderland project from the following of Danny Sesta. And Ryan and I were the brunt of that when I didn't know who Danny Sessa was. And then we all of a sudden were like VC bros or something like that. It was crazy. And so again, going to what Ryan was saying about coming into this industry with fresh eyes, talking about with some of the more legitimate chains, when you come into the lunchroom and you see like the Salana click and you see the avalanche click and you see the Ethereum click, how would you describe the differences in those cultures? Are there any differences that stand out to you? There's no huge differences that really stand out among the legitimate chains. I mean, I think that, you know, maybe Salana

feels like a little bit like the blockchain behaves, like it feels a little bit kind of faster pace and maybe a little bit more degeneral. There's obviously plenty of Digen on both Avalanche and Ethereum. But I think that they all have, you know, I've spent a lot more time in the Salana and Ethereum ecosystems. The two of them, I think, have, you know, very kind of like positive kind of internal community. And I think there's a big emphasis on actually using the products.

I mean, like, for me, when I came in and started playing around in the space, one of the first big aha moments for me was when I was working with the team at Mirror to make one of the pieces that I wrote both ownable as an NFT, but then kind of automatically also distribute the proceeds to all the people that I cited in the piece. And like doing that, I was just like, this is really magical. And that was because, you know, people in the space when I said that I was kind of getting interested were like, oh, you should try to do this. You should try to do this. You should try to do this. You should try to do this. As opposed to buy our token, buy our token, buy our token. And so I think getting that first kind of real hands-on experience playing with something

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So we started with Ethereum and looking at this whole Web 3 thing and exploring that. Now we looked at some alternative layer ones, in particular, Solana. Now let's talk about this other article that you wrote, which is like a big theme of 2021 that I think you dove into headfirst. And indeed, all of us dove into headfirst, which is NFTs. and he wrote this fantastic article called Status Monkeys. And there's a little bit of theory in this article at first that maybe we want to start with about the status monkeys. Because who are the status monkeys? All of us, human beings are status monkeys, right?

And I think you cited a status as a service article from Eugen Way. And I wasn't actually familiar with who he was. Maybe you could describe what that is. But I just want to read out the two bullet points for Eugen Way's thesis that you articulated, which is number one, people, all of us, are status-seeking monkeys. And number two, people seek out the most efficient path to maximizing social capital. And I think Eugene wrote this in 2019 before NFTs were like, quote-unquote, a thing, like a cultural thing. But you say he sort of laid the foundation and kind of almost like in this article predicted the rise of NFTs.

Can you tell us about this? What's this idea behind status as a service? Yes, this quote that we have on screen I'm going to read from Eugene Way from the article, which said social capital is in many ways a leading indicator of financial capital. And so its nature bears greater scrutiny. Not only is a good investment or business practice, but analyzing social capital dynamics can help to explain all sorts of online behavior that would otherwise seem irrational. And like I have been a Eugene Way fan for a while.

He's written a bunch of, you know, really great essays, particularly on kind of social media platforms. He's done some great work on TikTok. He has this essay status as a service, which might be his most popular ever, which essentially describes how new social platforms are able to kind of take off. And it really is like kind of by creating a new proof of work that kind of appeals and is doable by a younger generation of people. So if you missed out building a huge Twitter following or, you know, people who are older and have been on the platform a while have big Twitter followings because they were funny

and they were good at writing 140 characters and like they got really good at that proof of work, the next generation comes in and they lip sync and make videos and do all. all the things that they did on Musically, which became TikTok, because like, that's kind of the new proof of work that can help you gain status. And that for any platform that comes out to take off and to kind of reach the kind of scale that a Twitter or TikTok or a Facebook has, you need kind of a new proof of work that's not the same as other types of platforms. When you say proof of work, do you mean, like, is it proof of status? Is that really what you're talking about? I guess proof of status, but it really is like this idea that, you know, you're good at this thing that the platform values.

And so you're like, you know, on Twitter, you can be. And that gives you status. That bestows you status. That then bestows you status. And then proof of performance? Proof of performance or proof of like, yeah, proof of appealing to the algorithm. Yeah, whatever it may be. But that any platform that comes in and tries to kind of steal that same mechanism from an existing platform is going to fail.

And so I think one of the really interesting things to me in rereading that article was that, you know, there's a lot of attempts and will continue to be a lot of attempts. and I hope some of them work, of building kind of decentralized versions of the existing kind of social media platforms by using almost the same product and almost kind of the same proof of algorithm or proof of performance or whatever we want to call it. And I think that actually might be trickier than people think. And that something new like NFTs actually behaves maybe more like a Web3 social network that's native to this new thing that either says I have money. And so that's one way of status. In Web 2, you can still bring in exogenous capital. If, you know, when Obama signed up for Twitter, if he hadn't been on there first, he would get a million followers instantly,

but any random person like us would sign up, it would take a while. I think it's very, very similar to NFEs where you can either buy your way in because you have exogenous capital, or you can be early to projects. You can be deeply involved in the space. You can participate in communities. You can turn your board ape into a mutant. You can do all the things that you need to do to prove that you're a part of this community. And so it almost feels like kind of the first social network on top of all the other social networks is this NFT layer. That's fascinating.

And the ability to like, I guess convert some of your social capital right into like actual monetary capital liquidity is kind of new. And that's kind of interesting. There's also this graph that you put in where I think Way talks about like three elements, three important elements here, ingredients to all of this, which is like social capital. is one kind of dimension, also utility, but also this third thing, which is entertainment. Can you describe what is this graph showing us here? The graph is showing the types of things.

So you're essentially looking at a quadrant with another axis, another line kind of through the middle, social capital, entertainment, utility from low to high, and that any new social network that is going to emerge and kind of reach scale needs to be high on social capital, which gives people the opportunity to build up their social capital. capital. It needs to have utilities. So, you know, remember Facebook. Like, Facebook was valuable in the beginning because it let you connect with people that you went to high school with or, you know, it let you find that person that you met at the party the next before. So there's some utility that kind of kicks everything off, come to the utility, stay for the network.

And then there's this entertainment value of, oh, this is really fun. So going back to the Facebook example again, there has to be something like scrolling through the news feed, seeing what your friends did last night that is actually really fun or scrolling through, you know, TikTok is really, really fun. So it has to have kind of at different stages in its life, a mix of high social capital gaining ability, high entertainment, and high utility. And then you could put like NFTs on the same graph, on the same access as well. And David, I'm wondering if you could scroll down to that. So what it shows is that right now, NFTs already kind of high social capital within the space. I have high utility. That is debatable. And every project has utility somewhere on its

roadmap. And then entertainment is going up. I know you guys talk about. about the board ape yacht club around and trying to build the metaverse. So for example, if your board ape actually gets you into a game world and you can play around and it's fun, just even being part of the community is fun. There's all these entertaining pieces to it. But being able to show a board ape on your profile picture, there's a reason people do it. It's to show that they have status. It's to show their social capital. And then utility again, debatable, but at least we'll give you access to a community, might give you access to future drops. and then hopefully over time more utility will be built into things.

And so NFTs kind of fit perfectly into the Eugene Way definition of status as a service. One of the aspects about NFTs that I think a lot of people, when they get confused about, why are we spending like millions of dollars on board apes or why are we spending so much money on NFTs? It's a lot of what you were just talking about, like, you know, access, entertainment, vibes. But also it's the resaleability, which is also the utility. And that is the novel thing about NFTs. It's like, no, you're not purchasing a $5,000 monkey figurine that's going to sit in your house, right?

You are buying, it's an asset that you are purchasing and you are just kind of like. That's what I keep telling my wife. Right. I mean, when you get this wrong, you like, this is where you get wrecked, right? You buy the NFT that goes down to zero just because no one, everyone else forgot to buy it. But like the thesis of NFTs is that you can buy this as an investment and then it gets you an infinite access to the social capital. and that is utility in of itself, but you also, if it's a good NFT, you have the assurances that your capital is also preserved. And so, like, a lot of, like, NFT naysayers are like, why are people

wasting so much money? You're not wasting it. You're just transforming it into something that has social capital and utility and entertainment. A hundred percent. I mean, I think one of the starkest ways to look at that is the visa buying a crypto punk example where they paid, what was it, $150,000, which is cheaper than they would have paid for any marketing campaign, you know, regardless. And they have an asset that is now worth more. So they essentially got paid to get all of that marketing exposure by buying a crypto punk. And that's a stark way of putting that value that you get all this stuff for free or even, you know, that will pay you over time. You use this term investment as status.

So is that just the idea that like you're also in a lot of the social networks in Web 2, we are kind of, I guess, active contributors but passive investors, right? So I build up my Twitter profile, but I can't take it with me. I can't take my follower list with me outside of that network. But with NFTs and with Web3s, it's really you are an investor in the status networks that you're creating as well. Is that the idea behind investment as status, that all of this is much more portable? I think that's part of it. It's also, I think even beyond Web3, one of the things that I think we kind of all noticed

over 2020 and 2021 is that investing became, you know, particularly for retail, more than just, you know, like the discounted value of future cash flows, it became about, you know, if you're a Tesla shareholder, became about being somebody who cares about the environment who likes memes, who supports Elon, and also the fact that maybe Tesla will produce a ton of cars over time and make a lot of money. Or, you know, GameStop and AMC are obviously the canonical examples of this where, you know, there is part of an investment that is a financial thing and there's part of an investment, which is a status thing saying like, I believe in this thing, and I'm putting my money where my mouth is on that. There's another article that you wrote, Paki, that you labeled the Pareto Fundier, and I think that's where we want to go to next.

And I think the quote that I think from a different bankless podcast that I want to bring up is from Chris Dixon when we did our mental models for Web 3. Something that stuck with me is he said that NFTs has made the internet weird again. And that was the signal for him that like, oh, we're on to something now. Like the internet's weird once again. Like people are buying monkeys for millions of dollars. And I think we want to dive into the Pareto Fundier thinking about that as context. This is another graph to explain to the listeners where we have money on the vertical axis and then fun on the horizontal axis.

And I think the gist here is you want to maximize both, right? And there's another quote that comes to mind is the future of the Internet is making money online with your friends. Yeah. Can you kind of just explain the Pareto Fundier model for us and the listeners? Yeah. So this is a terrible pun on the Pareto Frontier, which is the, You know, with a certain set of resources, if you have two axes, in this case, money on one and fun on the other, you can't just push all the way out and have like the maximum amount of fun and the maximum amount of money.

There's some frontier where you have to make tradeoffs. This will be familiar to anybody who's spent time looking at layer one blockchains, for example. But there's a trade offset that you have to make where either you can have kind of more money and less fun, like, you know, an investment banking job, for example, would fit into that category or you can have more fun but less money. So, you know, negative money maybe even by like paying money to go to a concert, for example. The interesting thing about crypto in this context to me is that by baking money into a lot of different things and by baking fun into financial things like, you know, NFTs or a super fun investment relative to a bond, you can push out the Pareto fun tier. And so you have the set of opportunities that is more kind of money or more, you know,

financially good, potentially if prices are going up, more financial. financially good than any other thing that is that much fun, and you have things that are more fun than any other thing that can make you that much money. And it's a really powerful thing to be able to kind of push that whole thing out for people. I want to put this under the context of DAO's, because a line that I've given out a lot is all DAO's are really a vibe. And if your DAO doesn't have a vibe in it, you're not going to incentivize people to come into the DAO to work for the DAO. So your DAO has to have a vibe. The vibe is the campfire, right? The stronger the vibe, the warmer the campfire, the more people you can support around the vibe.

So can you put this into the context of DAOs for us? Like how do DAOs kind of illustrate this fun tier, if you will? It's assumed that there is a DAO for almost anything that you'd want to do, right? You could go work for a DAO to buy an NBA team, right? So this is something that probably you'd want to do anyway, given the opportunity, if you're a basketball fan, to work on a group of friends who can buy an NBA franchise. When you put it in the context of a DAO, you can join this thing. you can get the tokens and as you succeed by doing this fun thing, which is buying an NBA franchise

with Kraushaus, you also have the potential to make money for your work. And you also have the potential to make money as the token appreciates. And so, you know, Kraushouse is maybe an extreme example because it is financial. But there's all sorts of DAWs where you'd come in. It's probably something that you do anyway. People are in group chats with their friends all of the time. But by having fun and by participating and by doing something as a group, you also have a potential to make money from that, is not what you normally have when you are just sticking around with your friends in a group chat. Yeah, this is so cool. This is one of my favorite models that I've seen on Not Boring, actually, Paki.

I just love this because it describes my experience in crypto, like perfectly. And I think a lot of people's experience, just to make the Pareto Funtier even more concrete, right? So you were saying you just optimize for two things in a simple model. The things that you do in life are like either money or fun, right? And then you give an example of, let's say you're using a one to 10 scale for money and fun. Okay, so let's say I wanted to read a sci-fi book, and I do a lot of that. So that might be a seven on fun, but it might be like a two on money. I'm not really making money doing that. So it's very low on the money scale, but it's very high in the fun scale, right? It's something I do as a hobby, let's say. Whereas if you talk about reading a finance textbook, okay, well, I need to understand how income statements work. Let's say, like, I need to brush up on my financial statement skills. Well, that's probably a six on money. You know, it's probably a pretty useful tool to have in your like business mental model tool set, but man, that's dry. Okay, that's going to be like a two on fun. When we get into talking about like Dow's versus corporations, right, people working at

soulless corporations, spending all their time in a cubicle, going into an office every day, doing work they don't love for a mission they don't really care about, an investment banker type role where people, you know, spend their lives competing against other Ivy Leaguers to like get this small set of jobs. That's going to be a nine on money. Okay, you're going to do okay on the money scale as an investment banker, but how fun is that? That may be a one or a two. And this is the beautiful thing about crypto. The beautiful thing about crypto, and I think why all of us are here on this podcast, probably why people are listening, is it like moves the numbers up completely. So like where my old stuff was maybe like my old corporate job was like a three on the fund, but like a seven on the

money, I work in crypto because it's a nine on the fund scale and a nine on the money. Right? And that's what you can do as part of a doubt. And it kind of makes you ask the question of like, wow, if crypto can move up the Pareto Frontier for everyone, more fun, more money, making money online with your friends, as David said earlier, how are these traditional institutions going to compete? I will never work for a company again. I will never go into an office I don't want to go into again, like never again. Why? Because it doesn't. maximize my Pareto Funter. That's the model. Right. The fun tier is, I think, permanently shifted. And so anything that people are going to do in the future has to at least compete with that. That doesn't mean that everybody is going to do Web3 things always and that all the jobs are going to be crypto jobs. But it does mean that, you know, maybe you want to go work in deep tech or you want to go cure cancer because like that is a 10 on, you know, you can substitute kind of fun and fulfillment purpose for the same thing. And so like that like really, you know, awesome. Like, and if you don't

make any money, that's also totally fine because, like, it is so meaningful on one of those scales. But are you going to go build a product that is like a Me Too version of something that already exists that maybe has a slightly different pricing? Like, probably not going to do that one anymore. So hopefully what it does is that it pushes out, you know, just that opportunity set for everybody when this is something that's on the table now. I think it also speaks to the fact that, you know, one of the critiques of crypto is that like, you know, money's baked in and there's speculation. And it's one of the beautiful things about this is that the things that you would normally want to do and have fun doing, whether that's playing a game or joining a doubt with your friends or all that can actually be your living and make you money. That is really cool. And so I think speculation and money being part of this is like a really great thing. One of the things I wrote in an article a while ago. And actually before I get to that part, there was a Friday open thread that we did forever ago. And the question was, how much of a pay cut would you take to get into crypto? And so many people would answer.

like significant percentages of pay cuts, like somewhere between like 10 and 30 percent. Like they are just dying to get into crypto. And probably a lot of those properties are probably because the fund meter goes off the charts. And so people are just dying to get into Web3. The thing is when you actually end up getting a job in Web3, people end up tending to make more money because Web3 can pay for it more because it's an industry about wealth and money. And so while people are saying like, I'm willing to get, like a 30% pay cut so I can have more fun in my job, but they are simultaneously also getting a pay

raise by coming into this industry. And so something I wrote in an article title, The Future of Work, is not only do the legacy institutions of the world have to compete with the permissionless labor monetization tools offered by Ethereum, but they also have to compete with a lifestyle that these tools offer, the freedom to work for oneself. And so this is why Ryan and I are always saying, like, go work for a Dow, go become bankless, get on the frontier, because the freedom, that is on the frontier is almost infinite. Could not agree, agree more. What are some other examples of this Packy? So like we talked about Dow's a little bit, but like tokens in and of themselves are examples. Like so Dow's are way more fun and potentially more money making, higher in the

Prado frontier than corporations. But I also feel the same about tokens versus stocks. Like I kind of like, why buy stocks when we have tokens? I mean, they're way more fun. They're like, you know, community-driven, we have this whole narrative. And the other piece of this is also gaming. I know you've been exploring AXI Infinity this year, too, this whole play-to-earned gaming movement. It's kind of the same sort of idea. Well, I can play a game and have fun and also earn equity in the network.

So can you talk about some of these examples you're seeing of the Pareto-Funtier actually being applied? Yeah. So I think the promise of Play-to-Earned gaming, obviously, Axi-Infinity, but there's, you know, I think partially inspired by that and partially just, inspired by the power of this model. There's a ton of other played earned games coming out where as you play, you're earning native tokens in the game,

which gives you, to your point, a stake in the network itself. And so you're playing a game and building wealth by doing it. I do think that that does bring up an interesting point too, though, which is like it doesn't happen by default. And so actually in the beginning, you know, like Axi Infinity said themselves when I talked to them for the piece that I wrote

that, you know, like they need to make the game more fun over time. And so in the beginning, you really optimize for, the financial piece. And so you go higher on the money scale because you know that it's lower on the fun scale. And ideally over time, you can make it so much fun that it's, wow, really cool that I'm making a little bit of money for also doing this thing that I like doing, but that you need to kind of like play with those levers in the short term. So it is not that this automatically

happens, but you need to be aware that if you're not going to be fun, there better be money involved. And if there's not going to be money involved, it better be really fun. It's a good point. I want to take this conversation actually outside of the crypto industry for a second, because there's something to compare it to with the rest of the world, the rest of the labor market. Something that we saw during COVID is a lot of people got laid off from their jobs. They got their stimmy checks. They got their unemployment money. And then getting these people back to work post-COVID was really, really difficult.

And it still remains difficult to this day. And all of a sudden, labor has had tailwinds to it because people are just less willing to do the things that they were doing previously. People are just fed up with their trad job of just like going and working for low wages. And I'm wondering, Paki, if you could kind of just like comment on like how crypto is expanding the Pareto frontier while the rest of society is more and more just fed up with their traditional trad job of just like grinding through for low wages. This can get I think super philosophical. Like there's this. Let's do it. Let's do it.

Yes. Yeah. This Kurt Vonnegut book Player Piano where it's this world in the future where things have been automated. He wrote this in the 50s. But this world of the future where everything's been kind of automated by these big machines that can do all of the jobs. And so the government hires people if you're not working on kind of building the machine or like being a manager at the place where the machine lives, they hire people to like dig holes in the road and then fill those holes back in and then dig holes in the road and fill those holes back in. And the point on it is that, you know, over time, like fewer and fewer and fewer jobs will be mission critical.

So like human survival. And so we're going to need to figure out things that give people the things that work do. a sense of meaning and like an income so that people don't just go crazy and dig holes and fill them back in and dig holes and fill them back in over time. And so I think one of the interesting things is like, you know, when people say that you're just kind of like trading tokens against other tokens or flipping JPEGs or all these things, like it gives people, I think a sense of meaning and a sense of fun. And I think over the next 100 years, if you zoom out, jobs generally are going to become more fun because we won't need as many people or as big a

percentage of the population doing things to keep humanity alive as more things get automated as technology gets better. Okay, so we've talked about all of the virtues of Web3 and people listening to bankers are probably pretty bullish on Web 3 as we are, of course, the three of us. But not everyone is in love with Web 3. All right. And there's some criticism. And I think like there's some valid criticism of Web 3 in its kind of current state today. And then there's a lot of like irrational invalid criticism that certain politicians are putting forward or certain narrative drivers, people with large followings are putting forward for whatever reason. Maybe they're just like anti-Web3.

Maybe they didn't buy tokens. Who knows why they're upset about this thing? But can we talk about this web three debate? And you wrote a post on this entitled, The Web3 Debate. And I think it was maybe kicked off in part by a tweet that went pretty viral from Jack Dorsey. He's a bitcoiner, a heavy bitcoiner. but does not embrace Web3 at all. He said this, you don't own Web 3.

This is in December of last year. The VCs and their LPs, their limited partners do. It will never escape their incentives. It's ultimately a centralized entity with a different label. Know what you're getting into. And of course, this caused a flurry of discussions. A submitted by the name of Professor G, who is kind of a writer in the space, summarized a whole bunch of criticisms against Web 3.

I'm wondering, Paki, if you could talk about. talk about that for a minute with us. So first, what are the criticisms that you generally hear about Web3 that people like Jack Dorsey and people like Professor G are putting forward right now? Yeah, so I think the big point that Jack was trying to make is that Web3 claims to be decentralized and that everybody owns, you know, the users own the projects and everybody wins in Web3 when really what's happening is that a bunch of VCs invested in the projects, They get tokens cheap and then the token gets issued. They had warrants.

The token gets issued. They make a lot of money and they exert a huge amount of control over these networks. And so almost like the way that people got mad at kind of like all of the different female led companies that get taken down by a business insider for like having this mission that people, you know, rally behind and then maybe like not everything lives up to the mission. His point is like we're rallying behind decentralization and distributed ownership and all of these things, but like, you know, the same couple of funds own big stakes in a bunch of the biggest projects. I am, you know, I've said before not a full kind of decentralization maxi. I mean,

there's certainly, you know, if projects are misleading their users and make it seem like, you know, there's not any VC money and that there's not any groups that own more than X percent, but there actually are. I think that's a bad thing. But the thing that gets me, I think about the VC ownership one, and I wrote about this again when I wrote about flow a little bit is like, Naprolabs dies 50 times if Union Square and Inreason and a couple of other funds don't keep kind of stepping up to the plate to kind of get them from CryptoKitties to developing their own blockchain to MBA Topshot and then finally they took off. And two years after the first token warrant was issued, you know, they did a public sale at the same price that the investors two years

earlier had gotten their token warrants. And so even though Union Square and Andreessen own percentages of flow, it is so totally different than a Twitter or a block, you know, Jack Dorsey's companies, ownership structures would have been just VCs for a very, very long time, and then a public offering, which is sold to institutions and then sold to retail afterwards. So I think one of the ways that Jack and even, you know, kind of Professor Galloway, this NYU marketing professor turned like just kind of bear on everything technology, one of the things that they're using, I think, is just this trick of misdirection and kind of making the debate about is Web 3 fully 100% you know fair launch decentralized versus is it better and more

decentralized than the things that we have right now and it loses just so many shades of nuance in the middle. Yeah, I totally agree with that take. And one thing is like I've been an Uber user for a long time, right? And I never got my Uber AirDrop, right? I did get my Uniswap AirDrop though. Yeah. And so did 120,000 other Ethereum addresses, right? It's like it's better than the status quo, obviously. And I think one of the points that you make in the rebuttal section is, you said, this debate is not about whether Web 3 on internet owned by the users and builders orchestrated with tokens is net good or net bad for humanity, not just as it stands today in its earliest forms,

but in the promise it holds, in the promise it holds for the future. And we see glimmers of it. I feel like what you're saying is many of the critics, the kind of the common thread, a lot of the criticisms of Web 3 is like this pure. standard that they seem to hold crypto to rather than just why not compare it to the status quo. No one is saying crypto is perfect right now. We're not saying it's maximally decentralized. We're not saying we are actively saying, man, there's so much work we have to do to improve the user experience, to onboard more people, to make it more decentralized, to scale this thing

out while preserving strong property rights. And like, we're working on it. But like they seem to many of the critics try to compare us to this like pure state as if, we're saying, yeah, crypto is the best thing. It's like totally perfect. We have no more improvements to make now come hop in our system. I think that's what you're saying here, right? That's exactly what I'm saying. And the fact to your point that it's, you know, they're comparing this kind of like midway through kind of the progress in the building to, you know, where it should be at some point in the future. I think most of the people in the space would agree with what you just said and would agree that there's a ton more work and that we're not even close to the end state

of where this goes. But like anything, we're building. And like in the, the beginning, it's messy and it's actually harder to build this way. And so it's going to be messier for longer. I also love the timeframes that people use are like, well, you know, it's been 13 years since the white paper. And so if this was ever going to happen, it's, you know, the first internet, you know, like, if you're comparing Bitcoin to the internet, like, that's like arpinet. It took 40 years before there were like kind of real use cases after that. And people really like, you know, using the internet at scale after that, I think a more reasonable time frame is even just looking back to kind of, you know, the Ethereum white paper. And so it's

been less than a decade that people have been building apps in a decentralized way. That timeframe is also hilarious to me because like literally we went from an industry worth zero dollars in terms of market assigned value, which is the ultimate like long term truth teller of what's value when it's done as the market. We went from zero dollars to over two trillion dollars in 13 years. And you're saying, ah, it's nothing. No big deal. Like, where else have you seen that? Where are the real use cases? Yeah. It's crazy. to me. One thing that confuses me about Jack Dorsey's perspective is that he seems to judge Ethereum and Web3 on its current state, but he applies such a future premium to the future state of Bitcoin.

And that discrepancy just confuses me so much. It's like, wait, wait, wait, why do you have so much promise for the future of Bitcoin, but you don't see any promise for the, like you're judging Ethereum on its current state? And this mentality is rampant around so many just cryptocritics. Yeah, I joked on Twitter that the reason Jack ended up leaving Twitter is because his engineers wouldn't build Blue Sky, their decentralized version of Twitter, on top of Bitcoin. And so he had to go to a square where at least you can just buy a bunch of Bitcoin in the product. It is funny that after he left, they started rolling at like NFT features and these sorts of things. And I guarantee you, I have no inside knowledge here. I guarantee you there were meetings where he was trying to get PMs and engineers to build NFTs and whatever else on Bitcoin.

And they're like, you can't, you can't do that. That's not how this thing works. The thing that gets me about that and about Professor Galloway kind of generally and just kind of the bears and the cynics generally is that everybody has their incentives. But by being the cynic, you look like the kind of smart, reasonable person, although you're just pumping your own bags in whatever way. Scott Galloway gets mad at things and gets eyeballs. Jack gets people to buy Bitcoin, which he's a huge believer in and holder of and which, you know, Square is a big believer in. and holder of and it has as part of its product. But you know, you look smart for being cynical, even though financially it's like way, it would have been way, way, way worse over the past decade. If the worst financial advice you could have given somebody over the past decade is to sit out of technology and to sit out of crypto. But I don't know. That's kind of my soapbox is that

what got me and I don't like doing ad hominem stuff, but what got me to write a whole article on one person's article that they wrote on their bearish take on Web3 is that there are hundreds of thousands of people out there who see this guy as an NYU marketing professor and somebody that they should trust who's out there using a soapbox using misdirection to convince them of his perspective and they just take it as gospel. And so now you have hundreds of thousands of people who might have been interested in Web 3 who aren't going to be now and are going to miss out on kind of all the great things that we've talked about throughout this episode. Full disclosure, bankless has a bias too. We want you to go bankless. Pachie, I want to actually once again

zoom out and kind of view this conversation from a bird's eye view. There's a lot of other things to consider in this world as well. So, you know, it's 2022. We've got a multi-chain, multi-layer-2 world. Everyone is building their own corner of the metaverse. Society's definitely moving to be far more digital than we ever thought that we would be probably at this point in time. Meanwhile, there's like war in Eastern Europe, like countries, entire nations are becoming more distrustful with each other. And people are becoming kind of fed up with the current status quo, there's distrust in institutions. And so we have these two things in the background. We have crypto in the background. We got war in the background. It got inflation going.

I just want to zoom out and just like wrap this all up. Like how do you kind of expect the rest of the 2020s decade to more or less unfold as it relates to crypto as it relates to Web3, but also as it relates to the demands that the physical world is pushing upon society? How do you kind of just like interpret all of these things? Yeah, ETH to 50,000 at least. Love it. You know, it would be the end of decade price track it. But the thing that I've been playing around with and haven't really written about, but it's just this idea of kind of like the things that are going to matter over the next decade are almost these barbells,

like the coolest possible things that you can do in the digital world. And then the coolest possible things that you can do in the physical world. Like, you know, there's been a big emphasis, you know, by Founders Fund and Lux and a few other funds over the past couple of years in defense tech and like all this really hard, cool tech that is now kind of coming in vogue as there's, you know, been a war as SpaceX is bringing launch costs down. So I think there's going to be all this really interesting stuff happening in the world of atoms. And then obviously all the things that we've talked about kind of happening in the world of bits and giving people ownership. And then over time, and it's probably starting to happen, you know, climate is probably the area where this is starting to happen the most where digital and physical are starting to merge and you're aligning

incentives using crypto that will hopefully help save the planet. I think over time, these two worlds of kind of bits and atoms are going to come together. We could colonize the moon, by the end of the decade, right? And you're going to need to have new kind of economic and governance models. Each asteroid represents a possibility for someone to go set up their own government. And so the fact they were able to play with all of these economic and governance models in crypto and then apply them to space colonization. And I just think that that is so unbelievably cool.

And so when people in hard tech, you know, make fun of crypto or when people in crypto think that that's the only thing in the world I get asked all the time why I'm not just a Web3 investor at this point. I think the really interesting stuff is going to happen at the intersection of those worlds. I for one cannot wait for the first initial asteroid offerings to come out as tokenized asteroids. That'll be a fun future. Pachy, this has been such a cool conversation. And it's really great to like, I feel like when I'm reading your post, as I said in the outset, this is like all about part of your journey, part of kind of your research journey. I'm curious, where do you think your journey's going to take you next. And also, like, how does writing itself sort of inform how you invest and how

you process how you think about the world? I think somebody when we said we were having Paki on the show said, you should ask Paki how he became such a legendary writer. Can you just talk a little bit about your writing process? Sure. I mean, I really do think that you identified, you know, to the extent that it resonates with people, I think it is because I'm kind of very much learning at the same time. I think I'm in this like Goldilock zone of intelligence where I'm, like dumb enough to not understand things well enough just by like, you know, seeing them and, you know, not having to like really think through and do a ton of research and like, you know, smart enough to actually be able to understand it if I put in a lot of work. And so like just being

in that middle spot and just like banging my head against the wall, reading as much as I can, asking people like you questions and like just trying to understand it myself. And then just kind of like figuring out the way to translate what I've just learned into something that people might be able to understand has been, I think, hopefully the secret sauce of not boring. It really helps my kind of thinking and my investing process because there are, you know, most of the pieces that I write, I go into it with a blank page without an outline and just kind of like work my way through the idea. So by the time I hit the end, I had the feces that I then go, you know, one, I'm putting out a bat signal that I'm interested in these types of areas whenever I write about something. So I'll

see more companies like that. And I'm also a lot more prepared because I've talked to the smartest people that I possibly can and read the best things that I possibly can. And so, you know, by the end of a piece, I feel at least like reasonably competent in understanding like what might be at play in a particular space and what's important and what's not important and what resonates with people and what doesn't resonate with people. So it's all kind of like mixed in together from me the writing and the investing and the conversations. And so I feel very lucky that this is what I get to do. That's really cool. I do think one of the most valuable things you can do as an investment space is of course use these protocols for yourself, but also just write about them, create content

about them. This is how you learn. This is. how you educate yourself by educating others. Think out loud. Think out loud, exactly. Packy, thanks so much for joining us, this has been very much a not boring podcast, and we've appreciated you. We did it.

All the way through, yeah, we nailed this one. So we appreciate you spending time with us. Thanks a lot. Thanks for having me on. Action items for you, Bankless Nation. We've got some resources in the show notes, as we always do. Action item number one,

go check out some of the articles that we talked about. There's five of them listed here. Ethereum, Solana, status monkeys, the Pareto Fundier, the Web3 debate. You'll find them all in the show notes. Also, Pack you mentioned a book called Player Piano. We're going to include that in the show notes, as we always do when a good book is mentioned. Finally, if you like the bankless podcast, get us to the top of the charts.

Wherever you are subscribed, give us a five-star review. Tell us what you like about the podcast so we can climb up those rankings. Risks and disclaimers, guys, none of this has been financial advice. It never is. Bitcoin is risky. So is ETH. So is all of D-Fi. You could definitely lose what you put in.

But we are headed west. This is the frontier. It's not for everyone, but we're glad you're with us on the bankless journey. Thanks a lot.