On The Brink with Castle Island - Alex Thorn (Galaxy Digital) on Dogecoin and Monetizing Memes (EP.214)

Episode Date: May 17, 2021

Alex Thorn, the head of research at Galaxy Digital joins the show. In this episode we discuss: Alex's career path and the insights that led him to diving into the crypto space Perspectives on Dogecoin and whether this is an enduring phenomenon Considerations for Doge market infrastructure and the status of the network from a technical standpoint The state of the crypto venture market and how Alex sees this evolving To learn more about Galaxy Digital visit their website. Follow Alex on Twitter @Intangiblecoins Sponsor notes: Copper is transforming how institutional investors engage with digital assets by developing award-winning custody and next-gen trading infrastructure. Headquartered in London, the firm is scaling rapidly across Asia and North America to bring its suite of products to a wider pool of institutional investors. To learn more visit copper.co or reach out on Twitter, @CopperHQ Aave is a decentralized, open source, and non-custodial protocol where users can deposits and borrow digital assets, and earn interest on those assets. Head over to aave.com to experience and learn more about DeFi.  

Hi, everyone. Today's episode is brought to you by Copper. Copper is the global provider of blockchain infrastructure solutions for institutional investors who are actively trading their digital assets. They have an award-winning custody application that's connected to 25 of the world's largest exchanges, and they ensure safe storage and movement of assets for some of the world's largest crypto hedge funds, market makers, family offices, and high net worth individuals. Copper's clear loop is the first off-exchange settlement network for digital assets, and it's the safest way to trade balances in custody across multiple exchanges without requiring unchain movement of assets. head over to copper.co forward slash clear loop to learn more. That's copper.com forward slash clear

loop. And today's show is also brought to you by AVE. AVE is a decentralized open source and non-custodial protocol where users can deposit and borrow digital assets. You can earn interest on those assets. And head over to AVE.com, that's AAVE.com, to explain. and learn more about Defi. Today on the podcast, Ria and I sat down with Alex Thorn, our friend and former colleague at Fidelity Investments. Alex is now the head of research at Galaxy Digital, and he recently authored two great pieces, one on the phenomenon that is Dogecoin and one on the state of the crypto venture

market. Alex is a deep thinker, and as usual, he had a ton of insight on what's happening in the market. I think you'll enjoy this one, so without further ado, here's our conversation with Alex Thorne. Brought down by bad mortgage investments, Lehman, which has 25,000 employees, will be liquidated. The federal government loans American International Group, AIG, $85 billion. This is a different kind of market, and the Fed is asleep. The federal government is stepping it to stabilize Fannie Mae and Freddie Mac,

the two mortgage giants that have been threatened by the housing crisis. The Bank of England has pumped 75 billion pounds more into Britain's ailing economy with a new round of quantitative easing. You print a couple trillion dollars, and all of a sudden, people start to worry. So out of this worry, we have something called the Bitcoin. Bitcoin. Welcome to On the Brink. I'm Matt Walsh.

I'm Ria Vitoria. And we are very excited to welcome a former co-worker, Alex Thorne, the head of research at Galaxy Digital. Welcome to the podcast, Alex. Yeah. Hey, Matt. Hey, Rea. Great to be here. Huge fan.

First podcast that I've done in a long time, certainly since I joined Galaxy. Well, who would have thought that the first time you come on our podcast is not to talk about Bitcoin, not to talk about institutional adoption? We're here to talk about some dogecoin. Yeah, dog money. All about that dog money. Yeah, who would have thought that? It's quite hilarious.

It's not a flash in the pan project either. This thing's one of the oldest cryptocurrencies. And, you know, it's sort of Bitcoin's Peter Pan shadow, right? My view is always, especially as we started looking into it deeply, is that it's going to last as long as Bitcoin lasts. This joke has legs. It's so funny. Well, we're going to talk a lot about that.

But maybe before we do, can you just tee it up with a, a little bit of background, how you got into the space, and what led you to Galaxy? Yeah, absolutely. So I only joined Galaxy three months ago. Prior to joining Galaxy, I had spent my whole career 12 years at Fidelity Investments, most recently co-managing Avon Ventures, Fidelity's early stage crypto venture fund. And before that, I was director of blockchain research at Fidelity Center for Applied Technology, the innovation lab.

But before all of that, I started at Fidelity in 2009, right after, I graduated from college as a paralegal at Fidelity Legal. And eventually they figured out that I was a technology. Officianado is the only way to say it. I studied polysize, so I'm not a trained technologist. But I had my first website, Alexthorne.com. Shout out, 1998, and a bunch of other fun stuff. Anyway, so I started doing forensic investigation, eventually managed legal and compliance

investigations before, finally in 2015, when Abby Johnson, Fidelity CEO and chairman directed folks, including yourself, to start looking into Bitcoin. And I think it was discovered at the time that I was one of the more advanced Bitcoiners at the company. So I was working in Fidelity Capital Markets Compliance. And it came to me. Someone came to me and said, hey, we hear you know about this Bitcoin thing. So I started consulting a little bit with that early group of people that was looking at Bitcoin and eventually weave my way into the actual department working on it. And that sort of is the story of how I did it. I think I worked in more fidelity departments than anyone I've ever met at that company. So it was at least four different

major business units in my time there. It's such a cool story. I remember it distinctly because it was a design thinking team that was going around and speaking with people that were really into Bitcoin at the company. And you were definitely one of the people that was really into it. Do you remember what made you excited about Bitcoin in the first place and how you even Oh, yeah. Yeah. And it was funny, too, because what first intrigued me about Bitcoin is not, it certainly isn't the only thing that intrigues me about it now. It's sort of different. The value proposition I saw in it has evolved significantly when I, so I, you know, again, sort of a hacker at at heart, been into encryption operating on the internet and IRC BitTorrent for my whole life, basically.

I actually ran a huge file sharing server on a protocol called Hotline Client Connect like years before BitTorrent. if anybody out there knows that. And so it was right around the Arab Spring, the tail end of the Arab Spring, also a huge international relations fan and geopolitics is a big interest of mine. And I was following the Arab Spring protests in Egypt and around the Middle East. And then somebody had mentioned in an IRC chat that there was this Bitcoin thing. So this is probably 2012. And I thought it was cool.

I thought it was internet money. People were talking about trying to send support to the protesters later during the Euro-Médaun protests in the Ukraine, the same thing. was happening. There were people holding up donation addresses, QR codes, in the streets of Kiev. And I thought that was really cool. I sort of put it in the bucket of Tor and encrypted messaging and

sort of internet money. Thought it was awesome. Had accounts on Mount Gox. I think my first purchase on Coinbase was June 2013. I scrolled all the way back in my Coinbase account. Sold a ton of Bitcoin in the run-up to that like 1,100. I probably sold around 800, 900, a lot of Bitcoin in 2013.

And it wasn't until Fidelity started looking at it, maybe a year and a half or two years later, that I sort of really, really decided to, you know, take the orange pill and develop that thesis a lot more and got a lot more conviction. And it, of course, regretted those sales of Bitcoin. Still do. Still do. And yeah, and it's sort of the rest is sort of history. I mean, it's only gotten more interesting since then.

So you're someone that I think identifies just really strongly with some of the core ethos behind Bitcoin and why matters. And you've become really well known in the community. You host the Bitcoin meetup on Clubhouse. And I'd say you're quite popular in the community. I'm curious how you think about the other projects. And in your role now at Galaxy and research, you have to research all types of things. But how do you think about just following the other ones? Are you passionate about anything else? How do you just contextualize what else is happening? Yeah, absolutely. I'm passionate about decentralization. I'm passionate about self-sovereignty and disintermediating. centralized parties that add counterparty risk and censorship. And so, you know, there's a lot in

the space that's really interesting to me. I think when I look at projects, I sort of view a lot of the technology that's being built in the space is one giant canon, one big academic work. And we see this a lot of times, you know, new projects will come out with something that they give a new term to, for example, and they say it's really innovative. And then you realize, well, this was proposed a few years ago by either Bitcoiners or another project. And you sort of realize that the protocol design and differentiation is really a lot more about trade-offs and design choice than in many cases, any actual innovation, any new, new innovation. Of course, there is a lot of new innovation.

There's a ton of innovation at the application layer, whether that's tools to make it easier for Bitcoiners to run nodes or store Bitcoin or spend it. There's a ton of innovation at the application layer on Ethereum. and similar networks on designing new financial primitives. I love all that stuff. When I evaluate, certainly layer ones, though, what I see is mostly changes in design and implementation sort of along the same lines, right? It wasn't that people tell me Bitcoin can't do smart contracts.

Well, that's not true, but by the real definition of a smart contract, but the reason it doesn't do stateful, turn complete smart contracts like Ethereum is a design choice. It's not because it couldn't do it. It's because Bitcoiners don't want to do it. Right. Different protocols make different tradeoffs to achieve different ends. And that's sort of how I think about when I evaluate projects. I mean, broadly speaking, I like anything that you can use your own cryptographic keys to store on your own. And that includes obviously Bitcoin, but any kind of cool assets. I love some of the incentivization that we're seeing using, you know, crypto economics to see whether we can use game theory and economics to incentivize different behaviors. I will say that automated market making is one of my favorite innovations that is truly a crypto-native financial innovation did not exist in the world before Uniswap and sort of others have worked on it. And that's everyone said it couldn't work, that no liquidity would actually go there.

And we just know that's not true. And that's been really exciting as well. It's such a cool innovation. There's a bunch of those. I think perpetual swaps are also in that bucket for me where I'd love to see some of this crypto innovation merge into the quote-unquote, you know, centralized. traditional finance world, it would be great to see. Absolutely. I mean, the purpose, like, such an amazing derivative product with no expiry that it's just, did Arthur Hayes invent that?

I mean, did it exist before Bitmex? Yeah, I think they were like similar ideas, but I had never heard of it described as a perpetual swap until then. Yeah. I think Bitmex definitely popularized it. I'm not sure if they invented it, but they definitely popularized it. Yeah, game changer and crypto liquidity for sure. Yeah. I have a quick question. So just piggybacking off of Matt's prior question, you know, in your role as head of research at Galaxy, today there has been this massive growth in the amount of content that's available on Bitcoin. How do you kind of decide what comes next?

Like what kind of questions are clients asking, how do you prioritize what you want to research and what you want to produce content on? It's an awesome question because it isn't easy, as you know, Rhea. And I sort of start with one major question when I think about how to describe and share insights that we're generating from following this space. And it's, does this matter? Why does this matter? Why is it important? That's sort of how we frame our research reports. We want to bring signal. We don't want to explain how things work and give a regurgitation of white papers or an update, a pure update. we always want to be trying to bring some insight right at the front. And so that's sort of how we kind of figure out what to prioritize actually publishing too, because the question isn't what is

interesting to us. The question is what is important, right? What is what is moving markets? What innovations are going to change markets? What trends and themes are impacting the world or will impact the world that we see. Right. So, you know, that's why we focused. I don't want to do the transition, but this is something, one of the reasons that led us to look at Dogecoin was, you know, we've known this project for years, right? And so, but we see it covered in the media. We know everyone on earth, for the most part, I mean, that has access to a device of any kind, is probably heard of Dogecoin. But no one knows the history of this fascinating project. And I think when we looked at it, we found that, first of all, it's a lot more interesting than

99% of people realize. But also, it's a, it's frankly a lot more robust. than anyone gives it credit for. And that is that, why is it interesting? Why is it important for Dogecoin? It's not interesting because it's part of a retail mania, which it certainly is, right? But it's interesting because the project itself is interesting in the history.

And so, you know, that's just more broadly on your question directly. Ria, too, like we're looking for things that stand out, that people aren't covering correctly that we think we can add or shift the mentality on in a way that's, you know, obviously factual but additive to the overall conversation and broadly, you know, educate and bring insights to our clients. You know, since you brought it up, I think it'd be great to just jump into the report. And you touched on it a little bit already. But I'd love to know. And I'd love for you to expand on what were some of your assumptions heading into the report.

And then in the process of researching, you know, what proved to be true and what really surprised you. Yeah. I mean, I've known about Dogecoin for a long time. I know you guys have as well. To be honest, it's always been funny. I mean, that Doge meme that Shiba Inu sort of looking over his shoulder, I think that was sort of rated by the internet as the meme of the year in 2013 when Dogecoin was created. And I thought it was just funny that, oh, this is a, you know, an alt coin that was made as a joke and that was funny that that happened and nobody could seriously still be using this thing or really interested in it and that even when Elon Musk tweeted about it in April 2019, he couldn't have taken up any kind of uptake after that. This had to still be just

totally this joke coin that we've been chuckling about for several years but has never been important. And I mean, we just found the opposite. We found that transaction volumes are up more than they've ever been on chain. There's more addresses that have a non-zero balance of Dogecoin than ever before, and it's going up significantly, which you know is a proxy at best, but for adoption and user ownership. That trend is instructive. We looked at the mining revenue. It's through the roof. There's an interesting situation with not a lot of supply of light coin miners. So Dogecoin is merged mine with light coin. So basically, its miners are light coin miners who can also mine Dogecoin at the same time with no additional

cost. But there haven't been any new light coin A6 made manufactured recently at all. We looked into it and talked to some folks in the mining secondary market for mining machines and found that the light coin miners are like mooning right now, something like from $50 to like over $500 or something. We have the chart in the report like just over the last couple months because Dogecoin is, is making mining light coin extremely profitable. And, you know, just broadly, it was like there is a lot more usage in ownership of this thing than we thought. And then, you know, you look at the price chart.

We have a relative price chart in this report, you know, that calculates the percentage increase from year to date. And I mean, Doge is 10,000 percent. It's up 10,000 percent or something year to date. Bitcoin's like a meager 100 percent, right? So, I mean, it just stands out. You can't ignore it. And then the story is so funny.

I mean, we knew some of this story, but when we actually started going back and cataloging it out, it was, we're just laughing so hard. It's really funny. You have that one chart in there that shows that, you know, what portion of light coin minor revenues come from light coin versus doge coin. And just to see how it significantly expanded as a portion of total revenue, minor revenue is insane. Yeah, it's like, you know, I think on a,

we ran this last on Monday, on Tuesday, the chart, and I think it was something like $6.5 million per day in minor revenue, of which 4.5 was Doge, and only two was like coin. And you can see the little tiny line

of Dogecoin revenue throughout the whole prior history of the chart. It looks like a border. Yeah, exactly. Then it's like, then it explodes. Yeah, it's just, and it was also just like the on-chain metrics, are encouraging. There's a lot more activity. It's clearly, it's more widely adopted than ever before. There's no doubting that. But then sort of because we were thinking about Doge so much for like a week and a half or so, we just started to realize that this, the world has merged free and open

source software and money. And that means anyone can create any money that they want. And people are creating really good sound monies like Bitcoin or internet web 3.0 monies like Ethereum. but they can also create joke monies. And it turns out, you know, this joke money wouldn't be funny if it was VC backed or or had an ICO, but if it was totally pure, if it was Bitcoin-esque, if it was mined for fun as a joke, that joke is pretty funny. Turns out jokes are valuable. Like they have monetary value.

And it's a new paradigm that you could literally create a joke money and have it be worth $85 billion. I still can't get over this joke. I'm going to be laughing at this joke forever. Another really interesting aspect of your report was, you know, you pointed out that in order to produce this analysis, you and Kareem tried to spin up a doge coin node and struggle to do that. So just talk about why was it difficult to operate or why is it difficult to operate a node

on the network? And then what are some of the implications of that for users and service providers? Yeah, so I did. I co-wrote this report with Kareem Helmi, who joined the Galaxy Digital Research Team from Coin Metrics. Rachel Rybarcich from Galaxy Digital Mining team also helped with that node portion, I should say. There's a couple reasons. One, the software is buggy. It's just buggy to run. It's hard to build. You have to change some flags sometimes to get it to work properly. The real issue is that the node topology of the Dodeskoyne network. So the web of nodes that serve the blockchain to new nodes that join the network, but also propagate blocks on the network, is flimsy.

There's not many of them. There's maybe a thousand nodes total that we could see. And a large portion of those nodes are not at the chain tip, so they're not fully synced to the blockchain. So they can't be relied upon to give you the latest information. But even worse, a huge portion of the nodes are like way behind on the blockchain. chain. There are also, even those nodes that are at sort of the chain tip and are fully synced, there's not a lot of good bandwidth coming from those nodes. They're slow. They're very slow.

And keep in mind, and Dogecoin has a one minute block time. So whereas Bitcoin targets a 10 minute block time, Dogecoin targets a one minute block time. And there's a reason why Bitcoin's block time is slow, this idea. Again, this goes back to the design decisions, right? One of the main reasons is to allow a very, very widely distributed node topology with nodes on consumer grade hardware, enough time to verify, receive and verify those blocks on Bitcoin. Well, one minute is not enough. That's why we see a huge amount of nodes, among other reasons, but it's one reason we see a huge amount of nodes on Dogecoin, just unable to stay fully synced with the blockchain.

That in general makes it really difficult to download the chain. We had to basically import a list of trusted nodes that people in the community and the Dogecoin community have shared. These are reliable. They do have fast connections and stuff. Even then it was very slow. So, I mean, I think broadly for users and service providers, it's not robust in that way. It's not a resilient, robust network at the network level.

And so, I mean, we know most, I don't know, I don't want to say most, that a large number of Dogecoin holders hold Dogecoin on custodial services, right? So we're talking about service providers who need to then run the nodes to actually verify that they're correctly holding and receiving that Doge coin. And even a lot of those service providers are actually using sub custody. So even the front ends that the users are using don't even actually hold the Doge. Right. So there aren't too many.

Even Coinbase doesn't support Dogecoin, which actually is surprising. And you know, you just run your own node. We know it's easy on Bitcoin. Bitcoiners take this for granted. Not only could you download Umbrell software or something and build your own Raspberry Pi very cheaply and quite easily, you can just buy a node right off the shelf from a lot of these hardware providers now, you plug it in and hit sync and everybody's upset that it's going to take a day or two because it's, you know, 370 gigabytes of blockchain data.

We take it for granted that it will work, though. It doesn't work on Dogecoin out of the box like that. It requires a lot of effort. And so that means you don't have a lot of people running them. It means you don't have what Bitcoin has, which is a large base of activist node runners that can participate in governance, do things like user-activated soft forks if required. You don't have any of that on Dogecoin, right? So there's, you know, it is what it is.

It's, I will say that the latest release made a couple changes to try to make, make it work a little better. And I was reading over a discussion on GitHub and that's happening now where some of the developers and the community members in Dogecoin are talking about backporting Segwit into Dogecoin, which is obviously an upgrade that Bitcoin did in 2017 that fixes transaction malleability and therefore allows for the Lightning Network also adds some scaling benefits. There's some debate about whether Dogecoin should do that. But they're also talking about raising the block size.

And I don't know whether they will. It's hard for me to tell a lot of the activity that exists is happening on Reddit and interming. There's really only a couple Dogecoin devs that are active, and then a large number of community members that are chiming in also. And the lead maintainer wrote this, that a block size increase wouldn't be a good idea. I wholeheartedly agree. You only have one minute block times. The nodes can barely receive the blocks in time and stay synced, right? Increasing the block size will only make that more difficult. So look, it's an earnest project. It means what it says, and it does, for the most part, what it says it can do. You know, but it's a

it's not robust in the way that other networks are. And that I think is largely because of the node topology at the moment, which is a consequence of some of these design decisions. But also, you know, no one took this project seriously. There isn't 12 years of service providers and adjacent developers building tools and hardware and stuff for it the way you have, you know, with something like Bitcoin. Is there any precedent for a project having been abandoned and people not caring about it, largely not having a huge development base that suddenly gets, you know, a breath of air in it and it is revived and people start using it and use cases emerge. Is there any other precedent or pattern recognition here?

I would say definitely not like this that I've ever seen. I mean, you don't have something that's so so whimsical and not intentionally non-serious and then, you know, get uptake from, you know, the world's richest person and, you know, Elon Musk has like 50 plus million Twitter followers, right? So it's like it doesn't even matter. If only a portion of his followers by any amount of those, right, it's impactful. I don't know, Matt. That's a really good question.

I mean, I'm going to have to think about that one. This project, and when I say this, I get comments on Twitter that people say, well, the project was never dead. And I'm like, well, you know, we've been following the space like full time for years. And we knew it wasn't dead. I mean, I could see that it was still operating, right? But it wasn't relevant. There wasn't any major update.

When we say there's no development, I don't mean that there isn't, you know, a minor code release or like any notes, any updates or notes being added or documentation being updated. We mean like there's been no significant upgrade to this thing in a long time in years, right? That has actually, that's why it's actually funny. I mean, it was only, I guess it was only just recently they started talking about Segwit. This is something that as a Bitcoin for work, you would want. You would want, if they don't implement Segwit or something like it, they can't go to a layered

scaling approach. We also have now TapRoot that's coming soon for Bitcoin. They won't be able to add that. They'll be so far behind the code base. And it doesn't seem that they have significant enough developer, you know, Mineshare working on the project to really go their own direction with new innovative stuff. So where that goes is going to be hard to see. I feel a tremendous amount of tension when I'm explaining this to people that are

not in crypto, because it sort of makes everything look like a joke to some degree, where you have, you know, a project like Bitcoin, which is a civilizational effort to, you know, have non-sovereign money. You have a project like Ethereum, which has thousands and thousands of talented people that are building in that ecosystem. And then you have Dogecoin. And Dogecoin is the one that's going up the most. And so it's just, how do you rationalize that when you're speaking to people that are not in this every day. There's definitely, it is either emblematic or the result of a retail mania around trading, but, you know, I have to lay some of the blame here right at the U.S. dollar. I can't help but do that. If you think the dollar is super valuable and doesn't have any problems,

you got to realize people are literally turning it in for dog money right now, right? For joke money. They're taking their dollars and turning it into joke, Dogecoin, right? And, So, I mean, I think there's clearly a cynicism about the state of financial markets in the world. And this is a really, frankly, hilarious and pure way to express that cynicism. Even GameStop, if you participated in that GameStop frenzy because you wanted to stick it to the hedge funds and the institutions that were on the other side of that trade, you're still making people that work at GameStop rich. I mean, company, you know, already wealthy corporate people, right? this is not like that. This is a much purer protest vote in some ways.

To what end? I don't think much of an end. It doesn't have the features and the robustness of a project, say, like Bitcoin. So it's not, I don't think it goes that far, but I sort of think it's going to be one of these things that is just always around. It has that purity that makes it a valuable joke. And people love jokes. And I think as long as jokes are funny, Dogecoin is going to be valuable.

And, you know, we did some stuff. that was so interesting when we really started digging into the on-chain stuff. One thing I didn't mention before is we did the hodel waves for Dogecoin. And it shows an incredible, it's really interesting, more than 60% of all of Dogecoin supply has moved in the last year. That isn't remotely true for other an asset like Bitcoin. And that would be super bearish if you were looking at Bitcoin. Bitcoin, people are supposed to be holding it longer, right? It's supposed to be digital gold. If all of a sudden a ton of it has started moving, you start to worry that huge portions are going to sell, or something. But I actually wonder, what is the character? What is the long-term view on the

asset that the newer holders of Dogecoin have compared to those from prior eras? And we are perhaps some of those holders from prior eras. And we thought it was like a joke, a joke, like this thing's not valuable, has no long-term prospects. The people I see on social media now supporting Dogecoin, and they feel differently. I wonder if it's changing hands into stronger hands than weaker hands. That is an interesting thought. It's hard to know. Yeah, like are people literally meming utility into Dogecoin?

Like so many people hold it now that will service providers eventually. I mean, they are like just this week. I think E. Toro and Gemini announced that they're going to support Doge. And like people started accepting it as a means. payment for like tickets and stuff. Yeah, I think it's, look, I mean, it's, again, because it's pure, right? It's just, I think some of the businesses accepting Bitcoin for payment like Tesla expressly say they're going to hold that Bitcoin, right?

They actually want to accept it as payment as a way to stack SATs. I'd be shocked if businesses that are accepting Doge aren't liquidating it to something else, like dollars upon receipt, but it really has a huge holder base. I mean, it's something like, I mean, it's a really popular. cryptocurrency. It really is. The thing is, I think the majority of people, and we didn't, we don't have data on this, but I think the majority of new ownership is happening on platforms like Robin Hood, and they don't support sending and receiving today, right, Dogecoin. So they can't spend their Dogecoin. But I would love to see it. I mean, like I said at the beginning, you know,

anything, I'm a huge fan of decentralization and self-sovereignty. And if, you know, what you want to keep on your hardware wallet is dog money and not, you know, sound money like Bitcoin, then more power to you. There's soundness and needs. Another thing that, you know, I love your take on is this idea that retail investors or more newer investors into crypto see the price per coin of something like Bitcoin, the price per coin of Ethereum. And they see the price of per coin of Doge is below $1.

And they think, oh, this is cheap relative to those assets. To what extent is that also driving interest in Doge and then potentially other alt coins? I think it's a huge, huge reason for it. You know, this unit bias, I've had people say, I think some people replied on the tweet where we published the report. They said, not all of us can afford a $60,000 coin. And, you know, I wear that t-shirt all the time from my favorite crypto graffiti. You can buy a fraction of a Bitcoin. People just don't know that.

I mean, it's a marketing failure on the part of the Bitcoin community for sure. And obviously, many have worked hard to promulgate the usage of the Satoshi as the base unit to sort of combat that unit bias. But it's huge. You look at something like Ethereum Classic, which is up huge this week. I mean, it's up, I think, 2X, just over the last seven days. Ethereum, on a huge run, up huge over the last few weeks. And I think people are going, logging into platforms, you know, crypto exchanges and saying,

I've heard about this Ethereum thing. Let me buy this cheaper version of it. I think we used to see the same thing with Bitcoin Cash and other sort of Bitcoin derivatives. They have the name Bitcoin in them. And also when you have a huge influx of new people into the ecosystem, not everyone knows where to start to learn about this space. So we've got a lot of newbies that have come in over the last few months.

And the distinction between Bitcoin and Bitcoin Cash or Ethereum and Ethereum Classic or what is better. about Bitcoin and Ethereum than Dogecoin. It's sitting right next to it on the list, right? Maybe I do have a wallet that can support Dogecoin. I'm able to send and receive it. What is the difference, right, to them, right? And to a lot of people. And I take that for granted. I mean, we look at it all day, every day, but it's not obvious to the average person. So I think the sticker shock, especially with something like Bitcoin being almost $60,000, like that hits. It was Jimmy Song, I think, who had the BIP a couple of years ago, changed where the decimal was. And,

and denominate it so that it, that might actually be a good idea. That's like a stock split. I think we should look into it. I do. So, Alex, where does Dogecoin go from here? Like, in the very short term, we have Elon's parents on SNL on Saturday. But, you know, like, what could potentially sustain interest, adoption, and more of Doge, in your opinion? I think certainly being added to more trading venues will be powerful for Dogecoin, without harping on a too much coin base in particular, doesn't support it, and is probably the largest U.S. exchange. So I think that would have a big impact on Dogecoin in the near term.

Just broadly, I mean, I kind of wonder, Dogecoin was originally this joke basically for crypto people to laugh about Bitcoin and the alt coins that had responded. 2012 and 13, you know, Jackson Palmer first tweeted about Dogecoin two days before the Bitcoin top in November 2013, right? So it was right during a very frothy period. But it was, it was crypto people that it was a crypto person's joke. I think this time we've seen that Dogecoin has become a joke for all people. Certainly there are many people who own Dogecoin and no other cryptocurrencies. And I don't think that was ever true in prior eras. So in that's, and that's,

sense, it's actually perhaps a great on-ramp into the space generally. There are a lot of people who's first and only crypto that they own is Doge. And that's, so I hope we can help educate Dogecoin holders about the rest of the space too. I'm not saying they shouldn't or can't own Dogecoin. I think that's going to happen. It's actually decent marketing for the space. And look, if we see more development on Dogecoin, if I'd be really surprised if we don't see service providers and even like hardware, more support from hardware wallets, from software wallets, add Dogecoin support. The newer Shibas can join the broader crypto ecosystem and it will help grow the overall

ecosystem. To me, it's just like long-term, Ria, like this thing I'm convinced will be around for basically as long as Bitcoin is around and certainly so long as jokes are funny. And I think we know that that is hopefully forever. It's pretty amazing that, you know, in 2021 and beyond DogePoint and NFTs are the gateway drug for people into the crypto ecosystem. Yeah. Pretty amazing.

It's true. And it is, you know, who could have guessed it? We all, this is stuff we knew about. I mean, NFTs, they're not new, right? Like, it still were blindsided by. I mean, we, people who work on this space 24-7, it just shows how, dynamic and exciting it is. There can be a lot of people going back and seeing if they have like feather coin

wallets that are still active. Maybe there'll be something else that gets activated. Totally. Totally. I can't tell you, by the way, there's so many posts on Reddit and on, even on the people are posting issues on the GitHub repository for Dogecoin,

like, you know, 10,000 Doge reward if you help me like get into my old Dogecoin wallet. That's a very common post right now, unfortunately. Oh, man. So Alex, I'd be remiss if I didn't ask you about another report that you wrote,

just on the VC landscape. the VC funding landscape. And obviously there's been just a ton of capital that's been flowing into these companies. So kind of a big picture question is, what's your take on just the venture ecosystem right now and some of the trends we've seen over the past year? There's been a ton of investment. Absolutely. I know you guys know this. And I sort of having followed the space, we sort of had an inkling of this. But now that we've seen the last two cycles have started to shape, right? I mean, I think we have room to run here on this. bull cycle, but we can, we now have the whole run-up into 2017, the two and a half year bear market,

and now this new market. And there were so many entrepreneurs that came into the space. 2017 brought in tons of people into the cryptocurrency world, right? And, you know, some portion of those people weren't just average sort of the taxi driver archetype that people talk about. A portion of the people went deep down the rabbit hole and became, you know, real adherence and really interested in crypto. And a portion of those people were founders, right? And 2017 laid bare a lot of deficiencies in market infrastructure in particular in crypto. There was no settlement. There was no prime brokerage. There was no institutional custody. There was no, there weren't really great wallets. There weren't even many great hardware wallets. There were, you know, Treasor and Ledger were around,

but that market has exploded since then. There was all these opportunities. There wasn't lending, right? And so a lot of those companies, a lot of companies were founded in 2018, 2019, that were founded by savvy people who saw gaps in the ecosystem and built companies to fill those gaps and bring these new services. Those companies that were successful are now big companies, right? And so they're raising huge amounts of money. I mean, BlockFi is one example. I've got the list here. Yeah, fireblocks, chain alias, tax bit. I mean, these companies, dapper labs even, if you think back to their, you know, they're,

their foray with crypto kitties and then now as such a bigger, I mean, a huge company, right? And even companies like Falcon X, these companies all came about then, right? We had settlement, we have lending, we have brokerage, you have, you know, compliance. And now they're raising it huge amounts. What I don't see, which is interesting, which part of what I wrote in the report is a huge new influx of early stage companies. seed deals are down. They're still almost at their lowest levels by deal count.

Even Series A are very low. And for the first time ever in Q1, the vast majority, more than 50% of the capital raised in this ecosystem by companies. So for equity capital, went to late stage companies. So it looks to me like this is a cyclical sort of private market. And we'll see a lot more founders come in and launch companies. And we'll see those seed stage deals, you know, peak up as the cycle continues. But right, you know, it just, it doesn't seem to have happened yet. The only other point I would make on that is there are a lot more sort of decentralized teams raising

capital, right? And we relied mostly on pitchbook for this data. And, you know, they have some of those deals, but they don't have all of them. So it's definitely possible that seed stage deals, I'm using air quotes here, are don't include some of the token-based financings that we've seen happen and all of that. But the other last point would just be that, All a venture has been competitive, even outside cryptocurrency, in blockchain. But if you look back over, you know, I think I went all the way back to 2016. Valuations were rising but comparable between crypto and blockchain VC and the broader VC market. But in Q1, crypto and blockchain VC valuations absolutely decimated.

I mean, way above the broader VC market. I think we found that it was, they were higher, 34% higher than the, average, the broader market. And so, I mean, I think the combination of fewer deals, tons of heat on the space, tons more LPs coming into funds to invest in the space has made these deals very competitive and funds are fighting for allocations. And that makes it an even more founder-friendly environment. And that pushes up valuations. In some ways, it makes a ton of sense because if you just take for granted that this is an asset class. So if you just, you know, assume that we agree with that, that there is this creation of a new asset class, then think about

the things that would be required to support the invention of a new asset class. You're talking about exchanges and brokerages and data companies, trade execution software. So if credit default swaps were just invented today, all of that stuff would need to get built. And you'd probably see a lot of banks and broker dealers building that stuff. And so a lot of value would accrue to them. A ton of banks and broker dealers have just knowingly ignored this market. And so it shouldn't be surprising to us that of companies like NIDIG and BlockFi that are just getting to be massive in the face of just the incumbents ignoring it. Yeah, I totally agree. We're only really just starting to see a wave of the incumbents finally coming in. Of course, if we leave Fidelity out of this, who was very early

on this tip, and I mean, Fidelity was doing Bitcoin when everyone else was doing blockchain, not Bitcoin. But basically, every other major traditional financial services company has only just recently and like the last six months actually started to pay it some attention. And yeah, it's, I mean, it's beautiful in a way. I mean, they kind of were hoping it would go away. It's like that meme with Mo kicking the guy out of the bar and he's kicking him out and then he wipes his hands. All right, great, they're gone. And then he turns around the guys back in the bar, right? Like that was crypto. That was Bitcoin. We're still here and you tried to kick us out, but you didn't let us in. I don't know the way to say it. But we built our own market here. And now that

market is big. Would love your thoughts on something, Alex. So, you know, the way or the different ways that founders and project creators have available to them to raise capital now is changing, right? Like more and more, and this is something that, you know, Matt, Nick and I have definitely been thinking more about is just this idea that now you have these massive project treasuries that, you know, founders and projects can use to fund their. operations and build a company, what do you think the impact of this will be on the opportunities

that VC investors have available to them? And how do you think that VC investors will have to adapt? That's a good question. On the one hand, I think it's going to be something that you absolutely have to adapt to. We've seen a lot of funds raised for, say, especially in the Ethereum ecosystem and the defy ecosystem for protocols that, unlike the 2017, ICO phase, these actually exist at the time of the raise, which is, I think, obviously, a huge improvement. But I will caution. I don't, it very much remains to be seen whether these protocols can succeed, right? I mean, many of them are fascinating and innovative, but to what extent can governance tokens really be useful in the long run? I think we're still early in that

experiment, and that's mostly what is being sold to investors. So I think it's too early to tell. I definitely think that, you know, decentralized communities, raising capital with tokens, this is not a new idea. We know this. I think what's different this time is that the idea is formed at the time of the raise. And, you know, I just don't know. I don't think you can beat a strong venture team with, you know, a huge network working with a company.

I'm not personally ready to say that, you know, everything will be a protocol or a decentralized team and that companies won't exist. I think they'll always be space for equity investing. But obviously, we've seen a huge growth in decentralized sort of financings, if we want to call it that. You know, I think we still have to wait and see how it plays out. It's also like a future of work discussion at some level where if these things do work out, and I totally agree with you that we're in the early stages, a lot of this is unproven, there's tons of regulatory questions. But, you know, one interesting byproducts, of this could be that, you know, if you're a software engineer, maybe you don't work for a

company. Maybe you choose to work for a Dow and you maybe work for four Dow's and you make money that way. It's just a fascinating mental exercise to think about just the theory of the firm. I mean, the more things that can be done in a decentralized way, you know, and you can, we could run a decentralized thing now, pay someone with dollars or Bitcoin, but you can't bake that as easily into the protocol, right? And so if you're talking about building like, you know, something like, I think sushi swap or, you know, AVE or one of these protocols that, you know, does lending or swaps or even you're in finance as an example, right? And they build up, you know, they put in a mechanism to accrue some of the value to a decentralized, to a treasury that's

controlled in a decentralized manner. And then users vote on what to do with it. And if, if some of that goes to funding development, and now you're one of those developers that works for, a defy protocol. I mean, that that is fascinating. We haven't seen, I will say, these types of business models expand really beyond finance, decentralized finance. To really buy into that idea that it could dramatically impact the future of work really broadly, I want to see more decentralized apps outside of the financial sector, right? Like, what else can we do with this thing, right? I have seen some of the stuff. I know, Ria, you were looking at, is it the Mirror Protocol that has the,

the writing challenges and stuff like that has always been interesting. I mean, we don't see a ton of it yet, but what else can we do with this thing other than just, you know, swap, lend, create synthetic tokens on, right, the same big group of assets, right? I mean, that is all innovative and it's powerful and it's, you know, got a ton of mine share behind it and it's making a lot of money. But, you know, what else can we do outside of assets? I think that's, that remains to be seen. If the answer is a lot, then I think you're right, Matt.

it will impact the future of work dramatically. Well, Alex, this has been awesome. We could talk to you for hours, and we will in person soon, hopefully. We'll see in a few weeks, actually. So this has been terrific. Where can we send people to learn more about Galaxy Digital and follow you on the internet? Oh, absolutely. This was awesome.

Love talking to you guys. Follow me on Twitter, Alex Thorne at Intangible Coins. Visit us, Galaxydigital.io. Yeah, thanks for having. Awesome. Pleasure, Alex. Thanks for listening to another episode of On the Brink with Castle Island. To find out more about Castle Island, visit castle island.Vicc.

To listen to all of our podcast episodes, please go to On the Brink dashpodcast.com or just click on the tab in our website. Thanks for listening.