On The Brink with Castle Island - Mahesh Ramakrishnan (Escape Velocity) on Decentralized Wireless (EP.376)

Episode Date: November 30, 2022

Mahesh Ramakrishnan of Escape Velocity joins the show. In this episode we discuss: Mahesh's career in traditional financial services and the path that led him to launching Escape Velocity. The decentralized wireless market and how it is likely to evolve. How tokenized protocols and USD stablecoins are likely to play a role in this evolution. How incumbents are positioned in this emerging category. Views on FTX and how that impacts the market more broadly. To learn more about Escape Velocity visit www.EV3.xyz.    

Today on the podcast, I sat down with Mahesh Rama Krishna, the co-founder of Escape Velocity, a fund focused on the decentralized wireless category. This was the first episode that we've ever done on the decentralized wireless category, and I hope it's not the last one because it's an emerging space, and Mahesh and his partner are at the cutting edge of it. I think you'll enjoy this one. So without further ado, here's my conversation with Mahesh from Escape Velocity. Matt Walsh and Nick Carter are partners at Castle Island Ventures.

All of these expressed by them or the guests on this podcast are solely their opinions and do not reflect the opinions of Castle Island Ventures. Guest and hosts may maintain positions in the assets discussed in this podcast. You should not treat any opinion expressed by anyone on this podcast as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of their personal opinion. This podcast is for informational purposes only. 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 Conjecturenton. 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. Mesh, so thanks so much for joining us today on the podcast. Thanks so much, Matt. I'm an avid follower of all the great content that you guys create and I'm really, really excited to be here.

That's always the best way to start the show by saying, You're a first time, long time. I appreciate it. Well, why don't we start off, we're going to talk a lot about decentralized wireless. That's really your area of expertise. But before we do, why don't we start off with the typical, how'd you get into crypto? Tell us a little bit about your background. You know, I could talk about D.Y for hours, but I'll start with some background. I've always been a student of history and in particular amazing piece of human achievement. It's not that hard to be inspired by the magnitude of the pyramids or the technical complexity of Machu Picchu. But digging deep into the context behind some of these amazing feats, I've always found that most were underpinned by really strong incentive systems that coordinated big groups of people to maximize physical and intellectual effort. Just in my study of history, I found historically that the two strongest incentive systems backing these out there are religion and finance, both of which align actors with a shared worldview as well as a shared reward system for that worldview. In religion, the worldview is faith and the reward is divine judgment and finance that worldviews economics and the reward system as well.

But in any case, I'd always been obsessed with how these systems maximize output and efficiency and ended up going to do undergrad studying just that. I went to Harvard to study economics and religion and absolutely loved it. And along that time, in 2015, I found Ethereum and I recognized it as just this, a new incentive system that could coordinate human action at scale. That said, I'd always wanted to be an investor. So I spent the next five years out of college really learning how to invest from some of the best investors I'd seen out there. First at Goldman, then at Apollo,

which is the second biggest private equity firm by assets. And it was super important to me to understand how institutional investors created, but more crucially updated their mental models to sort of address the gamut of market conditions. And luckily, the time I spent there was some of the most exciting times financial markets have seen in the last decade. And I was always really impressed by Apollo's culture of optimistic restraint. But I was spending all of this time underwriting these massive, clunky, inefficient, industries, which I was so sure could be fundamentally rethought, especially the ones I was spending time on, which were finance and wireless. They felt like oligopopatives. And everything really changed

for me in 2020 when I found helium, which was one of the first networks to use token incentives to build a physical network that deals in real world quantities. So pretty much helium had developed a network supporting data transfer for IoT sensor devices. And I had this amazing inside look there helping them think through the opportunity, think through their model, and giving them a fair amount of advice internally based on communication and the relationship that I had for them. And I think I realized pretty quickly that their model of building an IOT network, as amazing as it was, could be repurposed for tons of different use cases, most importantly, to support the creation and development of 5G. The wireless space had all of these characteristics of gangbuster outcomes.

I mean, there was heavy capital intensity and debt burden, tons of regulatory tape, aging infrastructure headed towards an upgrade cycle. And I think most importantly, trillions of dollars of incumbent revenues just across the 15 biggest companies. So backed initially by Ribbitt and then a number of smart individuals like Pete Brigger at Fortress, Vance at Framework. And fortunately, you at Castle Island Matt, Sal and I set out to raise a $25 million fund to invest in decentralized wireless, which is this amazing new space that's using token incentives to build physical telco-based infrastructure. That's an awesome background.

How the heck did you get into crypto when you're at Apollo, where you're just spending your nights and weekends looking at the space? I think there are two parts to it, and it starts in college. I actually think that to get really, really deep into crypto, you have to get indoctrinated both on the operating and financial side of it, but also on the philosophical side of it. And I was really lucky that I had a college roommate that I could best describe as a proto-anarchist. He was mining Monaro in 2015, really, really deep down rabbit holes,

ended up being the third employee at Crusoe Energy. Very smart guy. But he very early on had all of these worldviews and philosophies that he thought would develop around these crypto-based communities, Ethereum kind of being the first one. He saw models for governance arising. He saw models for religion, philosophy. And the way he described it, it almost felt like religious zealism to some degree.

You see these cults and you see what they're able to do in terms of getting people to do things? What if instead there was fundamental financial and economic infrastructure that was able to get people to buy into them almost like a religion and therefore coordinate the creation of potentially new societies over a 15 to 20-year period? He had this hilarious worldview that I still think is accurate, which in 10 to 15 years,

an autocratic government would be overthrown by a blockchain and fully managed that way. I think you and I talked about this briefly before. I still very strongly believe that will be the case, but he was talking about these kinds of things in 2050. So I got really, really deep into crypto at that point, multi-mining, building a little bit. But then the crash of 2018 came around, and I was still in college.

I was graduating that year. And I saw a lot of the progress in the industry, but as I mentioned before, I always wanted to be an investor. And I believe that there were a number of fundamental skill sets that I had to get before. I could just go out there and do that full time. I kept an eye on crypto, but I went to Apollo to do largely private equity investing.

I know a lot of the stuff that I've was doing was in financial services and telecom. But Apollo actually started their own crypto business over the last 12 months doing deals for companies like figure blockchain that I had the opportunity to spend a fair amount of time on. And I got to see their side of underwriting. I think a lot of crypto managers tend to be in the venture space, which are super focused on upside. And the manager that we have the most respect for is Rivet, just because my business partner worked there, their model of underwriting has always been really interested to me. But Apollo just took a completely different approach to it and actually achieved pretty amazing results. So I saw that framework that I

had achieved or I had gotten at Apollo and I compared it to one that my business partner had gotten at Ribbet. And it was so clear to us based on the ideas that we were seeing in the space, most importantly decentralized wireless, along with the emergence of defy, industries that could really crush regulatory oligopolis that exist out there, that this could be the most exciting opportunity of our lifetimes. So we wanted to do something where we could invest for the next 40 years of our lives and crypto was it. Decentralized wireless is such an interesting category. And I think it must be tricky for you to talk about this because a lot of crypto people don't know anything about wireless. But I'd say just generally speaking, there might not be a broad awareness in society around

how wireless systems work and how telcos actually function. People's engagement is probably having AT&T or Verizon accounts and having the internet that works or having a Wi-Fi router. So maybe set the stage for us a little bit in terms of what that market structure. looks like, and what pieces of the telco market and the wireless market you think will be most impacted by public blockchains? Maybe first I'll start with some of the structural context, and then I'll talk a bit more about the opportunity as whole. The move to decentralized wireless models, and I'll very quickly summarize what those

are, decentralized wireless networks are networks that use physical nodes deployed by people in order to support data transfer. So a traditional telco uses towers sparsely located across the U.S. that ping each other with signals to transfer data. These models use small cells coordinated by people in order to achieve a much better result. And I'll get into that in a second. But when you look at the early 2000s, the biggest companies in the world were Alcatel, Lucent. Telco hardware providers that operated networks that had hundreds of billions of dollars in market cap because of their differentiated hardware.

But today, 5G networks are going to be largely software defined. So previously, a tower would require hundreds of individual components, one box for switching, one box for receiving, one box for rerouting calls. And in that model, you need tens of thousands of people to maintain the physical infrastructure in order to make that work. Today, that hardware is commoditized, though, and can be mass produced. It's really software that manages that entire process of receiving, switching, and rerouting. So that got us to our first key insight, which I saw at Apollo, which was,

that software-defined networks could operate with 1% the number of people in far less capital intensity. And then the second really crucial element setting the stage was 5G itself and how 5G would be built out. 4G, the wavelength of the waves that carry the signals from tower to tower are long enough that they can support reasonable distances between those towers. 5G wavelengths are extremely short because they need to support far higher bandwidth and lower latency, just to support a lot of the use cases that we're going to see coming to market in the next three to four years, most importantly, streaming and robotics-related use cases. But what that means is the nodes, the actual devices that transfer data,

have to be way physically closer than they have historically for the network to work. And the tower approach doesn't work for this for a number of reasons, most importantly municipal regulation. I mean, imagine having 2,000 cell phone towers in Manhattan. That's not going to work. So the answer is that telcos are going to have to enter homes and access footprints of commercial real estate developers to get there. But that's a nightmare for a central company. They have to go door to door, negotiate price, and deal with municipal regulation, which are none of things that telcos or tower companies have the infrastructure to do. And the labor market is so tight right now. So that led us to our second insight, which is that network,

of small cells that will be needed to support 5G buildouts can be more efficiently built peer to peer in a permissionless system where you give people the fixed worldview of you're going to facilitate data transfer and the fixed reward system of you will get paid in this amount of tokens for every gigabyte of data transfer that you facilitate. And then when you frame it that way, it starts to look like some of the most successful and amazing incentive systems out there that I might have talked about previously. That's some of the history. That's some of the historical context for Y, D.Y and Y, DY, Y, DY now. If it's interesting to, I'm happy to talk about the networks itself and why the unit economics make so much sense. That's where I was going to go next.

So is the way to think about this from a unit economic perspective that there's a certain amount of economic surplus that you're effectively distributing to a community ownership over a network. Talk a little bit more about how you think about that. I think the best way to go through this is just to talk about what the actual cost buckets a telco has are today, and then how those can get repurposed to be given to participants in the network as a whole. Telcos today really have three major cost buckets that out up to hundreds of billions of dollars every year. The cost of rent and land capax a source for their towers. It's one. The cost of physical capax or labor to build and maintain the towers or the multi-billion

dollar payouts that make the tower companies to outsource this is a second. And then thirdly, the cost of spectrum to acquire licenses, or as I call it, bribes to the government, in order to access certain bands of spectrum and have priority access to that. Those are all massive cost buckets of wireless networks today, traditional telcos. DY drastically reduces each of those cost buckets, and then redistributes the value of the cost saving to participants of the network as a whole. So how does that work? You outsource rent and capex cost to people. The people, the people, act as nodes in the network and they already own land or they rent their land. So you're not paying them an additional amount of money in rental income. They kind of already have that. And there's no

additional cost to them besides the initial cost of buying the small cell to actually hosting these. So it makes a ton of sense because it's additional value that they create. And when you think about someone like a commercial real estate developer, that's a yield business. At the end of the day, if you can increase your unit economics significantly by deploying one of these towers on your property that you already have at no cost to you, really? You're going to be doing that in a second. Secondly, you take the cost of labor out of this altogether. Telcos are setting up and maintaining these networks, but this is a software-defined network. There's no maintenance intensity. The hardware is completely commoditized and incredibly easy to operate. Anyone can do it. So you've taken that cost

bucket out. And then lastly, DY uses unlicensed spectrum today. There's this massive band of spectrum called CBRS in the 3.55 to 3.7 gigahertz range. that's free to use and can underlie a 5G network at scale. And so they've taken that cost bucket out of the equation entirely as well. What does that mean? A traditional telco has a 25% EBITDA margin. And once you think about their CAPX and spectrum license payments, they have no cash flow.

A DY type model, a helium type model for 5G, has massive margins of 50 to 60% even after considering all of these factors. And then the last element that I'll hit right here is, The telcos have historically built their networks on the basis of borrowing. They don't have any cash flow to really build the networks themselves. So they'll go to capital markets, raise $100 billion and use that money to build their network, hoping that over time they'll recoup that. The cost of debt is getting crazy because the Fed is hiking rates.

Dish just issued debt at 12%. If the cost of building 5G Central is $300,000 or $250 billion, you take 12%, that's $30 billion of interest payments. You have to make a year. I don't think there's anyone out there in the telco space that can afford that today. All of these reasons make us think that D.Y and the unit economics that D.Y is able to create is a far more powerful system that will lead over time to being the system people used to transfer data. And in the meantime, we'll serve as offload mechanisms for the telco companies to get better markets.

And all of this is value that accrues to the people that are actually creating and maintaining these networks in terms of token return. How do you imagine that these initial projects will get to scale as they compete with the telcos? How do you think about the initial capital to start these things? I actually think about this space a lot like fintech between 2016 and 2020, which was you saw companies like Lemonade and Root really first come out gangbusters in 2016, 2017, as these big companies that could disintermediate incumbents and take underwriting for themselves and manage the capital on the backhand. And then what we slowly realized was it wasn't that simple without scale. The incumbents still had massive distribution footprints and a huge amount of customers day one that would create massive frictions for the fintech

companies to actually get to the scale they would need to be immensely profitable. So what ended up happening in that space was partnerships. You saw the biggest insurance companies partner with the biggest insurance underwriters whereby they would be on the back end. They would provide the equity capital. They would manage the regulatory relationships. and they would support the fintech companies on the back end with that capital and low cost of capital. And then the fintech companies on the front end would go underwrite. They would be doing the meat of the business. They would be dealing with the customer.

And they would be supporting this transition to a far lower cost point, higher margin over time. We think that's exactly what's going to happen in the decentralized wireless space. So we saw 2020, 2020, 2021, Keeleon explode and emerge as this incredibly exciting company that could create its own. network at scale across the U.S. That could be a new paradigm for Telco. What we're realizing slowly is that it's very hard to build a native network peer to peer initially that can beat the incumbents. They have hundreds of billions of dollars and regulators behind them.

So what we think is going to happen is partnership models. The DY network still have far higher unit economics from having far lower incumbent costs. So what we think will happen is the same paradigm of incumbents, big telcos, will become the capital. They will become the regulatory relationship, and they will provide that low cost of capital that then allows the networks, the DY networks, to scale rapidly, getting them customers at a far lower cost point. When you think about what AT&T is today, it's really just a patchwork of hundreds of different networks across the U.S. It's not like one big network that's natively and centrally operated. AT&T is rolling up a bunch of

networks across the U.S. already. It makes total and absolute sense. They would do that with another one, especially if the unit economics are so much better. And we've seen that play out already. I mean, Helium announced a big deal with T-Mobile that's been ongoing for the last few months, and they think they'll have customers really ready to go by early next year. Paul, in which is another player in the space, has a deal with Dish wireless where they're trying to do something very similar. And again, it's this model of how do you use your better unit economics, you being the DY network to support my the incumbent's regulatory and cost of capital advantages. And we think in the short term three to five years, that combination will be incredibly powerful to build out 5G at a time

where the telcos don't really have the capital themselves to be able to build out that central CAPX themselves. It's really fascinating to think about what the token models will look like in this future. So you could imagine a world where individuals that are running this architecture in their home, they don't really want to worry about a token. They might just want U.S. dollars immediately. You could imagine other behavior where there is a token and people take a long view on what an equity-like instrument in a network would look like, something that accrues value based on how big the network gets. How do you think the token side of this plays out over time? I think there will be a distribution of results, some of which will work, some of which won't.

But at a fundamental level, I just want to make it very clear, these DY systems could run on a stable coin. The unit economics makes sense based on a stable coin. You could use US dollars in the system, and you would get to a similar outcome. I don't think you would get to as strong of an outcome because you wouldn't get as much retail virality. You can get to a similar outcome using a US dollar coin based token. What the token models have done for the DY space issuing their own native token is, as you mentioned, to equitize the network. If you have these tokens underlying the equity of the network, you create this distribution between the central company in Helium's case that's Nova Labs, which is a separate entity altogether now, providing services to the network, but not actually

controlling the network itself. The helium network is entirely governed by the helium token. There's a couple other tokens in the ecosystem now. They went through a big transition, but that token should accrue equity value as the helium project succeeds. And there a number of different ways that'll happen. You can think that it'll happen organically, which will happen in certain networks between the staking dynamics required to accrue tokens and then to participate in governance have to then relock up those tokens. One thing helium has done really intelligently is create what we call a boat boosted system, whereby the biggest participants in governance are actually participants that are willing to lock up their tokens for long periods

of time. What that creates is this amazing dynamic of having really long-term bought-in participants in your network that are governing you and thinking through all of your incremental decisions going forward. But there are other models as well that have emerged that are speaking to exactly what you're saying of, what if I, the person deploying the node and transferring data, don't want a token. So there are companies that will either buy those tokens from you using the revenues that they've generated. There's an amazing company out there called XNet that's pursuing this 5G model. And what X-Net will do is use a lot of revenue that accrues to the network from data transfer just to buy back its token, creating a natural supply demand imbalance and appreciation in the token price.

There are other networks we think over time that won't even use a token to underlie this model, but we'll still use this crypto-based system of dollarized ways of automating payments. And some of those we've seen, Carrier 1 is a good example. it's just a completely different approach. But all of these are really underlying this fundamental effort of using peer-to-peer systems to build out 5G because of the unit economics advantage you get out of it. It's been fascinating to me to see just the number of startups that are popping up in this category. Do you have a mental taxonomy of the types of categories that you're seeing out there?

How do you think about just segmenting all of the investable universe? Absolutely. It's a great question. and one we spend a ton of time thinking about. I think the design space for decentralized wireless is absolutely massive. And I think a lot of people like they did in 2018 with Defi only see the tip of the iceberg of, okay, there's this amazing opportunity to create stable coins and lending protocols. That itself is a trillion dollar market. You had some really smart investors behind it that rode that trended exceptionally for themselves.

But by the same token, there was hundreds of other use cases for DeFi that emerged over time, structured products, exchanges, all sorts of stuff that have actually worked and worked at scale. We think decentralized wireless will be very similar, whereby the tip of the iceberg opportunity that people see and can underwrite today is 5G. And 5G in the U.S., which is a $500 billion market by all estimations. But there were tons of other types of wireless networks as well that we think need to be created and can be supported using this token model. I think the best example I see is India. When you look at India's current telco framework, it's awful. The government subsidizes a huge amount of bandwidth usage every year. They have a couple of big central oligopolistic

companies. You could even call them monopolistic companies that have extracted unit economics for time from the people. And there's just this really coercive model that's emerged of the government pretty much bribing a lot of those companies in order to provide data. The customers that honestly deserve better. And what we're seeing is in India, there's this amazing model for Wi-Fi-based decentralized wireless networks. When you think about street sellers,

which make up the majority of retail in India, all of them accept digital payments today, which means that all of them are running their own Wi-Fi or are connected to some degree of Wi-Fi nearby. What if you use a decentralized wireless network to create a Wi-Fi-based network across India that could support data transfer at an incredibly low cost? So point being, 5G is the tip of the iceberg.

Bluetooth opportunities, Wi-Fi opportunities are the next couple of ones that we see in decentralized wireless. And then there are some amazing companies out there that are building phone-based peer-to-peer wireless networks that literally use your phone as a mesh network in order to transfer data. And then you just bring your unit economic costs lower and lower as you take all of the hardware out of the equation. So some of these models we think are absolutely incredible and are just going to explode in the next couple of years. That's the high level for what we're seeing in D.Y. But then there's this also deeper opportunity of, DY is the first example of what we call and multi-coin calls proof of physical work networks,

networks that use token incentives to build real world networks. There are other opportunities as well that are massive. Energy is one that we've been spending a lot of time on where if you could create networks of decentralized solar energy and then build IOT networks on top of that to automatically make your energy use efficient in the most easy way possible. I mean, that's a huge amount of saving and a huge amount of revenue that's going to everyday people just from being able to sell their energy peer to peer.

So point being, we think this design space is absolutely massive, and we are in the earliest stages of seeing it right now, and that the canary in the coal mine is decentralized wireless, because it's an opportunity that we think will explode in the next couple of years. As incumbent telcos grapple with the fact that they really don't have debt capacity to go raise a huge amount in capital markets and have to grapple with the fact that telco buildouts have to be more peer to peer now, which is just very hard for a central company to effectuate themselves. Is your perception that the telcos are sophisticated

enough to see this opportunity and will start to act on it in the pretty near future? Absolutely. I mean, you've already seen T-Mobile announce a deal with helium. They're very, very deep there. And look, a lot of this is backs up by the fact that the cost of bandwidth is deflationary over time. T-Mobile just announced a price lock whereby I think it a couple months ago, they announced that if you were currently locked into a certain phone plan, they're never going to raise your prices again. I mean, imagine how horrible that is for an industry completely beset by inflation. So what we're seeing is all of these companies realizing that decentralized wireless and peer-to-peer telecom systems are going to crush their unit economics

and actually getting way ahead of that eventually happening by partnering with them. So helium was the first example. We've seen Pauline work with dish wireless to do something very similar. AT&T is jumping in as well. I mean, they have a deal with Carrier 1 in Canada and another decentralized wireless provider that I'm going to keep under wraps for now in the U.S. to do exactly this. And that opportunity is billions of dollars day one. So the way these networks will scale this with offload.

AT&T is willing to give people $100 million offload contracts in New York and the Eastern Hemisphere alone. You can figure out how to offload data for AT&T. You create this incredible flywheel of data transfer revenue. that drives value to your token, that drives the value of your token up, which then just drives more data transfer. At the end of the day, we think the telcos are well aware of this system. They are on their way to effectuating change in their own business model to take advantage of this. But I think they're also realizing that it's just not something they can do themselves.

You can't just go out and build a decentralized wireless network because these companies have some of the lowest customer net promoter scores out there to anyone. Customers hate telcos already. And then the last really important factor here is switching costs are going to zero. And these businesses are built on switching costs. The reason that AT&T and T Mobile are able to create the revenue they're able to is because they can give you with a phone for free up front and tie you down to a two-year contract where they know over time they will have enough lifetime value to pay back their acquisition cost. But Apple just announced that their new iPhone will be completely ESIM supported.

There's no physical SIM card needed anymore. That means there's no trip to the store to work with a customer. customer service representative who helps you set up your new phone, you literally just download an app and onboard onto a network. If you're a company like AT&T or Verizon, I'd be terrified. Their entire business is built on switching costs and keeping switching costs really high. So I think to answer your original question, telcos are very well aware of the evolution of this business model and the rate at which it's progressing and are devoting a huge amount of intellectual and capital resources in order to understanding that and getting enough. That's fascinating. It's interesting time to

be doing what you're doing because there's a ton of entrepreneurial action in this category, but we just had this massive Bernie Madoff level fraud revealed in FTX. And so what's your take on what's going on with FTCS? What's the impact going to be on the broader market of startups? It's a travesty, honestly. I think it's rare that society is fooled at the scale that they are by someone like Sam. He came across as a very charismatic, ethically driven. And he's a very charismatic, ethically driven person. And I think people jumped on that just because of the amount of opacity that existed in the crypto space and didn't realize the flywheel effect by which his initial reputation bootstrapped more press to him, which just bootstrapped a better and

better reputation. And then once you get to this point of almost being beyond reproach, I mean, people were calling him JP Morgan three to four months ago. That is the highest compliment that anyone's ever going to offer you in financial services, and it was completely wrong. I think the result of that is going to be a massive breakdown of trust in an industry that really built itself on the basis of creating trustless systems, which is just a travesty at the end of the day, because what you'll see, I think, is a double down by some people on defy in systems that underlie decentralized networks that are able to create permissionless innovation, which is to say they reduce the amount of trust you need in order to transact because everything is facilitated by code.

But the other half of the equation are going to run for the fences. And the sad thing here is I think the people that are going to stick around are actually going to be more retail. And the people that are going to be running to the fences are going to be more of the institutions. And that's a sad dynamic for an industry that looked like it was making a massive amount of progress. Because at the end of the day, I think there's one underlying fundamental thing that crypto represents, that was hard to argue once, which is that assets are more valuable when they're programmable. When you can do more with a given asset, you've increased the value of that asset because you can now use that asset to interoperate across a bunch of different industries where it used to just

be siloed. And that's what makes crypto so amazing is the ability to create productive assets, like Ethereum that underlies compute power or helium that underlies bandwidth. it. And you can create financial markets around these amazing digital commodities. And it's just so sad that a central market maker and a central player in this ecosystem use these trustless systems to create as much wealth for themselves as they did. And then didn't have the wherewithal, to be honest about what was going on when everything fell down. I actually think if Sam had been really honest about what was going on even a month ago, people wouldn't have been happy, but they probably would have forgiven him.

And maybe there's a chance he would have raised the money he needed to fill the hole on his balance sheet. But just the way that everything has come down and the revelations that are coming out now have progressed. I think there's no chance of that. I mean, you saw the head of the guy who's running FDX's liquidation process. He did the exact same job for Enron saying this was worse than Enron. It's really hard to recover for something like that.

But the one thing that gives me a little bit of faith in all of this is Enron was a horrible, horrible occurrence, but financial markets continued to grow and benefit and came to an amazing place for the next four to five years. I mean, some of it came down in 2008. But the underlying financial innovation behind structured products is actually one that has created a trillion dollar industry that creates a huge amount of societal benefit today, even if some of the origins ended up being something that left a bad taste in a number of people's mouths. Look, I'm still building. We have no exposure. But by the same token, it is a sad moment for an industry that was lionizing a person who seemed like he deserved it.

I guess it's a good lesson as you start to build out this decentralized wireless category and talk to entrepreneurs just around not having these single trusted points of failure, truly trying to build systems that are resilient and have provable attestations for centralized institutions, but also have the ability to just hold keys self-sovereign. 100%. And I think the one benefit that will come out of all of this, at least for the people that are reasonably in the digital asset space already is defy is almost beyond approach at this point. Defy held up exceptionally through all of this. The transparency just led people to feel so much more secure about what was going on. The fact that everything is on chain and redeemable

instantaneously with a huge amount of liquidity or good amount of liquidity gives people a lot of confidence. And my hope is that people that are in the crypto space that were affected by the FTCS blowup will at least give Defi a chance and try Defi before they decide that the space isn't necessarily for them because it's an industry that needs scale to benefit. For 10 years, everyone was crapping on Netflix, was crapping on Robin Hood, and then you saw COVID happen 2020, a bunch of people sitting at home, all these platforms doubled their number of subscribers and followers, and then the unit economics made unbelievable amount of sense.

And that's going to happen in Defi, and the fact is that's going to happen slowly over time. I truly believe 20 years from now, we will be living on the internet to a large degree. A lot of your life, my life, everyone's life will be done from the comfort of your home in some degree of AR or VR or VR over the internet. And when that happens, you'll start seeing these things really, really get to scale and produce incredible economic outcomes. But the path to get there is a tough one. And it's just sad to see negative events like this that maybe dissuade people from trying

things that are actually probably beneficial to society and economic. value creation in the long one. I totally agree. Well, the good news is the builders are still there. So, as you put out some great content on the internet, where can we send people to learn more about escape velocity and get inside that brain? We operate from a first principle's perspective of trying to be very detailed underwriters in everything we do. We both had P&D and banking backgrounds before we did this. And so what that means is we publish a lot of research on the quantitative side that really digs into the unit economics behind some of these models and some of the regulatory and sector-related shifts that we're seeing. All of that is available at our website,

evy3.xy. And then I have my own substack as well under the name of Monero Mahesh, where I publish research on a weekly, if not monthly basis, really hitting a lot of these big trends that we're seeing, some of the ideas that are most interesting to us, and laying out some of the pathways for how we see all of this evolving over time. The last thing I'll point out is that we just started a podcast as well. It's called Proof of Coverage. We're doing it with Connor and Jonah from Hexagon Wireless, who are two of the sharpest guys in space.

And what we're doing is we're trying to interview and bring to market some of the most interesting opportunities in decentralized wireless that are just not well known yet. I mean, it's still in early space. There's not a ton of distribution, and it feels like Twitter's blowing up a little bit. So bringing these guys to market, bringing some of the most interesting ideas to market,

in an interesting way that helps them frame how they think about the world is something that we're trying to do for entrepreneurs out there. So maybe the last thing I'll say on this point is if you're an entrepreneur and you're building in the D-Y space, please reach out. We'd love to talk to you. We'd love to interview you and we'd love to see how you are continuing to expand the space. And the fact is, we've seen a number of these new projects come up in the last couple of months, even with all the noise going around.

That makes us so incrementally bullish that two to three years forward, we're going to be an amazing place. Well, Mahesh, I'm really excited about what you're building. Thanks so much for coming on the podcast today. Thank you so much, Matt. I think you know that we have a ton of respect for everything you guys do. And we continue to be big cheerleaders of the space and cheerleaders of you guys as well. So thank you so much for having us on and really excited to you. Appreciate it. Thanks for listening to another episode of On the Brink with Castle Island. To find out more about Castle Island, visit castle island. 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.