Tech Brew Ride Home - (TWTR SPACE) The Coinbase Moment For Crypto

Episode Date: April 10, 2021

Here was our Twitter Space from this week. We ended up talking all about Coinbase, helped by some great analysis from Romeen Sheth, who I think you’ll recall I quoted from when we talked about this on Wednesday. You can follow Romeen on twitter @RomeenSheth, link in the show notes. And also, he has a great podcast called Square One, where he interviews founders and investors, folks like Anthony Pompliano, Li Jin, David Sacks, even Andrew Yang. Give it a listen, search Square One on your podcast app of choice. Sponsors: Today In Digital Marketing podcast GivingMultiplier.org/techmeme Learn more about your ad choices. Visit megaphone.fm/adchoices

On April 4th, 2023, around 2 in the morning, a man was found stabbed multiple times on a sidewalk in downtown San Francisco. Hey, who did this to you? What happened next turned the story into a political firestorm. Reports have identified the victim as Bob Lee, the founder of Cash App. From Bloomberg Podcasts, this is Foundering, the Killing of Bob Lee, beginning April 16. Welcome to another weekend bonus episode of the Tech Meme Right Home. I'm Brian McCullough. Here is our Twitter space from this week. I think we recorded it Wednesday night. We ended up talking all about Coinbase, helped by some great analysis from Romine Sheff, who I think you'll recall I quoted from when we talked about this on the show on Wednesday. You can follow Romine on Twitter at Romine Sheff. I've got a link in the show notes. And also, Romine has a great podcast called So, Square One, where he interviews founders and investors, folks like Anthony Pompilano, Lee Jin, David Sacks, even Andrew Yang.

Give it a listen. Search Square One on your podcast app of choice. I feel like there's been so much financial news. Like yesterday, today, all over the place. It's like it's hard to keep track of. Yeah, it's one of those days. Some days I do five segments and I scrape to find five segments. and then some days it's like I could do 10 and I have to leave things out.

But I wanted to leave that stupid Facebook story out today. That was the big one. I know, I know, I know. And I just, but yeah. I know. I understand. It's exhausting. Yeah.

Welcome to the weather that is Facebook preaches. Yeah. Okay. So which one do you want to kick it off? off with. Oh, come on. Let's do Coinbase. Yeah. Okay. Great. And because Romaine's here. Yeah. Why don't we do it that way? Oh, so I should probably kick us off. All right. So, welcome, everyone. Today is Wednesday, April 7th. This is the TechMeme Ride Home Experience with your co-host, Chris McClough, the host of the TechMeme Ride Home podcast. This is a show where we talk

about the day's news. We try to unpack what's going on. We try to understand it, put into a broader context, and basically addressed the need that I felt as I was walking down the street, all by my luncheon, listening to Ryan's podcast, and thinking to myself, man, I really want to talk to someone about this. And then it just turned out, like, I just talked to Ryan directly. And so we decided to make those calls available to everybody else to join in. So here we are. Yes. And, um, yes. The, the news of the day, uh, if people are, are jazzed about this is that, um, you know what? I might not even read, but I'll give you, I remember, I'm old enough to remember when Google went public and they announced their financials and people were like, holy shit.

Right. Oh, I see. But that was at a time where, you know, no one even knew that you could make money on the internet. There's been a lot of holy shit about the amount of money that Coinbase is making, so to put it in context, Coinbase is going to do a direct listing April 14th, and they promise that ahead of that, they would report their quarterly earnings. And, oh, why would you do that? Maybe because you've got some really good quarterly earnings.

And, like, you know, we're going to, we're going to talk about this in depth in a second. But, like, on the one hand, And they're basically, let's just put it on a base level. They're doing profits of as high as $800 million a quarter on $1.8 billion in revenue. So that's a great business. And then, you know, we can get into this very quickly. they're doing already more revenue than the New York Stock Exchange does. They're making more in a quarter than Deutsche Bank makes in a year. I think that's right. Or maybe it's more in a year than Deutsche Bank. But whatever. Look, dude, this is crazy. They're making so much money. And Romine is the person that I quoted on the show today for his tweet storm. So, Romine, if you want to, step in right now, or I can start quoting some of your tweet storm because, like, I just...

By the way, I went and pinned his tweet to the top of his space. So if anybody wants to go see it, it's there. But the numbers are just staggering. And you know what, Rameen, I'm going to tee you up a little bit. The idea that this crypto exchange is potentially bigger than the NYSC or the NASDAQ in a lot of different metrics. Isn't that a little nutty to you? Yeah, I mean, I think that's the crazy part of this whole thing, right? It's conceptually, right? Coinbase broke its numbers yesterday.

And the feedback from everybody was just, this is crazy, right? I mean, the market cap is going to eclipse Goldman Sachs when they go day one, when they go public. They're doing more revenue than ICE, which owns the New York Stock Exchange. They're doing way more than NASDAQ. So conceptually, I think it's just difficult for us to fathom that, you know, here's this kind of fringe cryptocurrency technology that we have. But there was another tweet yesterday on Twitter. I hope I'm pronouncing this guy's name right. Tyler Hogg, I think is how you pronounce his last name. But he's over at Divi. And he had a really awesome tweet, which has not just encapsulated the whole thing, which was Credit Suisse as a bank with 50,000 employees founded in 1856 and has a net income of $2.8 billion. And then you've got Coinbase, which has 1,500 employees founded only 10 years ago and is on a net income run rate of $3.2 billion. So it's just staggering, right? I mean, the numbers are, the numbers are incredible.

And I think the, I mean, the amazing thing also is, you know, the numbers in and of themselves are incredible, but I think the context, which a lot of people are missing is actually even more fascinating. So just a couple of facts, you know, for everybody listening, which actually I think makes the story almost even crazier. August 2017, I'll probably get the dates wrong, but this is about right. I think August 2017 or so, Coinbase did around at it was like a one and a half or maybe $1.6 billion valuation. I think Insight led it, Spark, battery, a couple other folks participated. And that's really when, you know, Coinbase kind of cemented itself in unicorn status and people were saying, okay, you know,

maybe this Bitcoin thing is real, right? But a lot of people wrote it off at the same time because they said, you know, 2017 was the significant bubble. Fast, about a year and a quarter later in October of 2018. And then they did around at an $8 billion evaluation. Now, Andreessen came in, Wellington came in, and the conversation at that point in time was basically, you know, this is insane, right? People were basically talking about how this was five backs, you know, from only a year earlier and kind of the classic signs of, you know,

this is a bubble, the valuation doesn't make any sense, right? People in Silicon Valley don't know what they're doing, et cetera, et cetera, right? So that was that was kind of the shop talk. You fast forward to 2020, why, and earlier this year, right, before these numbers were released publicly, we started seeing all these secondary auctions. So I think in February of this year, there was a private auction and the stock was selling at like 300 bucks a share, which would have been an imputed valuation of around $75, 80 billion, somewhere in that range.

Then in March, there was additional auctions and secondaries, and it was getting as high as $350 a share. And what people were referencing was effectively, you know, the price is now in the $90 to $100 billion range. And so, you know, again, crypto euphoria. This is a bubble, et cetera. And then these numbers come out yesterday, which, by the way, I thought was just brilliant, right, which is you have a direct listing coming out on the 14th. Let's basically release the numbers in the sixth. The old adage is when you're going public, right? You always want to have kind of six quarters in the bag. You know, these guys definitely have at least Q1 in the bag, right, comfortably.

and now we're kind of all left kind of chomping at the bits and frothy, you know, over this direct listing coming out in a week, right? So it's an incredible business. There's no question about it. And I think the context of when you kind of think of the fact that it was a $1 billion evaluation just four years ago. And it's going to break $100 billion, you know, when it comes out next week, also just shows, you know, how fast businesses are moving now, right? We're going to see businesses clipsing these levels faster and faster. And I want to come back to that in a second, but I promised, and I've already broken the promise. Romaine, please introduce yourself. I referenced you on the show today. I don't know

everyone listening has heard the show today. So just tell us who you are real quick. And then I do have a quick question on that. Yeah, absolutely. So my name is Romine Schaubt. Nice to meet everybody. I run a business in the workforce and talent space. We do about eight figures in revenue a year. And I do a ton of angel investing. So I invest a couple million dollars a year into startups across you know, every sector, kind of every industry and every stage. So glad to be with you guys. Okay. So here's my question based on what you were just saying. And I'm going to quote Alexander Tob from a tweet that he did where he said that Coinbase today just reaffirms that market and timing is everything when building a company. You know, a rising tide lifts all boats. And, you know,

that kind of gets into the whole idea that you'd better be lucky than good, you know. And he actually goes on to say that like, you know, teams are great and market fit is great, but timing trumps everything. I'm just curious what you think about the fact that what if this was a year ago? A year ago right now, all of cryptos were in the toilet. And we're going to get into why Coinbase has such a great business. But do you think that it's just like perfect timing for them? Like if this was a year ago, do you think they would be even contemplating going public? I don't know. It's a good question. I mean, I think whenever I think about businesses, I think that framing generally is right, which you think about kind of market product and

team. But there's different levels of kind of longitudinal thinking. I think you need to apply to these businesses, right? So, you know, would it have been perfect timing for them to go public, you know, at the dole drums of the crypto market? No, right? I mean, at the end of the day, no matter how you slice it, this business is inextricably linked to what's going on in crypto. If crypto ultimately fails, you know, it doesn't matter how great of a team they've assembled, how great of a user interface, how great of security infrastructure, et cetera. This company is just not going to work because fundamentally at the end of the day, it's a trade on, it's a transaction platform for crypto, right?

Right. So there's, I mean, there's certainly some element of timing involved here. I think savvy management teams understand that, you know, exactly what I was alluding to earlier. You want to go public, you know, when you've been. have the next, ideally four to six quarters in the bag. So, you know, would it have been wise for them to go public at that point in time? You know, absolutely not. Are they going public at a time at which, you know, we are in a little bit of a euphoric market stage and they're going to basically be able to, you know, get a little bit of a premium for it? Probably, right? But I think the right longitudinal

trade is to say, you know, ultimately, if you believe that crypto is going to have a place in the economy, which is very hard to believe it's not going to now. And you don't. You don't just believe necessarily in Bitcoin, in Ethereum, in any of these individual coins, but you believe there's going to need to be a marketplace for us to transact coins. This is the ultimate pick and shovels business, right? Right. And I'm going to do one more and then Chris can jump in, but I'm going to quote from something that I actually, I don't think I said this on the show today, because I quoted from your tweet storm on the show today, but you said whether retail has enforced inflated the price of crypto or not, it's impossible to ignore if you're an institution at this

point. This is going to further increase the price of crypto assets and correspondingly increase the value of each major crypto exchange. So essentially, what you're suggesting is that, number one, the picks and shovels idea that, like, you know, assuming crypto prices stay high, clearly they can make bank, and it's a beautiful, beautiful, wonderful business. But Essentially, by proving the market, they're almost guaranteeing that the market's going to grow. So, like, and I said, I did say this on the show today. It's almost like the Netscape moment for the internet where it's like there, if, if all the sudden, next week, you know, they have a hundred billion dollar valuation, I don't think people are thinking that high maybe, but like, it's going to prove to people that, like, This is, there is real money here, and it's almost going to be like that self-reinforcing cycle

where it's like, then, all right, then the institutional money comes in, then all the other money comes in. And like, this is almost like a big bang moment for crypto. Yeah, I mean, I think you're already seen that, right? So I think if we unpack your question into a couple, a couple elements. And by the way, I think $100 billion is totally reasonable, right? We can get into that, but it's basically like 13 times their run rate, right? And if you make the argument, which they did, which I think is right, is that, hey, our run rate is a little bit inflated, right? Because, you know, of how much euphoria is going on and, you know, don't think us as having a $7 billion run rate. Think of us as having like a $5 billion run rate.

It's still 20-time sales, right? Which is super reasonable and healthy for how fast that business is growing. That it doesn't even approach, you know, a lot of SaaS multiples today, which are in the 35 to 40x range. But, yeah, I mean, look, I think the right way to think about it is it's kind of encapsulated. in the way JPMorgan almost thinks about it. A couple years ago, Jamie Diamond's coming out on stage and basically saying,

hey, this whole thing is a joke, it's fraud. You shouldn't even be looking at it. And now JPMorgan has a dedicated desk towards it. They're putting out client alerts. They put out the price target the other day that hey, we think Bitcoin can go to 130,000. So the whole attitude has changed amongst institutions. And part of that has been driven by retail, right?

Another big part of that has driven this kind of institutional interest though, is just what's going on in our economy. I mean, we've printed more than 40% of all U.S. dollars in existence in the last year. Now, again, that's not to say that's right or wrong, you know, based on the situation that we were in. You can absolutely make the case. And many, you know, make the case. I would make the case that, you know, these levels of aid are absolutely necessary.

We're going through kind of a complete kind of once in a generation, you know, type shock moment. But it doesn't change the fact that, you know, that amount of dollars being printed by the Fed increases the money supply, which devalues every individual. dollar, right? And people are looking at, well, what is a naturally deflationary asset? What is an asset that can't be printed, you know, at whim, basically based on the government that's in charge? And Bitcoin can't, right? I mean, there's only 21 million coins. It's a finite supply, right? And so the idea that it's kind of a, it's a confluence of multiple forces, right? I think it's a part part of it is a moment in time that's certainly accelerating this retail interest. That's certainly accelerating retail's interest in the product. But I think we see this in a lot of industries.

And I think when you look at Coinbase's product portfolio, the interesting thing is for the first six, seven, eight years of that business, it really was just about sending and receiving crypto, investing in crypto. And for the longest time, it was three coins, right? It was Bitcoin, Ethereum, and Bitcoin. That's right, right, right? Really over the last two years, you're starting to see, you know, a savings platform, a custody platform, a staking business. Like, you're starting to starting to see all these evolutions and you're starting to see a lot more coins that are making it on the platform so you know coinbase to me now is actually more comparable to a true exchange like a NASDAQ, an IC, etc. Because it's not, you know, hey, there's three currencies on here

that you trade, but it's basically this is every individual crypto asset, not dissimilar from how you would trade every individual public equity. So let me let me poke at that for a second because I'm not going to get this exactly right, but someone told me this week that, and actually, Chris and I have experienced this for trying to sell NFTs and things like that, that like if you want to trade crypto on the blockchain, it's basically too expensive. Like, you know, Chris and I have experienced that with gas fees and things like that. It's like $100 to mint to sell for $40. So in a sense, Coinbase has a moat and an efficiency and a cost advantage. for being a marketplace, that for especially, you know, the big moneyed players, like, they'd rather do business on Coinbase than trying, like, if you're some sort of like crypto maximalists,

you're always going to be trying to do it on the blockchain, but everyone else is going to do it on Coinbase. And so, like, that's essentially a great sort of a moat that they can exploit for, the going future, right? Yeah, I think it's two things. I think one is whenever there's kind of like a fringe or a new technology, you always have technology maximalists or people that are at the cutting edge that are kind of focused on optimizing, you know, things like fees or really kind of going to the native source, et cetera.

The reality is, is the mass market and the mass public is never going to be on that fringe of technology, right? So you could have made the same argument, you know, 10 years ago, 15 years ago, et cetera, when you're thinking about, you know, email or different types of protocols, et cetera, where you could say, you know, you'd have a faction in a group which would say, well, you know, we could really, you know, do it in XYZ type way and it'd be more efficient or so on and so forth. But, you know, why is email pervasive, right? Or why are these businesses like Coinbase, et cetera, you know, pervasive? It's because the mass, the vast majority of people,

like, my thesis in 10 years is people are not, like, and you'll kind of know crypto has really made it when it gets to this moment. is in 10 years, you're not going to start calling companies, crypto companies, right? When these companies are just natively performing on the blockchain or leveraging crypto, and we're not identifying them as crypto companies, you know crypto will have gone in mainstream.

So I think that's one. I think that's one portion of it, right? I think there's another portion of it also, though, which is whenever you look at any business, right, especially any disruptive technology, it typically always starts out. Like, there's a clear pattern of these businesses starting at the top of the stack, and then continuing as they get adoption to lower things

like transaction fees, et cetera. So Uber started out as a black car limo service, right? Uber pool was not in the cards when that business started out. Tesla has famously put out their plan that, you know, the whole idea was to build the Model S and such so that they could get enough economies of scale and enough kind of modular parts or know-how to build cars like, you know, the three and more economical cars. So I think we've seen this in technology generally, but we've seen this in brokerage, right?

I mean, it used to be $9.99 a trade on E-Trade or Charles Schwab or so, right? I mean, Robin Hood has completely come and knocked that out of the part. You can make the argument they've taken it too far in the other direction, which is, you know, they're basically lowering the interest that you would require for margin because they want to sell your order flow, right? So I think over a period of time, these fees come down. And I think that's actually a challenge candidly for Coinbase's business, which is, you know, the fee structure is going to come down, you know, over a period of time.

Yeah, let me give you one more before I let Chris in, and I'm so sorry, Chris. This is about specifically Coinbase and competition and being in the Picks and Shovel's business. Like, PayPal is doing this and Square is doing this. And so when we're talking about margins, and I think like Coinbases, their fees are like two and a half percent or something like that. So, you know, one of the reasons why Square has been exploding in, if you've been a square shareholder recently, is because of crypto training and things like that. So, like, is Coinbase, you might not know this.

I don't know if you're an analyst of Coinbase stock or whatever. But, like, if everybody sees that there's tons of money to be made here, which we can all see, like, is the danger that everyone's going to come and try to eat their lunch? Yeah, so definitely not a Coinbase analyst. So no, we should take my advice as a Coinbase analyst. So let's unpack that. I think there's a couple of things in your question, right? So one is, you know, what's the impact of other people seeing that there's an opportunity, right? And then the other part of that is I think it's inexorificably basically tied to market size. Right. So the way I think about this is it's probably best explained actually through an analogy. And then I'll explain kind of the logic or the parlayta Coinbase's business. So a lot of people talk about self-driving cars for Uber, right? And the classic kind of trope, I think the classic kind of false choice fallacy that people fall into is self-driving cars are going to come eventually. And when self-driving cars come, there's going to be no room for drivers in Uber's business. Okay. Now, if you look over the next 10 years and you look at ride sharing today,

ride-sharing is like 1% of all miles that are traveled in the world, right? And so let's say self-driving does come into place, right? If Uber over the next year, lift any of these businesses, let's say the global share of ride sharing increases to just 10% of all miles that are traveled, that market is going to grow by 10x. And let's say self-driving comes in and takes 50% of that market. Let's be overaggressed and say they take 70% of that market. You're still going to need 3x, the number of drivers that you have on the Uber platform. today to satisfy that demand. So that's kind of the way I think about Coinbase.

Coinbase wrote in their S-1, they said, look, we want to attract the entire smartphone wielding population. Okay, that number is 3.5 billion people. So let's say they did get all those folks, or let's say all of those folks kind of came online. And for a second, let's just assume they got all those folks and other competitors didn't, right? If they got all those folks, that's about 350 million active users, right? And that's at about a 10% ratio.

They have about 56 million users and I think about 6 million are actives or so. So let's say they got all 3.5 billion users. And let's say they kept their ratio, which is 10%. They have 350 million active. That's 50x from here. And that's just assuming you're talking about the transaction product. So I think a lot of times what happens in technology is we get like, We get really kind of cornered almost into this false choice, which is this idea of, well, what happens when Square comes in and PayPal comes in and all these players are going to come in. Anytime there's an attractive market, anybody that has the ability and where it strategically makes sense is going to build buyer partner. They're going to be a part of that ecosystem. So there's no question that all these other guys are going to come in. The argument I would make is there is so much room to run here. We are so in the first innings of this. And I think that's the important part for everybody to think about, which is,

on one hand, kind of our mental models are breaking because this company is going to go public at $100 billion. Goldman Sachs is $110 billion market cap. So on one hand, we're kind of breaking our mental models of saying, how did this thing that came out of nowhere in only the last 10 years is effectively going to eclipse every major financial global financial institution in the world? That's like that's what's happening on one side of our brain. It's kind of breaking our model and we're not able to really grasp it. On the other side, though, when you actually look at the size of these markets, it's just so obvious that we are so in the first inning, it's not even funny. Right. Okay, so let me push around because I think like what you're saying is, is interesting in the

sense that these things will grow, just as if you were to invest in Netscape, you know, in like 1994, I think it was then. Or, you know, like I was involved in the launch of Firefox in 2004 to for to imagine the web growing into what it is now and how ubiquitous it is. Seems like something, of course, it's not guaranteed, but it seems like that is where a lot of the winds are heading. One of the things that I'd like to understand from your perspective is the, I guess, power that the platform owners and builders have to affect the ability for Coinbase to service those customers that you just mentioned.

So it's one part, right? So whether it's Apple Pay or whether it's, you know, what Facebook has been trying to do with DM or whatever it's called now, or just Android and Google Pay, those don't really have onroads into crypto yet. Maybe they will. Obviously, PayPal's in there and there's, you know, cash and Square and those guys are doing it too. And then the other part of this question, though, is what is or what are those new millions and millions of customers actually doing with Coinbase? Because Coinbase currently seems like this nice on-ramp into what effectively is sort of like a Forex except it's, you know, defy. And so how relevant is Coinbase actually to the

customer base that you just described in the future? Like, yes, payment and cash is relevant to all of those people. And yes, crypto can replace kind of the fiat currency of the past with digital currency of the future. But I'm trying to sort of just wrap my mind around this growth potential and whether or not Coinbase actually has control of its future, given, you know, what we're seeing with Facebook where they don't have a mobile or a hardware platform. And so they're scrambling to try to win the future, or at least these parts of the future with an augmented reality headset or a watch or something like that. So these are all the things that I'm trying to sort of understand when it comes to

what coin bases long-term businesses and a relationship to its potential customers are. Yeah, I mean, look, I think in some sense, that's kind of a million-dollar question, right, Chris, because none of us are any... A multi-billion-dollar question. Yeah, multi-billion-dollar question, right? on how they're thinking about it. But what I will say is, if we just kind of look back

at the framing of your question, I think there were two parts that you mentioned that were really important, one of which was, you know, you were involved in the early days of Firefox, et cetera, and nobody had any idea

on what the internet was going to turn into, right? And nobody could imagine that, right? That's number one. I was just watching this. Somebody had sent me this tweet a couple of days ago,

which was basically like a Good Morning America clip on like what was email. And they were spending like 30 minutes talking about the at symbol and what did that actually mean, right? And that was only 20 years ago, right, which is just astounding. So that, I think that's one big part of it. I think the other big part of it is, you know, if if you're in a situation like Facebook where we're saying, you know, hey, they're clamoring for their life or they're clamoring for kind of that next thing, I mean, that business is an $800 billion dollar business, right? With billions of users on the

platform. And I think the thing when you, the thing that's exciting when you look at a business like Coinbase is they only have 56 million users. I can't off the top of my head, and I'd even challenge folks that are listening to this with some decent research, think about a ratio of a company that only has 56 million users, and of that,

6 million active users generating the kind of financials that these guys are generating. I mean, in a sense, it basically says, like, if these guys can go pick up 50 to 100 million active, which is a penny draw, in the world. You're talking another, you know, 20 to 30 X from here. And again, what we're assuming, and this is kind of always how you have to have these discussions, right, is, you know, we're basically assuming that they're existing in their product. I'll give you an example.

A couple of years, I've got a podcast myself as well. A couple years ago, I'd interviewed Megan Quinn, who used to be at Spark Capital, who's now at Niantic Labs. Yeah. And Megan was on the, at least at that time when she was at Spark, she was on the board of Coinbase. And I remember asking her this question. This was like four years ago. I said, you know, what do you think about the price of Bitcoin, right? And how do you think about that in relation to Coinbase? Isn't that the big existential risk? And at that point in time, I'm sure with obviously some purview into being on the board,

she told me, she said, you know, Rameen, I think you're, I don't think you're thinking about it big enough. And I think you're thinking about it incorrectly, which is you're thinking about Coinbase basically as a platform to exchange Bitcoin and being tied to Bitcoin. Because at that point in time, that's basically what it was. Right. But the way we think about the business is it's basically a trend. It's basically a transaction platform for all cryptocurrencies. And remember, in that period of time, you know, kind of late 2016, early 2017 or so, that was not obvious.

Like maybe if you were super into crypto, you were looking at all these different currencies. She's talking about actually using crypto to buy real things. I mean, like, you know, when Tesla needs to accept the coin, right, to buy vehicles, that's not powered by it, Coinbase. No, no, not at all. So what she was talking about was she was talking about it basically being an exchange platform. in the same way that NASDAQ or New York Stock Exchange or any of these, you know, are, like end users, you know, like the users of smartphones don't really have a relationship in NASDAQ,

at least as far as you can tell. Like maybe they buy, you know, some of NASDAQ's products, but not in a conventional, everyday, day in and day out kind of way in which you might touch Apple Pay, right? So help me, like, connect what Megan's saying to this future potential, like, you know, business that the Coinbase is going to have. Well, I think they're different businesses, first off. And I think that's actually what points to the opportunity being so large, right? So when you have the squares, et cetera,s of the world, I mean, those are payment gateways, payment platforms, right?

That's their business, right? And so when they're thinking about, hey, we need to have a Fiat on ramp, right? The way that they're thinking about it is not so much we need to have a Fiat on ramp so you can just store cryptocurrency as an investable asset for the sake of it. They're thinking about that as the reserve currency of the world is the dollar. The vast majority of currency is in Fiat-backed currency. And so if we ever want any sort of transaction system, right, that is exchanging cryptocurrency at any meaningful scale, we have to develop a fiat on-ramp. Now, in the same way, businesses like Coinbase, Cracken, et cetera, are also solving for that fiat-on-ramp problem, but not because of increasing purchasing proficiency, right? They're creating that fiat on-ramp, because if there's no fiat on-ramp, there's no ways for people to translate dollars into crypto, right?

So I think they're different businesses. I think one set of businesses, the visas, the squares, the cash apps, et cetera, the world. I think there is a lesion there around how does cryptocurrency, you know, form as a transaction mechanism. And then for these other businesses, the coinbases, the crackens, et cetera, of the world, you know, their pure play exchanges. And I think part of the nuance and what's interesting is, you know, as we kind of head into this new world, there's no clear, you know, example by definition, because this new financial system is, you know, is different than the legacy financial system. So you're right, you know, we don't really have, quote, unquote,

relationships with the NASDAQ or so. Now, the companies that we invest in via platforms like e-trade, Robin Hood, et cetera, et cetera, obviously have relationships, you know, with those exchanges. If those exchanges did not exist, you know, all these front-facing platforms like the Robin Hoods, et cetera, of the world would have zero utility because we wouldn't really able to buy anything. Right. Right.

Right. Yeah, what did you buy with them? Yeah. Exactly. Right. So I think of it as two different businesses. And look, you know, as like one of the things that I think is really interesting about, you know, kind of this space generally is, you know, folks talk a lot about Coinbase. And obviously we're talking about Coinbase and their numbers are phenomenal. But, you know, Coinbase has been driven by retail investors, right? Like companies like Cracken and a couple of these other exchanges have very sophisticated products from an institutional perspective. And so you could actually make a pretty clean, I think, and compelling argument, you know, that Coinbase is a little bit ahead, right? And part of it is because they really rode this retail wave. but as we've seen in retail, you know, eventually retail fees go to zero.

And so that is an inherent risk in the business that they're going to have to translate towards. And when you look at other institutional capabilities, things like bank charter, so on and so forth, you can make the argument, you know, the crackens, the Gemini's, et cetera, is the world, are very sophisticated on that lens, right? So I think it's, I think to go back to your earlier kind of point, Chris, it's two different types of businesses. That's the main framing. But I just think there's so much room to run here that, you know, it's hard to, there will be competition and there will be effects of that.

You know, that always, you know, competition affects pressure on margins, things like that. But I think there's just so much room to run that, and there's so many possibilities we still don't know of. It's going to shake out in a way that I think is kind of, you know, winner, you know, it's not going to be a zero-sum game, basically. Yeah.

I mean, I think what I'm trying to, you know, and again, like my bias is more towards like consumer. And so I'm trying to sort of understand this and put this into that perspective. Whereas to me, Coinbase is obviously more in the fintech space, more in the financialization space. And to me, inherently, you know, money is just a different beast when it comes to just the personal relationship that people have to that and to finance and to all of those different topics and conversations relative to entertainment, celebrity, sports, like those things which feel more accessible and which, you know, this power the wave of, like, social media. So I guess what I'm trying to also think about with this future is if Coinbase has 56 million customers, of which 6 million are active today, I don't fully have a grasp on what those 6 million people are doing. Like if they're big-time traders and they're like doing day trading of individual coins and they're just doing like the leverage and it's like a whole new financialization and financial market. But to me, that feels much less accessible than even something like a Robin Hood where, you know, the stocks that you're buying and selling are, you know, to some degree household names or they're nostalgic or whatever it is and there's a relationship that's the thing that you're buying. The abstraction of cryptocurrency to me puts this in a realm beyond what, I mean, you literally have to be sort of a very online person who, like, lives a lot on the internet to kind of understand the things I think that we're talking about, which is the future potential of where this is going.

And so I guess when I'm thinking about the long term of this, on the one hand, I'm trying to gauge how fast this is going to happen. And how, I mean, so there's two other angles now that I'm thinking about where this could grow really, really fast in a way that we don't have a lot of antecedents for. One of which is just a younger generation grows up. And crypto is like totally normal to them because, you know, they're used to, you know, World Warcraft or Minecraft and buying things in the virtual world. A little bit, a little bit ding, ding, ding. Yeah. What does that mean? I mean, I think that that's part of it, but go on.

Make your second point, yeah. All right. So the first part is just that there's a younger generation that grows up where they are, let's say, crypto-native. Then the other part is the rest of the world, which is underbanked or unbanked or China. And in those parts of the world, I can imagine them adopting these things very, very quickly because they're built into the apps by default. And rather than, you know, you had this conversation with Pomp recently about how, you know, it's in some ways where the United States or, you know, the West may be at a disadvantage because we are well banked and we have credit cards.

And so the need and the pain to move to something different is much less. Whereas in other parts of the world, they're just getting the stuff for the first time. So the things that are going to learn is their first exposure to financialization could be crypto or defy. So those are the two aspects of this that seem to me likely to accelerate this trend versus Coinbase coming in and being a replacement for existing financial instruments that people are used to in the West. So how does that square with maybe how you think about the future potential for Coinbase? Yeah, I mean, I guess the way I think about it, so again, a couple of things that we just unpack what you were saying. I mean, I think one thing you're saying, which is absolutely right, is if you look at emerging economies,

or developing economies, this always happens, right? So there's a reason why in Africa and India, et cetera, they've accelerated to their mobile moment and they move past landlines. This always happens in technology, right? Exactly, right? There's kind of a leapfrogging moment. But I think one of the things, like, you know, what I would challenge is kind of this idea of, you know,

hey, you go on Robin Hood and you buy kind of household names, and that's, you know, more secure or there's, that's more familiar, it's more familiar, et cetera, right? I mean, the argument that I would make is like you go on Robin Hood and you invest in companies that you believe are more familiar, but how many people are out there investing in every cloud stock that folks on, you know, in tech, VC, whatever, Twitter talk about all day long, right? I mean, if you're on, if you're in kind of tech Twitter, you're familiar with all of these cloud companies, right? The Bessemer index. I mean, down to kind of the 40, 50 tickers in there. But who, if you're not kind of involved in like tech, Twitter or so, or you're not a hedge fund or, you know, looking at kind of this sector of the market, I mean, I don't know if I would make the claim that, you know, going on Robin Hood and buying HubSpot or buying, you know, Shopify or any of these stocks is super common or super familiar. I mean, they're starting to get more and more familiar as they become larger and larger businesses and they cross over into more kind of quote unquote non-tech, right? type folks and they infiltrate into real businesses and into real consumers. And I put real kind of

in quotes, which is, you know, not people in a tech echo chamber or ecosystem. And I think that's what's happening with Bitcoin, right? I mean, five years ago, right, there's a reason why Coinbase as a business was the size it was, as big as the addressable market and the potential folks that were buying this stuff, right? We're not as familiar with it. Right. And it was fringe and it was weird. and it was, you know, hey, is this a scam and things like Mount Gocks were happening. And it was the wild. Oh, my God. Right.

That was huge. Right. But now it's totally the opposite. And I think to your earlier point of kind of you're going to have a generation that grows up and this is just familiar to them. I think it's the same concept, right? Like our generation grew up on internet companies. They're native to us. Like we don't call these companies internet companies.

We don't call them dot com companies. They're just businesses, right? I mean, they're just businesses. And that's exactly what's going to keep happening with crypto. Now, I think what we often try to do in technology is we often try to look at an emerging trend and immediately say, you know, we have to find every use case for this. Here are the use cases why this works. Here are the use cases why it doesn't.

But this is super early, right? I mean, things are going to naturally, fees are going to go lower, transaction speed is going to go higher. Security is going to be better. Crypto, when we're talking about crypto in 10 years and we're already seeing it, right? That's one of the exciting things about when you think about. you know, these exchange businesses and you think about, you know, these hype cycles or when crypto's price goes up, when it goes down, et cetera. What hasn't been going down is the number of

developers that have been entering the ecosystem, the number of projects that have been getting started, right, and the amount of mind share that's been attentive to crypto generally. That has been consistently rising year over year at significant Kakers, right? And so that's the part that, you know, a lot of us kind of in mainstream don't look at. We look at things like what's the price of Bitcoin, etc. These are all proxies for what's going on underneath, which is crypto is just becoming more and more pervasive, more and more popular. It's like an index on belief in this new system or use of this new system. I think that's exactly right. And I think if you're one of these exchange businesses,

it's hard to find us, it's hard to look at a scenario in which you don't look at that. It's just overtly bullish for your business. I don't know how that necessarily translates exactly into the business structure today necessarily other than, you know, buying and selling cryptocurrencies because that is, you know, 80, 90, whatever, plus percent of Coinbase's business, like that is the business. But if you have that level of activity, that level of project, that level of innovation, that level of talent, it's hard to see how derivative products don't exist and then, you know, well-positioned, trusted brands like a Coinbase, a crack, and, et cetera, enter those spaces. Romaine, if you don't mind, I'd like to put a pin on this

topic by asking one more sort of funny question. And then you're welcome to stay for other topics as well. But I said this on the show today. How should we think about the fact that, at least at this point, the biggest business built in the crypto space is sort of antithetical to crypto ideals in the sense that, you know, crypto is all about decentralized everything. and essentially Coinbase is a centralized marketplace. Like, is there anything we should learn from that? Or what do you think about that? Yeah, it's a really good question.

And it kind of ties to, I know, over the last week or so, there's been a lot of news of China and kind of developing a coin, and we can talk about that if you guys are interested. But I think it's interesting, right? I mean, in one sense, you're right, it is totally antithetical. I think that's why, again, amongst kind of like, you know, fringe crypto enthusiasts, not really fringe, but I mean like cutting edge kind of crypto enthusiast, there's all this excitement around D5, right? Because again, the ethos of

crypto is decentralization. But look, I think it's really hard. I think it's really hard to have any sort of concerted or aligned movement if you don't have some sort of centralization, right? So I would make the argument that it'd be very difficult to gain mass adoption because of the way that we are psychologically programmed because of the other products that we use and because of the kind of cultural in baked norms we have in our brains and our DNA to basically just have mass adoption of a system that has ultimate decentralization. And again, I'll give another analogy. You know, self-driving cars, let's say, again, conservatively, it takes 30, 40 years and it's like super safe. It's been proving kind of time and time again. It's like 99.99% safe. You're not going to get into an

accident, et cetera. It's going to be really hard for people like us that grew up driving cars to just completely cede control, right? Like our kids or our kids' kids that grew up in a system where they had self-driving cars from day one, they never had licenses, like all that is foreign concepts to them. That's just going to be the way of the world, right? But for people that had control to then give up control, like as human beings, we are very tied to control, right, and knowing things, even if it's the unknown we want to know about it. I think it's just very hard when you have mass markets working in centralized financial systems where you feel like, you know, I've got a bank, I've got, you know, it's a reputed name brand. It is something, you know,

I can trust, et cetera. I know they have a physical branch. Like all those things don't actually matter, but where they do matter is on your psychology, right? And so I think it's going to be interesting to see how all this evolves. I mean, Coinbase themselves, via Coinbase Ventures has made a ton of interesting investments in Defi and just, you know, the decentralized ecosystem generally. But I don't think you could have, I don't think you would have mass market adoption purely from a bottoms up decentralized way, right? So I think a centralized fiat on ramp type mechanism is just required for this thing that even have a shot at getting off the ground. So one thing that I'll bring up in this context, in this paradigm, which I think is relevant,

Because, you know, of course, we want to look at past, I don't know, examples, behavior, like, successes, and try to predict the future from what's happened before. And where my mind goes in that sense is to think about, you know, if you're saying that Coinbase, you know, either through angel investing or not angel, just like investing through Coinbase ventures or through its presence in the marketplace, that it becomes something of a kingmaker for the next set of products or applications that are built in the crypto space, Facebook had that role to some extent thanks to its creation and propagation of the Facebook platform. And of course, there were a number of outcomes that were, let's say, not so.

We're somewhat problematic, and we're still dealing with those things. It does feel like in this case, what's interesting is that if there was such a thing as Coinbase Connect, the fact that Coinbase is so regulated, that there are so many financial regulations that exist on the institutions that participate in this world, unlike the world of social media and social technology that really got its kind of, I don't know, became prominent around 2009, 2010. That suggests that the types of things in how people build them will be different and there will be a level of, I don't want to say, like, total protection and, you know, care built into them, but it may prevent some of the distortions and the abuses that occurred in the unregulated market space. So I suppose on the one hand, what I'm sort of imagining is that the types of things that Coinbase wants to see built will be built, and they'll be built with a different, I don't know, set of restrictions on how those things are built because of all the regulations that are inherited from the financial world. And I don't know if that will have an inhibitory effect or it will just create maybe slower innovation but more robust innovation that actually goes deeper and longer. than the types of things where you built like a zinga or whatever and it was you know cool for like five minutes while it was hot

but then of course people became you know really inert to it because they got annoyed or there was like you know exploits and hacks and attacks and so on and so forth so I'm curious like how you look at coinbase being an operator in the space and driving innovation relative to the defy community which is really about decentralization which is really about protocols and white papers and you know I don't know where or if interop is going to happen in like a number of these places or if that even matters because it is a bit of like a wild wild west out there but coinbase seems to be rising above the fray in so many ways and as you say on the one hand there's the fiat on ramp which is maybe symbolic of the broader I don't know approach to and and I don't want to say this without really knowing it but like to be somewhat more responsible as a player in the space relative to

those that have come along and just sort of exploited their ICOs and then you you know, went bust quickly. You know, I guess I think about, it's like, it's interesting to me to also put this in the context of the creator economy because the kin cryptocurrency was built by the guys who are building substack right now. So a lot of the same ideas are being recycled by a lot of the same people, but they're finding different outlets for those energies and for those ideas. And again, like, I guess I'm trying to just like replay the success of Facebook and

wondering if Coinbase will have a similar role historically in the, in the crypto defy world. Yeah, a lot there, and I'm by no means a defy expert, so I'll kind of caveat that, right? But I think there's a couple of things there, right, which is, you know, if you look at just Facebook and Coinbase, like, businesses aside, I think there is a distinction, which is Facebook is really an end-of-one business, and Coinbase is a one-of-end business. And what I mean by that is Coinbase is one of several exchanges. You know, they have grown their market share quite precipitously over the last two years, I think from around 5 to 5.5% to about 10 to 11% or so. But they have 11% market share. That is a very different market time.

And a very different market structure than a company like 50% in this book. So I think the influence, the leverages than it is in one of end businesses, I think what it also does not for distribution. And that's where social media business and end of one business from an exchange perspective, but then they are also an end of one business, sorry, a one of end business from an exchange perspective. They are also, you can make the argument a one of end business from the crypto transaction payment layer type ecosystem.

They by no means have a monopoly on that ecosystem, whereas you can very well make the argument that when you look at businesses like Facebook, businesses like Google, these are end-of-one businesses. If you want distribution, if you want to show up in search engine results, you're on Google, and you got to play by their rules. If you want to be in the Apple App Store, you got to play by their rules. If you want to reach people, you know, through social media, et cetera, you got to play by Facebook's rules. And after they picked up Instagram and WhatsApp and right, on and on and on, you got to play by their rules. This is not that type of business. And so while I think they will have that type of influence, and again, I think there's just so

much unknown in terms of how these use cases are, you know, over the next 10, 15 years. I don't think they're going to have that level of influence. And again, and just to kind of bring it back to the perspective, right, this business is 10 years old, right? So the fact that they've gone from kind of total fringe, you know, only super fringe technology maximalist 10 years ago to where the business is right now, this is going to be, it's going to be a totally different world, you know, in the next system is Coinbase isn't the only one trying to do something capital, et cetera, that's going into the ecosystem is increasing as I would be fundamentally different. Got it. We're getting a little of the audio breakup and I'm going to blame spaces since it's still in beta. But I think I understand your broader point that the business that Coinbase is in is different than the business that Facebook was in. And therefore, there will be many, I don't necessarily many Coinbases, but of course the competitive marketplace is different because of the relationship of the asset that Coinbase is, I guess, harvesting or allowing people to interact and transact with.

whereas when it comes to personal data and relationships, and one of the things that's interesting about, you know, Coinbase in general is that I would imagine that Coinbase only benefits and becomes more powerful than more relevant, the more people use it. In other words, the greater the network effect of crypto, the more salience Coinbase has to, you know, many, many more businesses and consumers.

So that at least suggests that many, many more boats will rise as Coinbase finds success because that will also spell the rise of the distribution of crypto more generally. There was a tweet today that I almost used that was something like that. I think that's exactly right. And I'm not sure how much it is.

Rising all boats. Rising all boats. Sorry, go ahead. Yeah, that's exactly right. Sorry, guys. I think I'm kind of dropping in and out. It might be a lack on my side. But it's, yeah, I think that's exactly right, which is these businesses, you know, N of one businesses and one of end businesses are just fundamentally different. The market structures are fundamentally different and

kind of the evolution of these markets generally because of that dynamic are fundamentally different. Cool. Okay. So let's put a pause in the Coinbase story. And if, you know, you're, you're more than welcome and invited to stick around. In fact, we'd love to hear a little bit more about the China coin, if I can call it that, which is just mind-blowing in some respects, well, in many respects, partially because if I'm like positioning that, and you can go into a little bit more about what it actually is and what it means and what it sounds like, because I don't have the detail straight, but when I think about what Biden's doing with the infrastructure plan and all the money being spent there and the way in which the stimulus checks came out, you're kind of looking at that and you're like, wow, it feels like we're still in the 70s.

And then China's like, oh, fuck it. We're just going to like do defy. And or, well, actually, it's specifically not defy. It's the centralized phi. But it's like we're going to use blockchain and crypto to enable the government to be able to interact with currency in a very different way that's such like way more trackable, traceable. and actually works against many of the ininivity capabilities or aspects. Chris, let me jump in. Please. I'm going to quote from the Wall Street. Oh, sorry. Exactly. I'm going to quote from the Wall Street Journal piece that I did yesterday,

which is it's not just, it's not just like, it's more trackable and things like that. It's literally, if they have this new digital yuan that's going to come out, it's literally programmable. So quoting here from the journal piece, Beijing has tested expiration dates on the currency to encourage users to spend it quickly for times when the economy needs a jumpstart. It's also trackable, adding another tool to China's heavy state surveillance. The government deploys hundreds of millions of facial recognition cameras to monitor its populations sometimes using them to levy fines for activities such as jaywalking. So a digital currency would make it possible to both meet out and collect fines as soon as an infraction was

detected. And that's ending the quote right there. But I also said, you know, forget about all that stuff. Like, you know, think about like levying taxes and things like that. In essence, this is, this, we're continuing to talk about cryptocurrency, if cryptocurrency was a dream built on like freeing money from the sovereignty of states, like this is the complete inverse of that where the government can literally take the money in your wallet and disappear it depending on whatever infraction you have, whether ever taxes you owe, or whatever, or, or, Or just, it's another level of monitoring what you do in your daily life. Yeah, that was kind of a mind-blowing thing.

That's why I devoted so much to it yesterday. Yeah, I mean, the China coin in general is just, it's a really interesting topic. So, you know, backstory kind of for everybody that's listening is, and I think this broke, you know, a couple of days ago. I think the Times might have had a piece on it. but basically Rameen just to if you leave the room

and then come back and then it might fix the last maybe I'll DMN if you can hear us Rameen yeah oh yeah oh I think you left and maybe he'll come back and then we'll try that then I mean you know I think we had this this issue with Twitter spaces last time around this time too

right because I was the one I was the one that couldn't be heard all of a sudden. You went into the Bermuda Triangle. That's right. Well, that's the other thing is like now if we see him come back, can you see him? Oh, right. We have to make him a speaker. Let's see.

Well, okay. One thing that I did want to point out, though, you pointed out how some of the currency may actually have an expiration. Oh, here he is. He's connecting right now. Okay, cool. I think he'll be given the ability to speak when he returns. But there are actually, I think there are, like,

these civic coins or something that communities, what are they called? New York had these. And I know that actually, I think you covered this on the coronavirus ride home show, like a year ago. And the idea was to create these local currencies that you had to spend within a certain geographic radius and they would expire. So people wouldn't actually save them and they were motivated to actually create currency. In other words, the movement, you know, like the capillary system of movement of value. And so that idea is actually not that great.

Although, of course, when you think about sort of like the Chinese government, I don't know, like there's just sort of like this Western slash American responses. It must be terrible. But actually, it's kind of fascinating to imagine that things that you can do in terms of motivating certain behaviors or demotivating others. I mean, yeah, listen. Remains back. Let me see. Are you here? Can we hear you?

Maybe. Okay. Brian, go ahead. I was going to say, programmable currency, right. There's insane things you can do with that. For better or worse. Well, I mean, right. So, you know, the best case scenario is, like, again, and I think the journal piece suggested this, that, like, all right, you have a, you have a recession, then you can, you know, double the value of your currency for a certain amount of time and things like that. Or you have a natural disaster and you need to infuse sort, you know, capital in a certain area to like, you know, backstop sort of recovery and things like that. Right. Programmable money is amazing.

But at the same time, all of the programmable money also means that, you know, in a sense, if you think about how cash and fiat currency has always functioned, it's always functioned. This is a crazy analogy that I'm just coming up with right now. It's like in, the TV and magazine era where you had to buy ads where you assumed the audience was, but you didn't know how many people actually saw your ad. Right. So now, the governments have always been able to like, well, we know how much currency we have in circulation. We know how much is going here.

We know how much inflation is happening. But now, this is the era of it's impossible not to know. It's the era of like surveillance capitalism in the sense that. We know that there's dollars sitting in your wallet. We know what you spend it on. We know that, by the way, we caught you on this camera. And so you j-walked and we can, but also, we can ding you if we decide that we don't like you. Right.

And so that's the Orwellian stuff. I mean, this is going to start so fast, right? Because I kind of feel like we have no credibility in this conversation until or if we start designing like the USD crypto coin. because it feels like the U.S. government would probably do similar things. That's another story, which I feel like if Romaine can come back, I feel like he'll have something on that. But keep going, because I will have if he doesn't come back. Okay. Well, I guess. I think I'm back. Great. Okay, yes, we can hear you. Yeah, I'll just, I'll just like say my part, which is, I think that it's a mistake to, I don't know,

like, to let these stories, like, get away from us in the sense that, you know, a couple years ago, all the conversations like, this is like 2016, were about creating like the WeChat of the West. And like Facebook was, you know, enamored with that idea, seemed to be pursuing it. That was like the whole bot thing that was going on. But it sort of misunderstood or took the wrong message from. And like our culture doesn't really support the types of things that enable a WeChat of the East to exist and to thrive. So in a similar way, like I feel like we, I don't know, in the U.S. marketplace, we are resistant to some of these ideas because they seem quote-unquote un-American, or they seem like they're not part of our culture. And yet, the frustration

that we have with government also could be solved if we actually moved in this direction. So the Orwellian things that you're worried about, I feel like either can be addressed through, this is going to sound so naive, but whether it's like smart contracts or more transparency or other types of mechanisms that we just haven't invented yet and haven't thought to work on because we're either so lazy or so paranoid that we just don't want to go down that path and engage with these questions. So I just, I don't know, I would push us to be more thoughtful and intentional in this conversation than to say, oh, because China's doing it, it must be bad. Yeah. I mean, I think there's a couple of things there. I think one is, one is there's, and we kind of saw it with the pandemic, right? Like, you can compare, if you compare cultures and you think of kind of Eastern cultures, like I'm Indian. by my native, and you think of Eastern cultures, right? Philosophically, the way that Eastern cultures operate is it's much more unit-driven and that the way the Western cultures especially operate is it's more individual or solo-driven. And there's strength.

Collective versus. Yeah, collective versus individual. Yeah. And there's strengths and weaknesses that come out of that. I mean, I think there's a lot of reason why you see so much innovation from the West. I think there's a reason why you see, you know, a lot of kind of group-oriented or collective oriented activity or nature or so that needs to be developed in a certain way, coming out and emanating, you know, from the east. I do think, though, on this issue, there is a good perspective

on the U.S. side, which is, you know, this does start to get a little wellian. And let me, let me paint the picture in a couple different ways from the China side, right? So what's happening in China right now, you know, with this rise is, you know, Chinese citizens themselves are not responding positively. So cash circulation of the yuan over the last year has gone up to about 10% or so. And it's specifically because people don't want the Chinese government monitoring, not only every element of the economy, but every element basically of citizenry, right? From a macro perspective, more broadly outside of China, this can actually be very dangerous if the U.S. doesn't do something about it. So dollars, obviously the world's global reserve currency. And if that changes,

especially to a Chinese-backed authoritarian currency, that would have serious geopolitical ramifications, right? The Times, I think, had a piece on this a couple of days ago where they basically had an example of, you know, how Kerry Lamb, who's China's top official in Hong Kong, you know, she had sanctions basically levied against her, and she had a stockpile of cash or thing in her house because banks basically feared, you know,

that if they accepted her business, they'd risk exposing themselves to a U.S. freeze. while a digital yuan changes that, right? I mean, you can exchange money without U.S. knowledge. You don't need the SWIF system. You know, basically money can start moving without U.S. infrastructure monitoring it. So the effect of things like sanctions all over the world, money laundering, you know, money moving to different powers between different sovereigns, et cetera, starts to change dramatically. I mean, a lot of the Swiss monetary laws, the reason why there's a lot less, you know, black box rules in the Swiss system now is because the U.S. basically said, hey,

You know, we're either not going to play ball and we're going to make you return every U.S. citizens money and expose it, or you need to play by our rules, right? So there is, you know, this is a calculated move by China. It's a building block for them to move into the global economy, like actually be integrated into the global economy versus just being an isolated, you know, participant. Right. And so we have to do, we have to do something about that, right? So whether it's, whether the answer is a U.S.D. currency, et cetera.

it's unclear. I think there's a lot of arguments on both sides. And it goes again to the kind of this antithesis of having a centralized system, creating a, you know, operating a decentralized currency. But it's certainly the case that we, you know, when Facebook was developing this, I think it was chided by a lot of U.S. legislators and it was shut down because it's a U.S. company and U.S. regulations can facilitate that. But now that China is effectively doing the same thing, it's definitely a national security issue. Yeah, so I did mention that when I quoted this piece yesterday, but then I went down a rabbit hole last night and I tweeted, so I didn't share this on the show, forgive me.

But last night I tweeted, I was like, oh, my God, I just realized that by the end of the decade, we are 100% going to have a USD-backed digital cryptocurrency because this makes so much sense, like, when you think of the idea of being a superpower and these geopolitical things, one of the many ways that the U.S. has been the superpower for the last hundred years, especially since World War I, is because we have the global reserve currency that everyone can trust. And, like, I can see the angle that if Beijing can create a different kind of currency that is that is easier for people to use. And almost, because, you know, look, I am Ecuadorian. Ecuador uses the U.S. dot. They don't have their own peso. Like, you know, so like, it's not only soft power.

It's like literal, hard sovereignty power in terms of, like, your monetary base. Like, the idea that China can see that if this sort of, like, digital currency, stuff is the new way to break down borders. That's the way to create the sort of soft empire that the United States has enjoyed since the 20th century. What about the fact that, at least as I understand it, and again, I listen to the economist, and so that's partially where I'm getting this from, but where China is actually showing a lot more influence in places like India, Australia, Africa. And in those cases, if they move in and they start banking, folks with their cryptocurrency, doesn't that create a type of moat that we've never even seen

before? And we don't even like understand. Again, it's like one of those problems where, you know, superpowers end up fighting like the last war and the last battle. And we have a lot of legitimacy from all the things that we've done, you know, since World War II. But of course, you can't rest on your laurels. And so I don't know, I just find that like this move is so interesting. And it's like parsing the reality from the fiction. And that's really hard to do. But, Romina, as you're saying, it's like, you know, Chinese citizens are against this as well, then is it just a matter of time? Like, will the frog be boiled or will there actually be sort of like a resistance to this and people will just not use it, you know, in terms of adopting

this as an instrument of value? Yeah, I mean, I think this is why, and I'm going to have to drop right after this, so I appreciate you just having me on there. But I think just to kind of round out from my side, it's interesting. I mean, I think there's, this is a lot of the reason why you see a lot of Chinese money outside of China. Right, because a lot of wealthy people in China are extremely paranoid, that their money is going to be seized by the government and not just their money. But if there is this complete knowledge from the state, you know, over where folks' assets are, how much they have, etc., you know, it can start to get wielded against them. I mean, we've seen this in Russia where Putin has effectively taken out everybody that's had money, you know, in that country, either through, you know, fake crimes being planted or... wealthy people in China, right?

They've been shut down, under, yeah, house arrest. Yeah, house arrest, exactly, right? So I think there is a big resistance to this. I think when you have a power like China come in with that amount and number of people, it definitely becomes interesting. But I imagine there would be significant resistance not only internally from Chinese citizens. And I think you're seeing that, like I had alluded to earlier with the circulation of Yuan,

with the cash you on. But you're going to see a lot of international powers, you know, start to ban together to dry either levy sanctions or basically prevent that from happening. So it'll be, it'll be interesting. There's a lot of kind of geopolitical ramifications and certainly, you know, technology ramifications that'll come out of all of this. Awesome. Well, I know you've got a drop. It was, it was amazing to have you here. I think you've definitely educated us and the tech meme listenership. Yeah, I was not aware of you before today, but man, you're amazing and awesome. And so, So please, you're always welcome back.

And I'll also just point out, so, Rameen does the Square One podcast, and I did, I've listened to a couple episodes now, and there's just like an amazing set of connections there and folks to listen to. So you can go find that in your podcast app, you know, if you want to learn more about what he does and who he talks to.

I appreciate it, guys. Thanks for having me on. This was fun jamming on Cornbase. Awesome. Thanks so much. All right, thanks. Take care. Yeah.

All right. So before we wrap up, I'm bringing up Ameal from the audience. I guess he has something to contribute. So as he pulls up here, let's see where to go. Okay. Amil, what's up? Hey, can you guys hear me okay?

I know Twitter. Sounds good. Sounds good. It is not really, okay. Yeah, I just wanted to push back a little bit on the idea that Chinese citizens would be against this or rather how many would be, like what percentage? Sure. Just because I feel like that's a narrative that.

that, you know, the West wants to believe in, and our policies have kind of failed when dealing with China because of that. And the average, I would say, Chinese citizen, just from their perspective, you know, the government has done good by them, right? The middle class has exploded. And, you know, if you do interviews in China, again, the average citizen is very happy with what we would consider, you know, or really in things the government does there, as net good for them. Are you speaking as someone who has interviewed people in China? Yeah, but, okay, to be clear, it's not like I've interviewed thousands or something like that. Sure, sure. I've just, you know, like, for example, I like articles by the rest of the world.

They've done some very interesting takes that are kind of like counter narratives of like what we in the West, you know, think of what certain events that have in China and other parts of Asia and both the rest of the world. So I'm just kind of throwing that out there. I'm not saying, you know, one person is wrong here, one person is right, but it wouldn't surprise me. I mean, going back to what I was said earlier in the conversation where, you know, you had to grow up with certain things. You know, if a bunch of citizens grow up with digital currencies and this is how the digital yuan works and it's always worked like that, you might, you know, push back on parts of it. But if there's all these other positives of having a digitally yuan, you know, like, you know, I feel like the great firewall of China. was seen as like inevitably going to collapse and yet that didn't happen. China has successfully you know, um, kind of turned off free speech in the country. Well, and also, I mean, in theory,

in theory what helps is you might not have a choice. Right. Yeah, of course. I'm not saying, I mean, it could be very well that, um, you know, they're all unhappy there. Um, but yeah, and that's another way of taking it, right? If what does it matter if at the end of the day, still works, right? If all of China, just like they have a censored version of the internet there, if they all are using a cryptocurrency and it just works and there's, you know, these bad effects of it, but there's also a bunch of positives, like cryptocurrencies do have, you know, their positives. Anyway, just the thought, I just wanted to throw that out there that it might not go the way that we would think it would go based on our values and what we've grown up with.

I think it's really important, and that's partially also why, like, I will acknowledge the vast amount of ignorance that I have generally about China. You know, I've been there for all of like 10 hours in my life. And so I don't pretend to have intimate knowledge of anything that's going on there, but we use so many of our own values to interpret the stories that we hear from China. And it just seems to me that, and again, I'm coming from the perspective of a product person, a person in tech, a person that wants to believe that we can build things that are better. And I think that it's a mistake, again, to just assume sort of Orwellian outcome simply because something has sort of an echo of the types of things that Orwell was worried about back in the 30s.

I think it requires us to think differently about the direction of the world and where the world is going, what the threats are. And that crypto, in this conversation, moving, I don't know, it's like even the word crypto has a tinge to it, which I think instantly comes. causes people to think certain thoughts. And so when you combine crypto and China in the same sentence, instantly, I think your mind goes to this, like, you know, weird sort of blade runner-esque kind of future, whereas I think it's going to be more subtle and more similar. And yet the power dynamics are going to be incredibly different. And so the question is, how do you play

in those conversations with any amount of legitimacy if many other countries are moving forward with crypto and the United States still is like, we're good with our fiat, we're good with our credit cards, like, we're going to stay in that lien. Chris, you want me to put a pin on it? Sure, sure. This has been great. I think that if there's one thing we've learned over the last couple years, everyone uses the term Orwellian, but I think really astute people have noticed that

maybe it's the Huxley world that we're actually in, where it's Soma that we should be worried about. It is summa. It's amusing ourselves to death. That is the real thing. So as great, listen, 1984 was the most important book I ever read in my life, but I think that we're in the brave new world more than we're in the 1984 world. But that's a conversation for another time. Thanks everyone involved.

Everyone listening. Chris, thank you for co-hosting. Do you want to plug anything? Yeah, just to wrap, you know, again, this is the Technium Rhydenham experience for Wednesday, April 7th. I would say this continues to be an experiment and may be an experience. for the entire duration of this thing. We would love to hear from you. You can hit Brian and I up, of course, via DM on Twitter or ever.

We'd love to know how you found the show, if it's coming from my tweets or coming from the show itself. I would actually also like to plug the Shuffle Live Room that I guess we're also experimenting with. If you go to the App Store, it's iOS only right now. It's sad, but true. You search for Shuffle. You download that app.

you can actually go into the TechMeme Ride Home Podcast Room, which is an asynchronous social audio experience. It doesn't have to try it, and then you'll understand it. But I think that's a pretty interesting way of both getting at the content and the stories that Brian is curating from TechMeme. And I guess with that, we will find another time to come back and do this again. Yeah, and let me just say explicitly that we will release this as a podcast episode this weekend, either Saturday or Sunday.

So everyone can listen to that at the TechMeme Right Home this weekend when we release it as an episode. And you can then do it on Shuffle as well and participate asynchronously and comment in there. And let us know what you thought. Cool. Thanks, everyone. All right, buddy. Thank you. Bye, guys.