The Breakdown - Ryan Selkis on the Crypto Outlook for 2023

Episode Date: December 23, 2022

This episode is sponsored by Nexo.io, Circle and Kraken.   Today’s guest is Messari CEO Ryan Selkis.    Find our guest on Twitter: @twobitidiot Read Crypto Theses for 2023: messari.io/crypto-theses-for-2023 - Nexo is a security-first platform where you can buy, exchange and borrow against your crypto. The company ensures the safety of your funds and keeps innovating with products like the Nexo Wallet - a non-custodial smart wallet that allows you to create your Web3 identity. Get early access at nexo.io/wallet. - Circle, the sole issuer of the trusted and reliable stablecoin USDC, is our sponsor for today’s show. USDC is a fast, cost-effective solution for global payments at internet speeds. Learn how businesses are taking advantage of these opportunities at Circle’s USDC Hub for Businesses. - Kraken, the secure, trusted digital asset exchange, is our sponsor for today's show. Kraken makes it easy to instantly buy 185+ cryptocurrencies with fast, flexible funding options. Your account is covered by regular Proof of Reserves audits, industry-leading security and award-winning Client Engagement, available 24/7. Sign up and trade today at kraken.com/breakdown. - “The Breakdown” is written, produced by and features Nathaniel Whittemore aka NLW, with editing by Rob Mitchell and research by Scott Hill. Jared Schwartz is our executive producer and our theme music is “Countdown” by Neon Beach. Music behind our sponsors today is “Glasgow” by Falls. Image credit: Andriy Onufriyenko/Getty Images, modified by CoinDesk. Join the discussion at discord.gg/VrKRrfKCz8.

If there is a silver lining to all this, that was probably the best part of the year, which is we avoided really crippling legislation that could have very well been forced through this month called the DCCPA. The bill itself was not terrible, but it had some really damaging defy language in there that could have been excessively broad and I think really hurt the industry longer term. Not to mention, given the SEC much more authority and the ability to designate certain tokens as securities, which could have had a, you know, created much more of a deep dark winter than I think we're experiencing just because of the centralized contagion that took place. Welcome back to The Breakdown with me, NLW. It's a daily podcast on macro, Bitcoin, and the big picture power shifts remaking our world. The breakdown is sponsored by nexo.io, Circle, and Cracken, and produced and distributed by CoinDesk.

What's going on, guys? It is Friday, December 23rd, and today we are finally starting our year-end, coverage and doing it in grand fashion with Masari's Ryan Selkis. Before we get into that, however, if you are enjoying the breakdown, please go subscribe to it, give it a rating, give it a review, or if you want to dive deeper into the conversation, come join us on the Breakers Discord. You can find a link in the show notes or go to bit.ly slash breakdown pod. All right, guys, well, like I said, we are finally on end of your coverage. No more SBF shenanigans interrupting us, and we're starting off in a great way.

Because for the last six years, Masari CEO, Ryan Selkis, has released a crypto-the-sees, a set of thoughts, ideas about what happened and what was to happen, which is, of course, the theme of these interviews as well. This year, the document is a whopping 170 pages, and it just came out yesterday, and there is so much to dig into. Of particular note, I think, is Ryan's front row seat to much of the Sam in DC drama, and we get into all of that and so much more. So without any further ado, let's dive in. All right, Ryan, welcome back to the breakdown. How are you, sir? Good to be here. Thanks for having me again. It's good to see you. Yeah, no, for sure. So we're talking a little bit about before. I think it's funny, when I do most interviews, there's a clear entree point for everyone, right? It's like, oh, let's talk about proof of

reserves and Bitcoin, someone I just had on earlier today, or let's talk about, you know, XYZ. Whereas one of the things that you have done alongside everything that you've built is this sort of massive year and reflection that I think serves as a really good way for other people to kind of reflect on their own piece of the pie, but also be interested in in other parts. And so I think that the only place that it makes sense to start is actually just extremely broad. And we'll kind of see where the conversation takes us from there. So with that said, what is the worst thing that happened to crypto this year? And what is the best thing? I would love to be cute and try to come up with a clever answer aside from FTX. But I mean, the FTX implosion was obviously the worst thing that

happened in the year. But not necessarily just for the size of the bankruptcy. And, and all the ripple effects and contagion. But because of the general perception that the public had of FTX, both Wall Street, you know, kind of mainstream institutional audiences that put a bunch of money in this, and then, you know, obviously, D.C., where Sam was particularly active. So I think it was a black eye on those couple of fronts,

in addition to, you know, just being highly damaging to the crypto industry. I also think that those ripple effects aren't necessarily, fully fleshed out yet. We still have a situation at Genesis and DCG, which is a little bit of a black box and it's concerning. And maybe we'll get into that, but that could present some further contagion risk. I do think if there is a silver lining to all this, that was probably the best part of the year, which is we avoided really crippling legislation that could have very well been forced through this month called the DCCPA. The bill itself was not terrible, but it had some really damaging defy language in there that could have been excessively broad and I think really hurt

the industry longer term. So not to mention, given the SEC, much more authority and the ability to designate certain tokens as securities, which could have had a, you know, created much more of a deep, dark winter than I think we're experiencing just because of the centralized contagion that took place. Yeah, it's interesting. You know, obviously having been a first party to a lot of this, I have often felt in the last month, sort of torn between, one, the frustration with what was, contrasted with the counterfactual imagining of what might have been had this been allowed to go on for two more years, three more years, five more years. If you think about the sort of sheer tonnage of the wreckage created by this guy who literally, literally,

no one had heard the name of about two years ago. It's hard to kind of imagine. And I think it's a bleak silver lining, of course. And I think your kind of example of the DCPA is a more sort of prescient example of one little piece of why, you know, of course, had we our druthers, we would have just preferred for that never to have been a thing. But if it was going to be a thing, if the industry was going to deal with this fraud, it's almost like the best day to discover it was any day leading up to yesterday or today, and the second best day was today, right? Let's talk a little bit about some of that fallout and the contagion that might remain. Right now, it feels like there is a real hush, pause, just slow down in terms of activity. And it's not, you know,

with young startups or builders or anything like that, but in terms of the big institutional players in crypto, advertising budgets are frozen, marketing budgets are frozen. And it feels a little bit like everyone is, it's not that they assume that 2023 is going to be a dead year. It's that no one is willing to sort of make the first move back towards normalcy until they're convinced that normalcy is on the docket again. And I guess I'm wondering, A, if that is your impression, too, if that's what you're experiencing, but B, what you think the key kind of contagion risk factors are, things that people are watching. Obviously, you mentioned Genesis and DCG is one, but, you know, I'd love to dig into that more. Yeah, I think the biggest question is, has the credit unwinding this kind of daisy chain of bad credit fully run its course and have all the folks that needed to be liquidated, been liquidated? And I think the answer is we're getting close, but we're maybe not fully at the end. I do believe that that might be fully priced in at this point because there's only so much negative news that could come out. there's only so much size that could really hit the market in a forced liquidation that it feels like it's just a maybe there's a couple walking dead companies that were the last remaining

lenders that were distressed that have to find some resolution, whether it's a bankruptcy or some negotiated settlement with their creditors. But after that, you know, I think that we can resume normal operations to the extent that we're ever going to go back to, you know, fully normal. And, you know, one thing that I think is an advantage for us going into the new year, have things come back down to Earth so rapidly that maybe we get to hide in plain sight again for one more cycle. I don't really think that that's that we're going to have that luxury this time around. But it is a possibility with the gridlock Congress, you know, if you get to, you know, six months from now, nine months from now, you start to get into the presidential cycle. And if it's clear that there's not going to be a bipartisan, you know, a piece of legislation that can come out. out from Congress, then it basically allows us to play this game of trench warfare and fight back

against the regulation by enforcement from the SEC and some of the other regulators and fight that out in courts versus in some legislative process. So I'd say, you know, 2023 that is going to be the biggest challenge for the industry is where does public policy come out of all this. I think you can be hopeful and optimistic that there's some common sense policy that's enacted that oversees centralized exchanges gives them some clarity that gives some clarity in terms of how stable coins should be regulated. And then ultimately has some way of defining what these assets are, whether they're commodities, currencies, securities, what are those litmus tests?

And kind of what are the standards around disclosures for all three? But that's probably asking a lot. The first two may be possible and may be possible that we'll see them in in 2023, but I think we're going to be in this kind of messy gray area for quite some time still with respect to how do you actually define these tokens? And that really is the difference between this becoming a mainstream asset class and something that is kind of relegated to the tech frontier and the sandbox for all intensive purposes from a lot of more serious players. So it's interesting.

I am obviously a very active observer, but not a participant in D.C. conversations. And it seems to me that the window on there being too few people in Congress who understood crypto enough to kind of be suckered into thinking that because Sam committed fraud, everything in the place should be burned to the ground, it seems like that window has passed. And so the world in which this becomes the bully cudgel through which a comprehensive comprehensive negative legislation is enacted, seems like a relatively narrow path. You still have champions in the Tom Emmer's of the world, the Patrick McHenrys of the world, and many of them have sort of gotten more, not less power in this last election cycle. Where it seems like there may be then

room is on these very sort of common sense to your points, more discrete things, right? So instead of a Lumis-Jillabrand Responsible Financial Innovation Act, maybe we get the centralized exchange act, which has rules that, you know, probably all of us could agree to pretty quickly or at least within, you know, kind of some amount of reason. Is that your read as well, that to the extent that there is legislation that ends up actually making it through next year, it's more likely to be discreet around centralized exchanges, custodian, stable coins than it is sort of comprehensive? Or is that being overly optimistic? Honestly, I'm not sure. I think everything's on the table, right? You know, I would say the

the probability that we get stable coin legislation, I'd say greater than 50%, the probability that we get any other comprehensive legislation or kind of rules around the exchanges, maybe under 50%. And the reason for that is, you know, the more variables that you introduce, the harder is going to be to push something through Congress. I think that's always going to be true. It's going to be especially difficult when you've got Republican control in the House and frankly, a much more friendly Republican staff and members on financial services and ag in the House than you do in the Senate where Senate banking is, you know, without a doubt, the most, you know, openly hostile though, that I think the industry has with Senator Brown and Warren leading the charge there.

So, you know, there's a problem. path, right? There's always a way if there's some will from the part of Congress, but this goes back to my opening point, which is because the markets have come so far down and there's been so much that's already been washed out, are legislators going to put this as their top priority as like a too big to fail, we must regulate it now? It's almost like they missed the window, right? So maybe, you know, because they weren't urgent, you know, now there's no longer any urgency because, you know, the industry is collapsing under its own weight. There's a chance that that could be a sentiment next year. And, and And the moment passes and we're basically waiting until, you know, 2025 when there's a new

administration to see anything and whether there's something more comprehensive that can be passed. Yeah. Let's go back, I think, to kind of outside of D.C. and a little bit broader. One of the ways you kicked off the Theses this year was with the sort of, let's pivot away from Web3 again. Let's pivot away from that moniker. Let's get back to crypto. What do you mean by that? I just think the term Web 3 was a curse. And I think that it was overly cute.

And it was packaged in a way to attract as much favor, Curry, as much political favor as possible because it didn't sound quite so scary as crypto. I just think it's got a bad juju attached to it. It also doesn't really mean anything, right? It was like a contrived marketing term versus something that was kind of organic. And I just, when we think about classifications, we started thinking about like Web 3 as a sector, being things like, you know, file coin and distributed storage or, you know, video transcoding like LivePier. And I think, you know, we just discarded that entirely in place of what we call deep end,

decentralized physical infrastructure networks. It's more descriptive. It's less hand-wavy. and I think it kind of completes the sector overview, if you think about like NFTs, defy decentralized social, desoc or deso. There's a bunch of other pretty good descriptive shorthands for the different sectors of the industry. And Web3 was just kind of this like floating, ambiguous, trying to be all-encompassing term that I think we should retire and just get back to crypto.

The Web3 thing did kind of have it a little bit, had echoes of tokenize everything, tokenize the world from the 2017 cycle, where it was sort of ceased to be about money crypto and it was about tech crypto again. I mean, you remember because you were there, you were writing about it, but there was that whole, I mean, when we were bored in 2018 and no one had anything else to talk about, debates between tech crypto and money crypto. And I think a lot of what happened over the next couple years was that the moniness of crypto came to the four. I think defy was a huge part of that, is that even sort of in the Ethereum and sort of smart contract world, the money applications sort of came surging back.

And Web 3 with the combination of NFTs and Metaverse stuff, I think, you know, is certainly expanded. And I guess maybe, you know, how much are, is this space one space anymore in your estimation? You know, between, from you have Bitcoin, you have NFTs. Are they, are they really all part of the same thing? Are they only part of the same thing? Because from the outside, they look like the same thing. I mean, how do you, how do you think about that? Obviously, as, you know, as a company it has to kind of characterize and figure out how these things relate to one another. I think that Bitcoin and NFTs are operating on different sides of the same neighborhood. So I still think that you can classify these different innovations as all being under the

crypto umbrella. But Bitcoin is very much a monetary technology that will do well. in an environment where, you know, macro forces or, you know, debasing currencies and, and creating pressures, especially in international, like, non-reserve or emerging market, you know, kind of currencies, that could be something that leads to a resurgence for Bitcoin next year if you see some additional, like, monetary pressures in different regions of the world. So we just, you know, we've seen this recently with Ghana.

It's happened in Argentina and Venezuela and Turkey and different pockets of the world. have experienced a pretty significant pressure on that front. NFTs, in the other hand, that's kind of like a mainstream, you know, consumable, a consumer good. You're leveraging the same technology, but I think it's a very different demographic audience, right? And, you know, people like to say, well, when these technologies hit scale, no one's really going to know what they are under the hood. They're just going to use them and they're going to recognize that. And that may well be true. But I think that all these different sectors within crypto have ultimately grown and also had like they're overlaying hype cycles, right?

So defy got cold before the Alt-L-1 thesis got cold. And that happened before the NFT market cooled off. So each one of these were kind of like parallel hype cycles. It was Bitcoin and then it was DeFi summer. and then it was all L1s and then NFTs and then it kind of moved, you know, this hot potato kind of moved from one to the other. Now we're at a period where everything seems to be consolidating and, you know, we'll see which bottoms out first.

But I think that, you know, like other cycles, it might be likely that the thing that bottoms out first is Bitcoin and Ethereum. And then ultimately everything else kind of gets pulled up after that. But, you know, we are still looking for, you know, mainstream app that, that will. pull demand for crypto instead of us just kind of pushing this and hoping that some of these solutions ultimately have problems that they're meeting. In an ecosystem where innovation is the norm, it's the basics that are in the spotlight. NXO is a company that has never put the safety of clients' funds in question.

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With customization tools, unlike any other, Cracken Pro lets you set up your trading interface in the exact way you want. It's all backed by Cracken's industry leading security and award-winning client engagement teams that are available for support 24-7. No matter how you like to trade, Cracken Pro is built to make it happen. Visit pro.crockin.com or download the Cracken Pro app on Google Play or the Apple App Store today. Bitcoin and Ethereum have been through bare markets before and have been. sort of come out and kind of, you know, been reborn. This is the first cycle where you have NFTs, sort of, you know, after their kind of emergence and an explosion onto the scene going through it. I think you can say that more broadly about kind of metaverse stuff, although who

the hell knows what that means. And I think with Defi, it's kind of weird because it hasn't exactly gone through a bear market, but it kind of had a bear market during the bull market. But what do you think from kind of an NFT standpoint is important for that community to prove, or to build or to see during this bear market? I don't know that I have a good answer to that. What I believe about NFTs is that most of them are consumables, right? So I think because NFTs were a new hot sector of crypto that everybody got really riled up about and you saw these kind of crazy opportunities to flip JPEGs after a big release and the market

it was basically just a speculative, you know, fury and late last year and kind of early this year, people lost sight of the fact that these are basically, you know, consumables, right? So I'm not sure how much resale value most NFTs are going to have going forward. I think they will look and feel more like, you know, collectors items and, and digital goods today, which, you know, digital goods today, if you're talking about like in-game skins or, you know, upgrades your avatar, predominantly they're not resellable. And if they are, then the game maker is taking a massive cut of that. So I think people of, you know, today are more or less conditioned to not really think about these digital goods as like real, you know, sustainably valuable property so

much as like nice to haves that are, you know, part of their digital wardrobe. And I would actually compare it to clothes, right? You buy a new suit or, you buy a new suit or, you know, new sneakers or new shirt, like whatever it is, there's wear and tear on that. And when you go sell that, you know, you're going to goodwill or you're, you know, you're getting maybe, you know, 20 cents on the dollar for what you paid initially, maybe, right, if it's in good condition. Because there's just not as much, you know, resale value and used clothes. And I ultimately think that that's probably going to be the case with NFTs. And most of them, the resale value is going to be significantly less than that. So you have to really like what you're buying or you might not be

happy with the end result. This whole artificial scarcity in the NFT space, I'm not dismissing like outright, but the comparison I've made is, you know, okay, if you think about digital art versus the physical art world, the digital art like NFT space actually had a lot of parallels to 2013 Bitcoin, right? If you think about Bitcoin is like digital gold, a physical world, the digital art world, the digital art. physical gold. Well, we know what happened next. There was a 90% drawdown, but ultimately, you know, Bitcoin, you know, is slowly catching up now. It's maybe 10% of the fiscal gold market. So even if you think the NFT space is going to follow a Bitcoin-like trajectory in terms of market share capture versus, you know, physical brand goods, if you will, which I think

is very likely. I don't think that that means that NFT projects themselves are getting more valuable. I just think that the number of NFTs is growing. So if you're an NFT, you know, creator, if you're a brand, if you're, you know, if you're a game maker, that's very interesting because it opens up a new modernization scheme. If you're a creator and you're looking, things like fan tokens or other goods, you know, very, very interesting. But if you're the consumer of it, I think you have to, you know, be excited about what you're paying for and what you're ultimately going to get and just anticipate that there's not going to be any resale value to those goods.

No, it's interesting. I mean, I've been fascinated to see to what extent the NFT community is sort of almost blithely unaware or uncaring about what's gone on with the rest of the things. I mean, certainly they notice it in terms of sort of prices and whatever, you know, the correlations there. But, you know, those discords and telegram chats are very, very different than the rest of the crypto world, as relates to the last month and a half. Well, I think that folks in the NFT market can afford to stay irrational longer than most

because there's no real-time ticker for an N of one good. Yeah. They can't actually see their net worth evaporating. They just think that it's an isolated problem that's happening in the rest of crypto. And, yeah, I obviously think that nothing could be further from the truth. But, you know, we'll see. I'm not rooting. it's not like I'm actively rooting against any NFT projects.

I think NFTs is as a class of crypto and as a really interesting part of the digital economy going forward. It's going to continue to be a big kind of 10-year trend that we're in the very beginning of. But my point is more on the speculation around it. I'm very skeptical that's going to return in any meaningful way for many years, if ever. So two trends that have been, I wouldn't go so far as to say people are getting really excited about them, but certainly there's more chatter than there was a little bit that you didn't spend much time on are, one, the institutions are coming, institutionalization. And two, you do touch on it, but sort of tokenization of real world assets, which sort of is storming back as a narrative. What are your thoughts on those two? Is it sort of the, you know, not buying them or just they're not interesting relative to other things going on that are more crypto-native to you? Well, I think the context here is that I've lived through multiple cycles.

And when you get financial institutions in crypto that are responsible and reporting to shareholders in a quarterly basis, if you're spending a lot of money on building out a crypto arm in the depths of winter, it generally fizzles out. And this tends to be the first thing that gets cut in some of those institutional efforts. Now, we can argue maybe this time is different, right? We've had some cross-the-casm moments where, you know, crypto's here to stay for institutions. And in fact, I think there's a good argument that, you know, this time is a little bit different just because of the adoption of stable coins.

So some of these big financial firms are going to have some crypto infrastructure in place just because of the boom in stable coins and the fact that those, you know, assets and those volumes are not going away. You know, U.S.D.C. just had a record month in November in terms of transactions volumes has been up into the right, you know, unabated in spite of everything that's been going on in the rest of the market. With that as a caveat, you know, I've seen a lot of institutions, you know, get excited and then, you know, kind of pull back the reins for, you know, regulatory reasons, for, you know, just market size reasons once the tide goes out. And we'll see, you know, if this sign is different. But I'll believe it when I see it. And, and,

I'll spend time on the players that are kind of serious about this when I see it. I think a complicating factor in 2023 is that we're also staring down a recession, like an actual recession, not just a crypto winter. So I do think that there will be some boards and management teams that are under, you know, significant pressure to jettison things that are viewed as non-core or kind of play areas. And crypto would certainly seem to be high in that list, right? Do I think that fidelity is going to jettison their crypto team? No, but they're the exception that kind of proves the rule because they've been building out their operations cycle to cycle.

And in fact, I would argue one of the reasons they've been able to do so is because it's a private company. Now, will you see the same level of experimentation and depth from some of the big publicly traded banks? I'm not sure. Time will tell, but I didn't spend a lot of time, as you noted in the report. I think part of the reason that I asked is a little bit tongue-in-cheekly, is exactly that that's sort of that's, I remember the same conversations in 2018, 2019, which, by the way, is be wrong to think that because a narrative had a time four years ago that it wasn't the right time for it now, but it's just kind of interesting to note.

One of the things that you do well that I think is in two short supply sometimes is you're not a doom profit even when you're prophesizing doom, let's call it, right? And there's actually a meaningful distinction because one of the best ways, to get Twitter engagement, Twitter cloud, you know, content engagement is to be a doomsayer. This is a tried and true business model and we've watched, I mean, I am live watching a whole new crop of these folks pop up right now over the last six weeks. In that context, right now, you know, outside of DCG, the one big player that people are most scared of, they're two big players, that people are most scared of something happening, another shoot a drop, not necessarily

based on a lot other than kind of pattern recognition and fear. And that's finance and tether. What is your sense of those two right now? And I'm neither asking you to fud nor to defend just kind of, you know, raw senses you're observing and looking for the signals that would make you either concerned or not concerned. What do you see? Well, I have a little bit of a different take on both of those situations in that I think that the fear, uncertainty and doubt and people being scared is a good thing. I think that some of that is unfounded. But I think it's definitely a good thing because, Without it, you do have systemic risks at Binance and with Tether that would be difficult for the industry to overcome if there were any real issues. You know, finance was up to 75%, you know, 80% of trading volumes for, you know, many crypto pairs out of the centralized exchange space. Tether is still, you know, dominant internationally as like a digital euro dollar. But the good news is what I think will happen with finance is already starting to happen with Tether. That is, its market share will be eroded naturally, maybe because of some of these fears,

and, you know, hopefully with some regulatory certainty in Europe and the U.S. And if you look at, you know, Tethers market cap dominance, you know, it was 90% a couple of years ago. I think that's down to about 45% somewhere in there. Like, USC is rocketing up, you know, nearly catching up finance USD, which is, you know, a white-labeled product built with with Paxos, right? Those are two highly regulated stable coins. BUSD through Paxos, you know, actually, you know, comes from a New York trust company. Paxos is one of the only companies of crypto that has a trust company charter. I think there might be one other. It just, it's a unique and highly regulated, you know, business that they're running. And so, you know, when you're looking

at institutional players, it might be thinking about dabbling and stable coins, they're going to go to Paxis, they're going to go to USDC. Tether is going to be relegated to this offshore settlement currency. And so I think the market shares slowly started to reflect. We shouldn't put all of our eggs in this international basket that's a little bit of a black box. I think the same is likely to be true for finance in 2023. And frankly, I think it's going to be healthier for Binance if they don't have 70% market share. Right. I think there's plenty of food to go around. If this looks like a market where there's, you know, a few 25 to, you know, 35% market share players in different pockets of the globe, it starts to go a little bit hair if you're, you know, looking at one

dominant, you know, 800-pound gorilla like you see with finance. So nature is healing, I guess, is the way that I look at this. But I think that the risks are more, you know, regulatory in nature than, oh, no, we've got another FTX on our hands. Just my, just my hunch. So the one thing I will say is I had asked friends over the summer, like, I know that FTX Elmated did well. It doesn't make sense to me how they have this much money to bail out BlockFi and Voyager. And, you know, I just kind of got pushed aside, you know, a little bit like, oh, it's fine. They made a bunch of money on Seoul and AVAX and whatnot. But couldn't really make the numbers that. I've just kind of trusted that, you know, this is something that was covered in due

due diligence from the new investors, right? But with finance, it's a little bit different. like finance you can actually figure out where they made it like just an enormous amount of money because they're the market leader in exchange and you know the economics of the exchanges you know how much money coinbase made last year and you know that binaance is you know at least probably five x the size of coinbase in terms of volumes and and their business so um that's one thing that doesn't keep me up at night is like where did their money come from is you can run the numbers uh and and you can see that just based on their market share and their performance and how many assets. they'd covered, that it makes sense that they're in the position that they're in. Yeah, yeah, no, I think that that makes sense. I could kind of grill you on this all day long or just kind of dig in with you. But, you know, by way of wrapping up, as you were digging into this, were there any of these trends, you know, across any of the sort of parts of the industry that you found alarming or something that are sort of, it's a trend that you're noting, but it's a trend that makes you

worried. And then on the flip side, the trends that when you think about kind of what comes next, in 2023 and beyond, you're most optimistic about? I don't know if I'm alarmed by it or not. And you asked a two-part question earlier, so I'll kind of go back to it in terms of real-world assets. I think it's something to keep a close eye on. And Maker versus, say, you know, AVE with Avey's new stable coin coming out next year

is going to be an interesting one to watch. Because the majority of Maker-Dow's revenue at this point is coming from U.S. treasuries and USC, where it was, you know, five percent maybe of their, you know, total revenue at the six month mark this year. So they are, they are essentially a yield aggregator, if you will, of, you know, U.S. dollar denominated assets and treasuries, which I didn't have on my bingo card going into 2022. Now, people could talk about whether that creates centralization risks and whether that's a good thing, you know, I could, I could make the argument either way. I don't think it's good or bad per se.

I just think it's different. And what it does do is open the door for another crypto lending protocol to create a more decentralized derivative stablecoin. So if you think that dye is now subject to some of these centralization risks, maybe Avey and his new stablecoin go will be the platonic ideal of decentralization. and that will whittle away or kind of siphon off some demand from MakerDAO because you'll have some cohort of users that don't want to be subject to, you know, rug risks from regulators or kind of powers it be that might be upstream to the MakerDAO vaults. So again, not good or bad, but just different. And I think, yeah, there's going to be a number of protocols that are starting to cross over

into the real world assets in short order. And at scale, I think that is good and probably necessary in the natural, like, you know, the end game for crypto is to be incorporated into the real financial system. But there's going to be bumps along the way. In terms of things that I'm most excited about, I think decentralized infrastructure and continued hardening of some of these protocols in terms of their censorship resistance has come a long way. So, you know, I think a lot of people over the summer were concerned about Ethereum's censorship or censorability of transactions with the tornado cash sanctions. But there's two ways that you can harden the protocol against that. One is through software updates, which Vitalik has already committed to, added an entire

section to the Ethereum roadmap called the scourge to basically help mitigate some of of these risks from MEV that could result in censorship. And then, you know, tying back to that other theme of decentralized hardware, you know, having a decentralized network of, you know, RPC nodes or miners or, you know, other, you know, storage protocols, whatever it is, you don't run into the same risk as if you're talking about alchemy. And a certain contract is flagged in the OFAC list and you at Alchemy need to make a decision as to whether you're going to process transactions to that address or not. The answer is you're not going to, right? A decentralized network of hardware that's running a similar service might because it's not

necessarily subject to the rules of one specific jurisdiction. So I'm not commenting on whether that's, you know, good or bad. I certainly think that, you know, there's good reasons for sanctions, obviously. And I think we'd like to see less money getting, you know, stolen by, you know, loud and the North Korean hacking groups from bridge hacks next year. But I don't think that, you know, we should be anticipating that's the last attempt at censorship that we're going to see as an industry. And so you want to nip that in the bud now and start to build resiliency into the

system so that, you know, we don't run into a situation where these are, you know, decentralized or censorship resisted in a name only networks. Yeah. Great thoughts. I guess by way of last question, you've been here a number of, of cycles now. For those who have, this is their first time through a bear market, we're just clinging on white knuckled. What words of advice would you give? Wear a helmet. No, that's one of my go-toes. I think I would look at trends where the numbers

are still up into the right, right? Every price is down right now. But if you look at different products or protocols that are being used and whose adoption is still growing in spite of the ad wins, or at least like leveling off, I think it gives you some pretty good signal in terms of where there are pockets that you can still build and innovate. Uniswap is a good example, right? Volumes are way down, but if you overlay the volumes chart of Coinbase and Uniswap, uniswap's within 20 to 40% at any given time, which is pretty wild, right? If you look at things like, you know, file storage, there's more supply hitting the market,

you know, everything in the deep in the deep end space, decentralized physical infrastructure networks has been doing pretty well. ENS and some of these like, you know, identity and namespace systems have continued to do well. Decentralized social is picking up steam with things like lens and forecaster. So I would look for things that are still growing. If there's something that's growing in this environment, you can tell there's a pretty good shot that it's not a flash in the pan. There's some real kernel of innovation because the market has just been awful.

So if you're growing in this market, that's going to bode well for future more bountiful years. Awesome, Ryan. Well, thank you once again from the entire crypto community for taking the time to do these theseses and for all your work. I'm excited to see what you guys build next year at Masari and what you do as an individual as well. Thank you. Always a pleasure. Cheers. All right, guys, back to NLW here. And listen, one of the common threads across the interviews you'll hear is a real clear-eyed sort of disposition heading into 2023. If there is one upside of the incredible flameouts and betrayals of this year, it's that we head into next year with a much clearer field of

vision around what needs to happen and frankly what matters overall. I appreciate Ryan taking so much time to release these theseses and then to come talk with me and you guys all about it, and I'm looking forward to you guys hearing the rest of these interviews. Until tomorrow, be safe and take care of each other. Peace.