The Breakdown - The Most Important Bitcoin Infrastructure Developments of 2020, feat. Alyse Killeen

Episode Date: January 1, 2021

Alyse Killeen is the founder and managing partner of StillMark, and has been investing in bitcoin companies since 2013. While much of the conversation this year has been about high level narratives and new institutional investors, Alyse breaks down the technical advances that happened this year. Find our guest online: @AlyseKilleen Enjoying this content?   SUBSCRIBE to the Podcast Apple:  https://podcasts.apple.com/podcast/id1438693620?at=1000lSDb Spotify: https://open.spotify.com/show/538vuul1PuorUDwgkC8JWF?si=ddSvD-HST2e_E7wgxcjtfQ Google: https://podcasts.google.com/feed/aHR0cHM6Ly9ubHdjcnlwdG8ubGlic3luLmNvbS9yc3M=   Follow on Twitter: NLW: https://twitter.com/nlw Breakdown: https://twitter.com/BreakdownNLW   The Breakdown is produced and distributed by CoinDesk.com

I think that the way folks come into Bitcoin is shifting and that that will be meaningful for Bitcoin. Specifically, I think that as folks begin to earn Bitcoin and the way that they understand its utility because they're able to save or spend in ways that they hadn't before, those folks will be the ones that are really shaping the definition of what Bitcoin is for the longer term. and so paying attention there is something that should be meaningful for the community as a whole. 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 crypto.com and nexo.io and produced and distributed by CoinDesk.

What's going on, guys? It is Thursday, December 31st. Happy New Year's Eve. Today on the breakdowns end of year extravaganza, given that it was New Year's Eve, I thought I'd bring the person who, among many other things, helped the chain smokers get involved in the crypto and digital asset space. Elise Colleen is the founding managing partner of Stillmark, the Bitcoin VC firm. She's been in Bitcoin since 2013 and has been an angel investor in numerous tech in Bitcoin startups. I'm really excited to welcome Elise to the show, so let's dive into the conversation.

All right, Elise, welcome. to the breakdown. It's great to have you here. Awesome. Thanks for having me. So this should be really fun. I think you'll have a really cool perspective on a lot of these questions. To get started, I've been asking everyone the same kickoff question, which is what, in your opinion, was the most important economic story of 2020? So what surprised me most and what seems to be quite important, although I'm not sure I've seen sufficient attention paid to it is really the apparent disconnect between Main Street and Wall Street this year. And the reason why I found that to be important and why I think it's an important story to dig into when thinking about what's to come in the years ahead is that

the disconnect between Main Street and Wall Street was something that was really impactful to millennials in particular. So to Gen Z, to millennials, to young Gen Xers, to folks that that make up the majority of productive workforce, have less exposure to the stock market. Yeah, I think that this question of access is hugely important. And it's really interesting because you see the Fed has been asked, I feel like, about inequality and their role in inequality more and more and more. but really what it keeps seeming to come back to for them is like if inequality is the price to pay for everyone having a job, basically if asset price inflation is the cost of low unemployment, that's a cost we're willing to pay.

But it's sort of tone deaf to, I think, what a lot of people are experiencing. Right. Yep, exactly. I mean, I think that you took the words right on my mouth and laid out a part of my thinking maybe more eloquently than I could have. But that's, you know, I think that's the story of 2020 and also something that's been weighing on my mind even more so in the most recent weeks.

So I guess, you know, this is kind of a, I mean, you almost started to answer this a little bit, but what I guess is the most important economic story that people didn't pay enough attention to it. It sounds like that's kind of almost the same answer for you. Well, it is. And I, so I guess what I wonder is when there's a disconnect between Main Street and Wall Street and when, you know, millennials, folks under 45, right?

So young Gen Xers, Millennials, Gen Z, when these folks are asked to take a break in their professional progression or when they can't find roles that match their skill set, when avenues for their productivity and value creation are stymied. I don't know. I mean, I wonder what that does to shape innovation. So my field, I wonder what it does to people's trust in their community and in their government, I suppose. My concern is that people continue to have forward mobility and feel like they have a fair shot at advancing themselves, regardless of where they stand in the socioeconomic pyramid. So if you have folks of lesser means with access to a job, I think that that's important.

Fair wagers for sure. I also think it's important for people in the middle class to have mobility and just for people in general to be able to feel like their contributions are valued and that they can create and accrue value, you know, both on Main Street and in their investments and so on and so forth. And so it felt like part of the assumptions that people base their career and investments on both investments of their time, investments of their capital. Some of those assumptions were probably broken. this year. Yeah. I mean, you know, I guess this gets me to another question, which is how much do you think this year was an acceleration of shifts already happening versus something more fundamental or more of a paradigm shift? Well, that's a hard question to answer for just this year, I think, because, you know, the last four years of the current administration have been either an acceleration or a new paradigm, right? One or the other. And it has kind of been, whether the current administration is ushering in a new paradigm, or was it something that was

always, I guess, quietly present. I think the last year, I think that 2020 was, I guess, an acceleration of things that had been building in the prior three years. Does that answer your question? Yeah, absolutely. I hope that the last four years were something that's not a representation of what to expect in the next couple decades. So obviously, you spent a ton of time thinking about, innovation, new paradigms. I mean, you've been angel investing, you've been a venture capitalist for a long time. You know, as you look out across things that change this year, I'm interested in what your take on, which of the shifts that we've experienced are temporary, I guess, versus which are more like things that are permanent shifts in behavior and demand. You know, I mean, you know, you obviously kind of have an incentive to

to make bets on that. But as we move into the next phase of kind of the vaccine error or whatever, we get some sort of normalcy back. What do you think about what's coming back versus what types of behaviors have really shifted entirely? Yeah. So first, just to go back to the context that you set for this question, I've been in venture for a little under a decade. I don't angel invest. My investments all go through my venture practice. And in my venture practice, we're really looking at longer-term trends and the forward-looking longer-term trends. So really thinking about what will happen in the next 10 years or the next 15 years. And those trends, I think, honestly, have been pretty persistent. And regardless of, you know, external politics or a pandemic, and the pandemic

shifts things, you know, a bit like it either adjusts or slightly realigns a path, but it doesn't really create anything new, I don't think. And so, you know, what we're seeing is a changing in demographics. Now strictly speaking about the United States, we're seeing changing demographics. When we think globally, we're seeing a change in a shift in control over spending or who is free to acquire a product, who is free to spend on services. All of that is relevant to Bitcoin. And we're also seeing, I mean, maybe a little bit, maybe to shift gears from what I had said earlier, Another trend that's important generally in terms of how tech develops and matures is that we also in the United States, well, and elsewhere, have an aging population. And so all of this, we're trying to look at these trends, you know, not in terms of what happened to affect them this year.

What's happened that has stain power to affect habits, behaviors, expectations, and the way that people will meet all of that with tech over the next one or two decades. And then how that applies to Bitcoin is we want to make sure that the companies we invest in in the Bitcoin space are really building for a future that's relevant across the next couple decades and not just for the next couple years. And so while a pandemic is important because, you know, frankly, it creates a different sort of stress for the companies we invest in. and for the users of those products, both individual consumers as well as enterprise businesses, it's less important for what we invest in and more important for how we work with portfolio companies. Got it. That makes sense. I think that, you know, everyone's kind of horizon is different. And obviously in venture, you have to take a much sort of longer term horizon. So I think that that tracks. This episode is brought to you by crypto.com, the crypto super app that lets you buy,

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and earn up to 12% compounding interest paid out daily on your crypto and fiat. Your passive income, made simple. Get started at nexo.io. You actually jumped a little bit into where I was going to go next, which is when all was said and done, what you think the biggest stories in Bitcoin or or crypto more broadly were. Yeah. So I think, well, that's a great question. I'm going to push back on that question a little bit and say the same as what I said in response to the pandemic, which is that it's really less about the stories and more about

the long-term work and trends. And what I mean by that is, is that something like the development of miniscript, right, which can potentially broaden the group of folks that can contribute to the development. of infrastructure in our space, while that might not be a big story, that's the type of introduction or development that can be meaningful, I think, for the ecosystem developing on top of Bitcoin. And that's really my world. So, you know, what's most meaningful, I think, is less about the stories or less about the dialogue on Twitter and really more about the long-term development. And this is something that unfolds over years. And then after that, I think,

What's important are the companies that are developing to make use of infrastructure and new developments and what that means in terms of utilities, utilizations that can be introduced in the ecosystem. And then even more important than that are what that means in terms of new users of Bitcoin that can come into the ecosystem. So to kind of repeat and summarize what I just said, we're thinking less about stories and more about what's being developed at the infrastructure level, what that means for companies developing on top of the infrastructure,

what sort of utility they can introduce, and how that expands Bitcoin's user base. Is that actually a great answer? Because the construction of the question is very much sort of narrative-driven, because obviously that's kind of the world, I think, in terms of big macro narratives. But I think it's a great, great pushback, actually, so I really like that.

It actually gets right into another question, which is even more pointing, I think, in the context of your answer to the last one, which is what is an unheralded advance in this space? You mentioned manuscript, but for people who are interested in that sort of layer of infrastructure development, what were some of the things that were really important this year? You know, it's hard a question for me to answer because I pay attention to different areas maybe than others would.

So what's in heralded? You know, I don't always know what those things are. Yeah, right. If you're not really paying attention to the heralds in other parts because you're just finding what's most important to this sort of theses that you have in learning, it's hard to answer it in the context of unheralded. So we could just call it important advances in that space, right? I think I'll just take a shot at it, though. So there's three kind of things that had been pretty exciting for me to see unfolding this year, whether or not they got attention. And by the way,

it's not just this year. These are pretty consistent, two of the three are consistent trends. So I think that there's been an opportunity for the broadening of a user base of Bitcoin. So a broadening of who can own and hold Bitcoin. And that, of course, is not specific to this year, but it's a trend. And we hope that continues. We've also seen second greater utility from the infrastructure. And so, you know, that's, again, not specific to this year, but it's also something that happened this year. So an example of that is, for instance, seeing what Sphinx has been able to do in terms of the introduction of a chat and call app on top of L&D. the structure, what that can mean for podcasting, and just the share of value ideas and content

in a distributed way and over Lightning Network. So that sort of utility, it's broad, right? It's not just that, but the introduction of potential of discrete log contracts, the way that spending perhaps has been greater enabled this year. And much of this is at the very early stage. And so I don't know that it gets the attention that it's due. It can kind of be less on the radar. And then there's a third thing that happened, I think, that was maybe a bit newer this year and that I mentioned before, which is that the field of contributors, there's been tools that have been introduced that can kind of create breadth and inclusion in who can contribute. And so miniscripts can be an example of that. there are also companies building tools, developer tools for building in Bitcoin and cryptocurrency

ecosystem. So for instance, Clover is an example of that. Clover is building developer environments and other tools and services for folks building on blockchain infrastructure. We also see new sort of grant programs, for instance, Brink, John Newberry's Brink. And I think with a different form of a program, a longer format program, you can see that being used as a method to educate and include sort of a different type of poor developer. I don't know that we talked a lot this year about expanding access of contribution to this space, but I see that it certainly happened. And then I would think of contributors to Bitcoin, not just as folks building on Bitcoin core or higher layer infrastructures, but also folks that are building the company

that create the ecosystem, like the kind of nascent ecosystem that exist on Bitcoin, and that has broadened this year as well. That's awesome. No, I think that that's a really important thing. I mean, there has been so much high-level narrative stuff around the sort of macro backdrop, around these new institutional investors coming in, that I do think that those topics of conversation have been significantly under indexed, at least kind of in the conversations that we're having on Twitter, right?

And not even on these podcasts. So I think that's a great, great addition to the conversation. That's right. Sorry to interrupt, but yes, that's exactly right. And I think that the introduction of institutional money or of a public company placing part of their treasury and Bitcoin, those conversations, I'm glad that we're having them. And I think that, you know, those are all things that deserve attention. But some of the things that are more relevant to the work that I do are the things that maybe get less attention. And so it's good to have a chance with you to call those out.

Yeah, absolutely. Well, let's, I guess, take that same conversation and zoom it forward. For people who want to kind of start paying attention on that level, what should we be, I guess, what are you watching for in the year to come? What are things that you're excited about? What are things that we should be paying attention to more? Yes, so exactly what I'm looking for, looking at are how advancements at the core protocol or higher layer infrastructure, lightning network, side chains, how advancements in that

infrastructure, that the architecture are relevant to entrepreneurs. And so specifically, we're looking at what's enabled to be introduced as a product that's consistent with Bitcoin's principles and early promises that's made newly possible because of changes in the tech, or made newly possible because there's an entrepreneur that understands the tech in a novel way, such that they can create, you know, a product that hasn't been imagined before. And so, you know, that's kind of what I'm looking for. And within that, I think some of the interesting opportunities that have emerged in, say, the past 18 months, one that I'll call out is the opportunity for earning to happen or for people to be introduced to Bitcoin through earning just because the easiest way to pay a certain workforce would be through Bitcoin. So an example here, here is Stackwork. And we know that Stackwork is able to create and pay a distributed workforce to do tasks like photo tagging or video tagging. They're able to pay this workforce in real time via SATs using the Lightning Network. You know, that sort of insight that the founder had on an

application for Lightning Network in emerging markets, that's exactly the sort of opportunity that we're paying attention to. We're looking for and listening to, founders that are observing the tech and then understanding what that means for a new user base. Elise, this has been really, really great. It's actually honestly a very different perspective than a lot of these. So I know that the listeners will really appreciate it. I guess just to round us out, a fun question that I've been asking everyone to end is what's one prediction that only you have? Yeah. So for this, I think after infrastructure development, the way that folks come into Bitcoin and the economy is created around that will be was most influential to the long term of Bitcoin.

So to create a thread from my prior answer, I think that the way folks come into Bitcoin is shifting and that that will be meaningful for Bitcoin. Specifically, I think that as folks off Twitter begin to earn Bitcoin and the way that they understand its utility because they're able to save or spend in ways that they hadn't before, those folks will be the ones that are really kind of shaping the definition of what Bitcoin is for the longer term. And so paying attention there, I think, is something that should be meaningful for the community as a whole. Love it.

Great answer. And a super, super fun conversation. Thank you so much for hanging out for a little bit. I'm excited that you could share these ideas and insights. Like I said, I know the audience will have really appreciated it too. So happy holidays and we'll look forward to talking to you again soon. Likewise, thank you for having me. Enjoy the holiday and the new year.

We'll connect again in 2021.